The Future of Fintech: AI, Compliance, and the Evolving Economic Models of Financial Services

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As fintech continues to evolve, one thing is clear: it’s far from dead. In fact, fintech is poised for a new beginning, driven by artificial intelligence (AI) and the demand for greater efficiency and innovation across financial services. The transition we’re witnessing today, from early internet-era solutions to cloud-based services and now AI-driven platforms, is reshaping the very nature of finance. AI is not only changing the way we approach financial data but is fundamentally altering business models, compliance, and customer engagement.

AI: The Next Frontier in Fintech

We’ve seen fintech grow from putting existing financial products online to becoming a core element of almost every industry through solutions such as cloud infrastructure and mobile-based financial services. Today, AI is powering the next cycle of innovation. Traditional banking systems, long reliant on human labor for compliance and customer service, are increasingly looking at AI copilots and agents to take over routine tasks and deliver real-time insights. This shift has the potential to augment the roles of thousands of professionals, transforming the way financial institutions operate.

For example, compliance officers—one of the fastest-growing roles in financial services and they are likely to see much of their work streamlined by AI. At large financial institutions, where compliance departments can account for a significant percentage of the workforce, AI can improve accuracy, cut costs, and reduce the time spent on mundane tasks. This is particularly relevant as fintech companies like Archive Intel, a Social Leverage portfolio company, have developed AI-driven tools for communication archiving, with the potential to make these processes more efficient than traditional manual review of communications across email, social media, iMessage, WhatsApp, Blogs, etc.

In addition, we are seeing the work of traditional analysts across hedge funds, asset managers, and investment firms changing quickly. In a world where Excel & VBA skills were once a differentiator amongst candidates, the expectations quickly changed to those with Python or R coding skills. Now with AI, the analysts and investment professionals that are leaning into the AI copilots, are finding the most success. Finchat.io which Social Leverage invested in, continues to push the boundaries of what is possible. Leveraging their own segments and KPI data alongside some of the most respected fundamental data sources, they are saving investment professionals hours of work each week. Their AI not only outperforms the competition including OpenAI, but their charting, screening, and UI/UX continues to set them apart. The team ships at blazing speed and new features are put in front of clients on a regular basis. There are numerous AI copilots for finance popping up every day, but the true moat will be those with data.

Rethinking Economic Models in Fintech

One of the enduring myths in the fintech world is that if you become a bank, you’ll be valued like one. This misconception stems from a belief that fintechs with bank licenses will be pigeonholed into bank-like price-to-book (P/B) multiples, which typically cap valuations. But the reality is more nuanced. Fintech disruptors, with their tech-driven business models, can outpace traditional banks in both profitability and growth potential.

Consider the case of Nubank or American Express. Both hold bank licenses yet trade at multiples far higher than traditional banks, thanks to their ability to generate superior return on equity (ROE) and maintain high margins. This is possible because fintechs often have lower costs to serve, thanks to digital distribution, and the ability to generate revenue from both interest and fees, giving them a much higher asset turnover. This makes fintech models not only more nimble but also more attractive to investors seeking long-term growth.

New Players Shaping the Future: CarbonArc and StreamOS

As AI reshapes fintech, a new wave of innovators is emerging, pushing the boundaries of what’s possible in the data-driven world of finance. One of the most exciting entrants is CarbonArc, founded by Kirk McKeown. CarbonArc is creating a consumption-based data marketplace, enabling users to access and pay for the data they need on demand. This model aligns with the growing trend toward flexibility and scalability in how data is consumed, which is critical in an era where AI-driven applications require vast and varied datasets.

Powering the CarbonArc financial stack is StreamOS, a revolutionary finance platform created by Ajay Krishna. Both McKeown and Krishna bring over a decade of experience in the hedge fund industry, and they’ve applied their forward-looking vision to make data consumption seamless and scalable for the masses. This pay-as-you-go model is exactly what’s needed in a world where data drives decisions, and organizations must adapt quickly to stay competitive.

As the data world continues to evolve, it’s clear that the competition between platforms like Databricks and Snowflake, which are each vying to attract data vendors, will only intensify. By offering consumption-based pricing models and embracing the power of AI, CarbonArc and StreamOS are set to disrupt the traditional landscape and push fintech into an exciting new future.

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