What interesting changes will emerge in the Fintech industry in 2023 due to AI?

Most leading AI products are built by startups. A “winner” is far from emerging, and competition remains fierce in most categories. Written by: RockFlow Emphasis added * From 2018 to 2022, AI companies attracted an average of 12% of venture capital, accounting for less than half (25%) of 2023. Although the pie of early investment has become smaller this year, the share of AI cannot be underestimated. * Most leading AI products are built by startups. A “winner” is far from emerging, and competition remains fierce in most categories. Compared with the previous generation of products, the growth of AI products is very healthy, and consumers are very willing and able to pay. * AI’s innovation on the Internet will be gradual but determined. It will first impact product categories with “high user friction” (manual completion is painful) and “low judgment requirements” (automation is easy enough). * The current Fintech industry is a bit like oil drilling. As initial supply dwindles, the technology to extract resources from existing wells is no longer scarce. With the support of AI, various financial products will produce more new changes, and it is even expected to achieve extensive and extremely low-cost customization and personalization. Crunchbase data shows that more than a quarter of all U.S. startups that have received VC investment this year are AI companies. At first glance, it’s not too shocking. AI has attracted more attention than ever before, especially since the beginning of the year when leading companies in this field (OpenAI, Anthropic, etc.) received huge financings one after another. However, comparing 2023 and 2022, a striking conclusion is that the attractiveness of AI to VCs has more than tripled. The chart below shows how venture capital funds’ attitudes toward AI have changed over the past six years. From 2018 to 2022, AI companies attracted an average of 12% of total venture capital capital, less than half (25%) in 2023. What happened in 2023 to cause the above transformation? A few things are most obvious. First of all, the overall investment scale has dropped significantly. In the first half of 2023, the scale of North American venture capital dropped by 50% year-on-year. Most industries have fallen into a downturn, and the number of financings in almost all industries (from real estate to financial technology, Web3 and other subdivisions) has dropped significantly year-on-year. Yet among these, AI stands alone. Companies in this category are very popular, and the number of financings is increasing year by year. In other words, while the early-stage investment pie is getting smaller, AI’s share is growing. Security field. Taking banks as an example, tens or even tens of billions of dollars are lost every year due to fraud. With the help of AI, Fintech companies can better detect suspicious activities and improve network security performance. Investment areas. According to PwC’s “2023 Asset and Wealth Management Revolution Survey Report”, the global asset management scale will reach US$115.1 trillion in 2022. More than 90% of asset management companies have introduced AI, and the total assets managed by robot-advisers (automated investment advisors) are expected to reach US$5.9 trillion in 2027, compared with US$2.5 trillion in 2022. An increase of 136%. Among them, Betterment and Wealthfront are the best. Productivity apps. AI-based products can improve data processing or take over clerical tasks (invoicing, etc.) and have a wide range of applications. customer service. AI-powered chatbots can both help customers and significantly reduce business costs. Simply put, in finance, AI can improve the quality of decisions, optimize user experience, and save money. According to A16Z’s speculation, AI’s innovation in Internet products will be gradual but decisive. It will first impact product categories with “high user friction” (manual completion is painful) and “low judgment requirements” (automation is easy enough). The former means that consumers will be more motivated to try new products, while the latter can better guarantee a good experience for users.