Over the past two decades, the fintech industry has experienced remarkable growth and transformation, reshaping the landscape of the financial services sector.
Hundreds of fintech startups today provide more accessible, efficient, and customized financial services to individuals and businesses worldwide.
Still, according to the survey, 77% of Americans report feeling anxious about their financial situation. This is where we could leverage the power of AI to reshape the way individuals manage, invest, and plan their finances.
AI-powered financial apps can offer a range of features that help users gain better control over their budgeting and savings.
For example, AI-driven budgeting apps like Mint and YNAB already use AI to automatically categorize expenses, set budget goals, and provide personalized recommendations based on spending habits.
Let's consider a scenario where a family wants to assess their spending habits and gain insights into their financial health. AI-powered programs can evaluate their transactions, categorize expenses, and may recommend switching to a cheaper utility provider or suggest subscriptions that can be canceled to reduce monthly expenses.
It is interesting that a recent Oracle study found that 59% of people trust a robot with their finances more than themselves.
From robo-advisors to autonomous finance: How AI will transform personal finance
AI-driven fintech tools are creating a new niche of autonomous finance.
Andreessen Horowitz, a venture capital firm, refers to the term “Money on Autopilot” describing how with the help of AI startups will finally deliver on the vision of financial automation, with products that serve as “autopilots” to help consumers: save and spend, make investments, plan for retirement, manage debt, prepare/file taxes, and more.
The integration of Artificial Intelligence in personal finance management offers a wide range of benefits. Let’s take a look at how AI will transform consumer finance.
Automated Budgeting
AI-powered budgeting tools can monitor income and expenses in real-time and provide proactive suggestions for optimizing spending habits, identifying potential savings, and alerts when you're approaching your budget limits.
An example is the Wally app, a completely automated personal finance app that tracks your spending, cash flow, and bills to help simplify budgeting decisions. You can ask WallyGPT questions like "How have my grocery expenses changed in the last 6 months" to "How much do I need to save each month for a vacation in Spain?" to get personalized advice.
Automated Investing
When it comes to investing, AI-driven platforms powered by AI, will continuously monitor the markets, adapt investment strategies to align with individual goals, and more. For example, Robo-advisors such as Betterment and Wealthfront, use AI algorithms to manage investment portfolios based on your risk tolerance and financial goals.
Credit Scoring and Loans
AI will enhance the credit scoring process by incorporating a broader range of data points, including social media behavior and online activity.
For example, Credit Karma uses AI to provide personalized recommendations on how to improve your credit score.
Tax Optimization
AI will assist in optimizing tax strategies by analyzing your financial transactions and recommending tax-efficient investment and savings options. It will also simplify tax preparation and filing processes.
Education and Literacy
AI will assist in financial education by offering interactive and personalized learning experiences. AI-powered chatbots and virtual assistants can provide instant access to financial information and advice, helping to develop a better understanding of financial concepts and terminology.
For example, you could ask a chatbot about the difference between a fixed-rate and adjustable-rate mortgage, and the chatbot would provide a clear and concise explanation. This on-demand access to information can help build financial knowledge and confidence over time.
The future of AI in personal finance
The advancements in AI-driven personal finance tools are only just beginning. In the coming years, we can expect AI technology to play an even more significant role in making personal finance management more efficient, secure, and personalized to our goals and needs.
According to a PwC study, 77% of financial institutions plan to adopt AI for process optimization and predictive analytics in the next three years.
And also, let's not forget how "every company will be a fintech company".
