Full Speed Ahead: Artificial Intelligence and Fintech In the Age of COVID-19
By Susan DoktorMarch 11, 2021
Full Speed Ahead: Artificial Intelligence and Fintech In the Age of COVID-19
The economic consequences of COVID-19 have been multitudinous and devastating. Record unemployment numbers. Mounting small business failures—at the rate of 800 per day in the US, according to one study. Evictions, car repossessions, and bankruptcies. People are suffering. But technology is helping.
Fintech Firms at the Forefront of Business Relief
Venture capital is flowing to financial technology (fintech) industry players, often in $100 million increments. While year-over-year investment in fintech in the US declined in 2020, it has been surging in emerging markets.
Here in the US, fintech has succeeded where traditional delivery of financial services has failed. Fintech earned hero status by rescuing the Paycheck Protection Program (PPP), the Small Business Association’s initiative to aid many small businesses that were on the precipice of disaster. The PPP, a loan program that was guaranteed by the federal government but administered by banks and other lending institutions, was mired by the complexity at its outset. Traditional lenders were overwhelmed by the sheer volume of loan requests. Bottlenecks prevented suffering businesses from accessing federal funding and many failed while they waited for relief.
While the PPP backed over $520 billion in loans in its first two rounds of funding, some of the neediest businesses were shut out. Banks favored their existing customers so businesses who didn’t have established credit relationships were deprioritized. Reports emerged that many businesses that would not fit the definition of “small” in the average person’s mind, were first to receive funding, often in the vicinity of millions of dollars.
But a new crop of fintech-powered lenders operated without those biases and threw a life raft to businesses that were struggling with PPP access and bureaucracy. Many focused on the 80% of small businesses that have ten or fewer employees. The technology they employed used artificial intelligence at key stages of the loan process, including credit analysis and approvals, to speed things along. Along the way, they injected greater fairness into lending. And while these companies represented just 12% of assets held by US lending institutions, they delivered 28% of the funding extended through the PPP.
But it’s not just business that’s benefitting from artificial intelligence. The breadth of industries using AI to deliver consumer services has broadened. The result? Companies are now better equipped to deliver higher-quality, more economical services in a host of categories.
AI Helps Consumers Protect Their Credit
Artificial intelligence is helping consumers caught in credit nightmares—their numbers are growing since the onset of the COVID-19 economic crisis—by making both credit repair and credit monitoring faster and more accurate. From process automation to using biometric identification to reduce credit fraud, AI is fueling improvements that deliver better results for consumers while also helping credit industry leaders operate more efficiently and profitably.
Surprisingly, given the crippling financial ills so many people are experiencing in the wake of the global pandemic, the credit repair industry has contracted and is expected to shrink by 3.1% in 2021. But the identity theft protection industry is growing at a rate of over 12% a year. Its expansion has been driven by our propensity to live and shop online and our growing collective consciousness of the risks and painful repercussions of having one’s identity stolen. AI-powered credit monitoring is a critical feature of identity theft products and we can expect to see innovation in AI technology as a result.
AI Innovations in Consumer Lending
AI is also providing consumers with an easier way to refinance their mortgages and student loans. By taking advantage of declining interest rates in various loan categories, borrowers may be able to reduce their monthly spending. While federal legislation initially mandated that lenders extend some loan forbearance, those regulations were time-limited. And time is up for many borrowers. While economists predict that economic recovery is on the horizon, it will be a long haul. With recovery, interest rates are expected to rise. We’re already seeing that in the mortgage industry, where interest rates reached and remained historically low for many months as we weathered the economic storm brought on by COVID-19. Consumers who refinanced or refinance soon will be in a better position to wait the storm out and enjoy the benefits of lower payments far into the future.
What’s more, AI and fintech are expanding access to financial services for groups of people that have traditionally been underserved: the 22% of Americans who are either underbanked and unbanked and are disproportionately comprised of people of color and households that earn less than $40,000 per year. These demographics have had to rely on alternative financial services —some of which are expensive and even predatory—like payday loans and check-cashing services. The costs and requirements of banking, from complicated fee structures to minimum balances, have long been a deterrent to equal access to banking services. The influx of purely digital banking services, empowered by AI and fintech, has broken down these barriers and made basic financial services like checking and savings accounts more affordable for more people in more economic strata than ever before.
The Telemedicine Revolution
Healthcare is one of the largest expenses consumers face. Whole presidential campaigns and political party platforms have been built on the promise of reigning in healthcare costs. But with the help of artificial intelligence, consumers are mounting a campaign of their own.
The healthcare industry has seen a monumental shift as more and more of us turn to telemedicine—the delivery of healthcare via digital channels—to access the care we need. The telemedicine industry has been on a growth trajectory for some years, but certainly the nation’s reluctance under COVID-19 to venture outside our homes at all—let alone into a waiting room full of sick people—underlies the 2020 spike in telemedicine usage. Consumers are relying on telemedicine to treat everything from cold and flu symptoms to depression. In response, the number of traditional healthcare facilities offering telehealth services jumped 42% in a single year and a full 75% of healthcare institutions are now practicing telemedicine, but they’re seeing plenty of competition from their purely digital counterparts. Virtual healthcare providers have been the darling of venture capitalists for some years. You can now add in-home medical testing manufacturers to the list of companies attracting funding, too.
Artificial intelligence factors into the practice of telemedicine in various ways, including patient assessment, providing accurate diagnoses, doctor/patient matching, and ongoing monitoring of patient progress. Both virtual and traditional healthcare providers also use AI for revenue cycle management and to improve work processes. As in so many other contexts, AI lends efficiency and accuracy to medicine. In the end, increasing medicine’s power to heal—no matter how it’s practiced—and bringing down the cost of healthcare, benefits businesses, consumers, and communities. Watch this space to keep up with news on how AI is driving positive change in virtually every economic sector you can name.
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