Trends in Technology

Conversational AI in Fintech: The Situation in Asia and the US Compared

November 23, 2020 by Bobby J Davidson
Read similar articles in: Banking Technology

Over the years, Fintech has grown rapidly not just here in the U.S, but in every part of the world, with the overall funding in Fintech growing from US$11 billion eleven years ago to the US $78.6 billion today. Moreover, Ernst & Young—a leading multinational services company, reveals that a third of worldwide consumers today are using two or more Fintech services. Cleary, Fintech is the future of the financial services sector and technology that is helping it to progress and gain traction is artificial intelligence (AI).

AI: A Growing Fintech Trend

A lucrative but somewhat saturated market, Fintech demands that companies stay on top of the emerging trends to capitalize on them before their competitors do. A rapidly growing Fintech trend is the use of artificial intelligence (AI). Today, several big brands and even a few startups are laying the groundwork for robotic financial advisors to be adopted. Whether you’re trying to maintain a competitive edge or are keen on researching Fintech’s AI opportunities, then you may want to know the current situation of conversational AI in Fintech in Asia and here in the US. We will provide you with that information.

How Conversational AI/Chatbots Evolved Over the Years and their Current Situation in Asia and the US

Enabled by artificial intelligence (AI), chatbots are programmed to think, study, and communicate like a human. They are also programmed to respond to ad-hoc queries, all in real-time. Since they can help create differentiation in an increasingly crowded landscape, chatbots have attracted the attention of many companies across a range of industries. Conversational AI has evolved over the years to raise the bar of intelligence and create a larger impact for stakeholders. Starting as a simple digital tool, the chatbot has progressed over time to become a virtual assistant capable of carrying out several functions on its own, such as arranging meetings, scheduling taxis and remotely requesting items based on text and voice commands. So, it’s clear that conversational AI is an incredibly useful piece of technology to have but what is the current situation in terms of investment in the technology? According to a study by PWC—multinational professional services network headquartered in the United Kingdom, in the past two years, Fintech startups focused on AI have witnessed greater overall investments than previously, averaging US$1 billion in investments during this time. Many of these startups are applying AI and related technologies to offer 24/7 personalized financial assistance.

The Growing Trend of AI-Powered Virtual Assistants

A Fintech trend, AI-powered virtual assistants are widely used in personal finance apps today, which shows why there has been increased investments in conversational AI in the past few years. Despite the increased investments in technology, the first generation of chatbots in Fintech is yet to win over the majority of the consumers here in the US. However, as the technology progresses and develops, banks and payment firms predict a range of positions and capabilities for these automated assistants. Banks in the U.S expect that as conversational AI gets better, more and more consumers will turn to chat platforms, such as Facebook Messenger and WhatsApp, to conduct their financial affairs. And, when that happens, the AI chatbots—the digital representatives of these companies, will serve as the next frontier.

Lesson for U.S Fintech Companies to Learn From Their Contemporaries in Asia

Perhaps, there is a lesson for banks and other financial institutions in the U.S to learn from their contemporaries in Asia. Today, there are over 500 million connected smart phones in India while China will have more than a billion smart phones by the end of 2018. The fact is India and China have far superior national infrastructure to connect banks to consumers.  Chinese systems went AI first and were built for scale on the cloud way before the world adopted these technologies. Hence, Ant financial—an affiliate company of the Chinese Alibaba Group and Wechat, process far more transactions in a second than MasterCard and Visa put together. Since its launch in 2013, WeChatPay has grown exponentially and today it boasts over 800 million users, which demonstrates the power of combining social and commerce platforms. The same pattern is unfolding in India, where WhatsApp has begun beta testing payments with about 1 million clients. With 200 million active users, India is WhatsApp’s largest market and the addition of payments could see even greater expansion to the messaging platform. In Korea, K-bank and Kakaobank—the country’s first web-only banking system and have gained millions of users in a matter of months. K-bank is operated by telecoms company KT, while Kakaobank is supported by the KakaoTalk messaging application. Both provide a streamlined user experience including easy-online authentication and cheaper rates for loans and money transfers Moreover, companies in the South East Asian region opting to invest in Fintech have a reason to be optimistic. Mobile networks play a key role in enabling Fintech and the percentage of mobile connections in South East Asia is higher than the global average

The Bottom Line

Compared to the U.S, China, India and Korea have fewer banks. However, their governments created opportunities for Internet, Telecom and Technology companies to work with multiple licensing models to participate in the Financial Ecosystem. This was the game changer because of Technology (Mobile+AI) was used heavily to create newer products and distribution models to shake up the incumbents completely.

Final Word

We see North America is at an Inflection point for change. The significant population remains disenchanted with their banks for both service and product range.  Un-banked and Under-banked are going to be looking at Non- Traditional lenders as the incumbents never really met their needs. With the newer models attracting customers, Fintech disruption is already evident in Wealth Management and Lending. Moreover, faster Payments and other initiatives are expected to create level playing fields for Banks and Non-Banks. Internet Majors are already eyeing financial services without using a banking license. With the above factors weighing in and significant capital available for disruption, we believe the Mobile+ Social -financial platforms will begin to proliferate significantly as they did in Asia.  Fintech startups that aim to disrupt the market with AI should prioritize this trajectory for conversational banking, and work more collaboratively with companies like Amazon and Facebook, who are likely to spearhead this movement.

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