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A pocket-sized financial advisor underpinning the future of personal finance

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By Rolands Mesters, CEO and co-founder of Nordigen

With the world increasingly moving into a digital sphere, every aspect of our life is following suit. While digital banking is undoubtedly growing in general, with the market estimated to reach over $30 billion by 2026, one new trend is set to personalise and innovate the technological era of banking even further. Introducing autonomous finance. 

Autonomous finance, or simply auto finance, is the delivery of personalised financial services and products through artificial intelligence (AI). Essentially, the term describes a programme that will autonomously create, execute and manage a financial plan tailored to the individual user. The plan is developed based on specific characteristics of the client, such as financial goals, age, bank balance, types of transactions, risk factors and more. The application takes on the role of a financial advisor, gathering information from bank accounts, neobank accounts, budgeting apps, and others to create a clear picture of the user’s finances and create a strategy fit for them. It also takes on the role of a personal financial assistant, as depending on the plan, it can also manage cash flow and investments on behalf of the client. The move toward this type of technology (referred to as “self-driving finance”) is driven by the increasing need for customer-centric experiences within commercial banking

Auto finance’s limitations without open banking

While autonomous finance applications can be created and can function well on their own within specific bank’s ecosystems, their true potential can only be accessed through the collaboration of auto finance and open banking. When functioning within one bank, the AI financial advisor can only interact with the information gathered from one bank account. This limits the validity and accuracy of the eventual plan provided, as the AI is not able to access the entire range of information from all financial accounts, instead being limited to one section of data. The exception being users that only have one bank account, however current financial trends show that customers are gearing towards opening additional accounts in neobanks and fintech solutions

Open banking, on the other hand, allows for financial data aggregation, integrating all existing accounts into one place, facilitating the secure quick sharing of financial information without additional manual input from the user. The AI could then analyse through all of the data possible in seconds, using it as a basis for financial decisions, combined with market knowledge that it also would have access to. So for example, if a user frequently deposits money to a specific account or pays for a particular service, the AI would take note of that and could prompt the customer to automate this process in the future. Additionally, if the plan created for the client prioritises investments to reach a certain goal, the AI could autonomously invest in assets that match the risk level and needs of the profile. The options could either be presented to the user to decide on case-by-case, or if the client consents, they could also be decided on by the AI itself, running in the background with occasional updates and results.

What does the future hold for auto finance? 

While a certain amount of AI-powered technological autonomous services already exist, such as Regov Technologies’ asset management system that automates client risk assessment, the AI that will fully take over your finances is still somewhere in the near future. There are many opportunities for growth in the industry and only the future can tell how far along this technology can take us. While there’s a lot to look forward to when AI-powered “self-driven finance” becomes the day-to-day reality, the way things will eventually evolve will also depend on regulation & policy decisions in the future. So far, what we have for sure is the opportunities granted to us through the introduction of open banking, allowing for financial apps and data integration, which could open many doors for future innovations and customer-centric experiences. 

Author: Rolands Mesters

About the author

Rolands Mesters is the CEO and co-founder of Nordigen, the only freemium open banking API that connects to more than 2,100 banks making it the largest network of bank connections in Europe. Rolands is a sales and growth hacker who is passionate about fintech and alternative lending. Nordigen began as a data analytics company that builds solutions for categorising and analysing bank account data. In December 2020, the company launched Europe’s first free open banking account data API. Rolands has been featured in the Forbes Latvia 30 Under 30 list as well as being featured in TechCrunch, Sifted, and the Financial Times. Rolands regularly shares fintech insights and analysis on open banking at top international fintech events, and is considered one of the foremost experts on open banking worldwide.

#DigitalBanking #AutonomousFinance #AI #OpenBanking

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