Since blockchain technology and artificial intelligence (AI) have been integrated into the financial services sector, many disruptions and changes have occurred.
There are several cornerstone benefits of the integration of AI and Blockchain into the financial services sector.
Security can be strengthened through AI enabling fraud detection and real-time user notification regarding suspicious activities. However, the technology is typically centralized, which results in mistrust and privacy concerns. In contrast, the decentralized and immutable ledger of blockchain technology contributes to establishing a secure and transparent space for financial transactions. Additionally, blockchain ledges can be utilized for a digital management system for data rights through which clients can set the terms and conditions under which companies and organizations can process their data. The implementation of both AI and blockchain secures not only the services in the sector but also the trust in the two technologies.
Additionally, whilst AI can raise efficiency rates by automating manual processes, blockchain can reduce the time and cost of settling ransactions between banks by removing unnecessary third parties from them. Further, blockchain enables clients to build decentralized exchanges of assets written to the blockchain directly. This implies that central authorities or third parties are not responsible for approving the transactions anymore which results in transparency. Concluding, customer experience can be enhanced through blockchain and AI by offering real-time information, updates, and personalized recommendations.
The integration of AI and blockchain in the financial services sector naturally also encounter challenges on the way. One of the main obstacles is represented by regulatory compliance. The already well-established structures and regulations within the industry are, to a certain extent, threatened by the potential changes that these technologies may cause. Concerns regarding privacy, security, and implementation expenses are resulting in hesitations regarding the adoption of the two technologies. Further, an obstacle that emerges from higher cost concerns involves the interoperability between systems and platforms required for the integration of the two technologies.
The integration of AI and blockchain into the financial services sector will result in many innovative solutions, raising the efficiency of the services and processes and responding to security and privacy issues. For FinTech, which is considerably centralized, the two technologies will consequence in many improvements and overreach the adoption hesitations concerning them.