Juniper Research has found that Fintech platform revenues for unsecured consumer loans issued using machine learning technology are set to see a jump of 960% during the period 2016-2021, rising to $17 billion globally in the latter forecast year.
This rise is driven by advances in analytics and accessible computing power.
The new study, AI & Machine Learning: Fintech Dynamics, Disruption & Future Opportunities 2016-2021, found that machine learning spend in Fintech will advance rapidly, owing to the highly data driven nature of the market, meaning that AI integration is likely to spell substantial benefits.
Machine learning, a subset of AI, has seen a tremendous leap in activity since 2011, with substantial increases in VC and R&D investment. For example, two Fintech start-ups, Kabbage and ZestFinance, have collectively raised $500 million in funding alone. Meanwhile, vendors analysed in Juniper’s research have spent a total of $83 billion in R&D during 2015. Each of these vendors names AI as a part of core strategy.
Until recently, machine learning was too expensive and computationally time-intensive to break into the mainstream. Meanwhile access to extensive data sets for algorithm training were limited.
Presently, the ability to use GPU (graphics processing unit) hardware for processing massive and highly available data sets, along with unlimited affordable computing power in the form of distributed architecture has opened the market to a swathe of disruptive new players.
Juniper says AI is particularly useful for risk-assessment purposes, where variables from numerous financial and non-financial datapoints are assessed by algorithms to approve loans. This widens the addressable market for financial institutions considerably over traditional FICO credit scoring, where lack of credit history may mean loan rejection despite a real low risk for the lender.
Research author Steffen Sorrell said: “Where Big Data analytics offered retrospective business intelligence, machine learning offers predictive and even prescriptive capabilities.
“Data is key – and industries able to draw expertise from data scientists will be the first to capitalise on the AI opportunity.”
The whitepaper, Fintech AI ~ A New Kind of Trader, is available to download from the Juniper Research website together with details of the new research and interactive dataset.
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