Major financial disruption, the “buy now pay later”, an instant loan service, is becoming established more and more quickly.
Artificial intelligence (AI) is moving into our lives and seems convincing, since 70% of the world’s population would already trust AI to manage their personal finances1. At the origin of the acceleration of data processing, AI could represent according to estimates nearly 10% of European GDP in 20302. This digital shift is a change that has an impact on many sectors and is revolutionizing finance, banking and even insurance. New AI applications are appearing in e-commerce, credit management or robo-advisors, further broadening the spectrum of this investment theme rich in opportunities.
Buy now pay later, the credit card of the future?
Financial disruption of magnitude, the buy now pay later, an instant loan service, is established more and more quickly. Purchases are funded by Fintechs who receive commissions from merchants. This offer particularly appeals to Millennials, who increasingly refuse to use credit cards, whose interests are often negligible. The American Affirm3 thus multiplies partnerships, with for example Amazon or Shopify, and democratizes the uses of buy now pay later. Large retailers also benefit from it, with the giant Walmart in particular, which offers its customers to pay using this solution. Fruit of the precision of AI, this financial revolution is made possible thanks to the qualitative processing of data which makes it possible to precisely calibrate the risks. The acquisition of the Australian company Afterpay for $29 billion by Square at the end of summer 2021 alone illustrates the strategic issues arising from this new means of payment. With skyrocketing companies like Sweden’s Klarna valued at $46 billion, the sector’s potential continues to grow, well beyond estimates. This innovation, which already represents one euro out of four spent online in Sweden, seems to be in its infancy.
The massive processing of data promotes the development of new solutions adapted to customer profiles but also the automation of claims processing.
AI, an insurer offering…
The insurance sector is also undergoing profound change under the impetus of AI. The massive processing of data promotes the development of new solutions adapted to customer profiles but also the automation of claims processing. This technology seems capable of transforming the insurance of tomorrow, by replacing the traditional solutions of “detect and repair” by intelligent methods to “predict and prevent”. Driven by listed and innovative insurers, the sector is entering a new era, which should be beneficial to both insurers and policyholders.
… and protector against fraud
With 1.8 billion euros of annual fraudulent transactions in Europe4the explosion of e-commerce, the increase in international payments and the growing popularity of new online payment solutions, the fight against fraud is proving increasingly complex. To respond to these threats, machine learning – the self-learning of AI – uses the immense amount of data available to banks and financial companies. By making it possible to manage the processing of digital payments in less than 10 milliseconds, automation considerably reduces the risk of online fraud. A notable benefit since online fraud now accounts for nearly 80% of total fraud in Europe5.
At the dawn of the greatest economic and social revolution in history, the digitization of the economy is accelerating. Encouraged by a volume of data which should be multiplied by 40 by 20355 as well as the launch of emerging countries in this race in the future, the speed of development of AI is much faster than previous revolutions. This revolutionary technology should create a growth lever for the world economy estimated at some 14,000 billion dollars, or more than 12.7 billion Swiss francs, by 20355. The era of AI is just beginning!
2 PwC, 2020
3 The values are quoted for illustrative purposes. Their presence is not guaranteed within the portfolios of LFDE
4 KPMG, 2020
5 PwC, 2020