Finance Reimagined & AI's Rise - Issue #457 February 29th, 2024

In a recent statement, Noshir Kaka, Senior Partner and Co-lead of Global Technology, Media & Telecommunications Practice at McKinsey & Company, highlighted the paradoxical nature of generative artificial intelligence (GenAI). While GenAI continues to captivate global interest, Kaka warns that its immediate effects may fall short of expectations. This anticipated shortfall is attributed to a significant disparity between available talent and the ambitious projections of businesses, casting GenAI as a promising yet presently underdelivering technological advancement.

Forbes vetted hundreds of companies, assessing a broad range of criteria including innovation, growth metrics, and the diversity of their leadership teams. Eligibility was restricted to startups with a significant presence in the U.S. and not affiliated with public entities. The evaluation revealed a dominant trend towards B2B services, with the sectors of Payments, Wall Street & Enterprise, and Business to Business Banking leading the charge, making up over half of the top 50 and capturing the majority of first-time recognitions. This shift underscores a strategic pivot away from consumer-focused spending in favor of more sustainable business models, especially in a climate of tightened venture capital. Meanwhile, sectors like Real Estate and Blockchain & Crypto face unique challenges, from market downturns to reputational recovery efforts.

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As the quest for blockchain's killer application continues, sectors ranging from supply chain management to cross-border payments have been touted as potential catalysts for widespread adoption. However, the spotlight has recently shifted towards artificial intelligence (AI), particularly with AI-focused tokens experiencing significant price increases in 2023, even as the broader crypto market showed minimal movement.

Artificial intelligence (AI) is revolutionizing the financial sector, enabling fintech and financial services to develop advanced embedded finance applications for digital and non-banking platforms. McKinsey highlights embedded finance's potential to change customer interactions with financial products, bypassing traditional banking interfaces. AI enhances these platforms with analytics for addressing challenges like identity management and fraud detection. Finastra's survey underscores Generative AI's transformative role, alongside Banking-as-a-Service (BaaS) and embedded finance, in delivering personalized customer experiences. Pooja Choudhary of our team spoke with Finastra's Chief AI Officer, Adam Lieberman, exploring the impact of their AI and embedded finance innovations on the fintech landscape.

Bud Financial, a leading data intelligence platform, has partnered with Fintech Galaxy, a pioneer in open banking and financial innovation, aiming to enhance the Open Banking ecosystem in the MENA region. This collaboration seeks to revolutionize the way financial institutions, fintechs, and businesses utilize and benefit from customer data. Sharing a common goal, Bud and Fintech Galaxy intend to use open banking and sophisticated AI-driven data enrichment to provide deeper insights into customer behaviors and financial needs, facilitating the creation of tailored financial experiences through the Open Finance FINX Platform.

Biz2Credit, a leading New York-based fintech firm specializing in U.S. small business loans, is expanding its reach to Abu Dhabi through a strategic partnership with Magnati, a payments company with backing from Brookfield. This collaboration will leverage real-time payment data from Magnati to enhance Biz2Credit's AI-driven lending platform, aiming to facilitate up to $1 billion in loans for small and medium-sized enterprises (SMEs) within the next 18 months, and annually thereafter. The initiative will draw on capital from international credit funds and local banks, marking a significant step in global financial collaboration and support for SMEs.

The Isle of Man Financial Services Authority (FSA) has entered a groundbreaking partnership with fintech startup Regsearch to harness the power of Regsearch's regulatory AI system, REGI. This move positions the Isle of Man as a leading FinTech hub, utilizing REGI's capabilities to enhance the FSA's website and improve service accessibility and satisfaction for financial entities on the island. The initiative promises to streamline compliance and reporting processes, saving businesses time and resources. This partnership originated from Regsearch's involvement in the Finance Isle of Man's InsurTech Accelerator Programme, highlighting the island's commitment to fostering innovation and supporting fintech growth.

A Chinese fintech company is leveraging OpenAI's Sora, asserting priority access via Microsoft's Azure, showcasing how mainland firms are eagerly aligning with advanced generative AI technologies. Despite these tools often being inaccessible directly within China, this move highlights the proactive steps Chinese businesses are taking to integrate cutting-edge AI solutions into their operations.