As a Fintech software development company, we get a lot of queries from clients regarding different applications they can make. More than that, they want to know how these applications can be made better. One technology that is transforming the entire financial industry is machine learning.
With efficient algorithms and the capability to sift through complex data easily, gathering insightful data, ML is disrupting this industry.
In this post, we will answer a few common questions that we get from clients. Hopefully, these will help clear some of the doubts that you too might have.
Can Machine Learning help with making decisions regarding Credit Score?
Yes, it can. One of the biggest benefits that machine learning service offers to the financial sector is predictive analytics. And decision-making and credit scoring are both benefiting tremendously from it.
You see, fintech companies and banking institutions earlier used rule-based credit scoring systems using data like age, gender, occupation, etc. But now, they are using ML-based credit scoring systems. They are now able to operate in more delicate environments and make decisions about a person that are more accurate.
Also, by approving loans regulated by ML-based credit scoring systems rather than just rule-based, banking institutions and other fintech companies optimize money circulation.
You will also be able to track the performance of loans by taking into account the saving and spending choices of a person. ML can determine which kind of customer is more reliable and trustworthy, which will reduce the cases of bad loans. or NPAs (Non Performing Assets).
This has led to an increase in the number of money lending apps. That has also made the processing of loans quicker while minimizing inefficiencies. A better client risk profile approach also makes them more accurate than the conventional underwriting process.
Is there a way Machine Learning can reduce the risks associated with Insurance too?
Absolutely! In fact, ML is redefining the way you evaluate insurance policies. Fintech apps are being used to assess risk because financial tools are a major driver of this industry. Businesses can determine a person's level of risk by looking at their activity.
The auto industry is a great example for this. IoT and Fintech app development have made it possible for this industry to assess a person's driving abilities through a mobile app. That helps determine their risk level.
In fact, there are multiple use cases of machine learning service in insurance.
There has been a sharp rise in the fraud cases in the settlement of claims process. That has led to exponential loss in this sector. In fact, the Coalition against Insurance Fraud (CAIF) conducted a study in 2022 that indicated the annual fraud cost of Life Insurance is approximately $74.7 billion.
By automating fraud detection audits and offering cutting-edge solutions like speech-based claims processing, fintech software reduces the scope of any expensive errors. AI converts these claims to text, simplifying and streamlining the documentation and claims management process. The speech inputs can also serve as voice-based biometrics to verify the claim at the same time.
Earlier, insurance underwriting relied heavily on employees to analyze historical data and come to conclusions. Another challenge was working with unstructured systems and processes while they attempted to reduce risks and provide value to customers.
By offering Machine Learning algorithms that gather and make sense of enormous amounts of data, process automation makes the underwriting process simpler. Additionally, it enhances the performance of rules, controls straight-through acceptance (STA) rates, and guards against application mistakes.
Underwriters can concentrate only on complex cases that may need manual attention as most of the process has been automated.
If you want to enhance personalization, then customer segmentation is a critical step towards it. It improves customer satisfaction, product design, marketing, and budgeting. Machine learning tools examine customer data to uncover trends and insights.
Tools with AI assistance accurately identify customer segments, which is a difficult task to complete manually or using traditional analytical techniques. A financial software development company can make an efficient tool for customer segmentation that will make it easier for you.
There are other use cases of ML that you can check in the image below.
What if I want to make a Trading Application? How can Machine Learning help me with that?
Machine Learning is now helping trading platforms thrive by creating algorithms that will benefit them the most. Finding patterns is the secret to profitable trading. In the past, traders looked for patterns in market data and made predictions based on those patterns to increase the profit from their trading activities. These tactics facilitate the buying and selling processes in particular conditions.
Technical trading indicators are mathematical calculations based on data about prices, volatility, and other factors that traders frequently look for patterns in.
Although it is possible to monitor the market and place trades using these types of strategies, doing it manually makes it slow and erratic. Machines operate more quickly and precisely.
When using a high-frequency trading platform that can process thousands of transactions per second, it is frequently advantageous to encode strategies in an algorithm that will give maximum returns.
The majority of trades conducted today are algorithmic, which is better than manual trading. However, there is still a catch. To find pertinent patterns and create an algorithm that can take advantage of them, it still depends on humans. Additionally, because of fierce competition, returns from algorithmic trading have decreased recently.
This is where the benefit of machine learning consulting services comes in. ML outperforms conventional algorithmic trading in a number of ways. Large data sets can contain patterns that ML algorithms can find. In order to use algorithmic trading strategies, they are used to identify associations in historical data.
One of the trickiest, time-consuming, and difficult aspects of algorithmic trading can be accelerated and automated by traders with the help of machine learning (ML). That provides a significant advantage over rules-based trading.
So if you are thinking of making a trading app, machine learning is your best bet.
Users are becoming more aware about managing their wealth. Is there a way Machine Learning can build a solid foundation for an Asset Management software?
For a while now, investment funds have used sophisticated algorithms to create reliable projections and simulations. Therefore, asset and wealth management providers have been able to revamp many of their procedures and are able to provide new services like wealth management tools. This has been noticed by fintech companies, who are incorporating these solutions into apps so that users can benefit from them.
Users can now directly manage their bank statements and complete significant transactions from any of their devices using these apps. This has almost eliminated the need for middlemen. Wealth management has thus been able to eradicate pointless procedures, assisting in the reduction of overhead costs.
Why should I choose Narola Infotech to build my Fintech Application?
When you are building software related to finance, you wouldn’t want just anybody to develop it. Even when we look for a service provider, we first establish if it has the experience, credibility, and the authority in that field.
Narola Infotech is a Fintech software development company with over 17 years of experience. Our 350+ IT experts have successfully delivered more than 3000 projects with a project delivery rate of 100%. Over the years, we have worked with clients (including Fortune 500 companies) in 50+ countries. Due to our customer-centric and insights driven approach, we have received a Clutch rating of 4.9/5.
If you want to develop Fintech software that is focused on quality, we are a Custom fintech app development company here for you. All you have to do is contact us, and our experts will connect with you to discuss the details of your dream project.