Fintech Innovation Lab Startup Grads Grab Hold of AI Boom

The newness of AI as a game-changer may have cooled, but it continues to be a sought-after element among this year’s graduating startups from the Fintech Innovation Lab New York.

The recent demo day included nine companies developing ideas that included Reality Defender's cybersecurity resources for detecting AI-generated content used by bad actors to commit fraud, and Qumis with its AI-assisting platform for analyzing insurance policies.

A rundown of the demoing companies can be found here.

While not every startup in this year’s class focused on AI, the increased leverage of the technology was to be expected as evidenced by the lab’s 2023 class dipping into this space and the overall attention AI gets these days.

In a separate interview conducted after demo day, Maria Gotsch, co-chair of the FinTech Innovation Lab, said the conversations with institution partners in the fall help frame how each class of applicants takes shape. “Not surprisingly, in almost every conversation that we had with the 40 financial institution partners, AI came up as something they were interested in,” Gotsch said. “So, when we went out to the market, we made a point of targeting those kinds of companies because it was of high priority to everybody.” Those priorities include finding potential tools with AI that could help financial institutions meet regulatory needs, she said, such as spotting deepfakes and establishing resources to protect against newer risks.

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Gotsch is also president and CEO of the Partnership Fund for New York City, one of the cofounding organizations, alongside Accenture, behind the New York lab.

“What we heard from the financial institutions was definitely also a theme of wanting to learn from the startups who are out there on the leading edge in these different perspectives,” said Steve Murphy, senior managing director, financial services industry solutions lead with Accenture. Murphy is also executive sponsor of the lab.

Accenture is no stranger to AI, having made a series of deep investments in this space in recent years, eyeing the potential it foresees.

Murphy said some 90% of the companies in the finalist class for the lab this year were either direct AI plays or use AI as part of their solution, which plays well with the needs of incumbents in the financial sector. “While there was an element of the financial institutions learning what’s going on and just kind of exploring, better understanding the technologies, and how they can fit into the regulated environment, we saw one interesting event just as we finished this year’s class,” Murphy said. “One of the companies actually got acquired by a financial institution.”

Related:AI, Data, and Crypto in Play at Fintech Innovation Lab Demo Day

Acquired by NuBank for undisclosed terms, Hyperplane, which did not demo, developed a platform that uses specialized LLMs to let financial institutions offer personalized consumer experiences. “There was definitely an interest to bring that capability and the talent in-house,” Murphy said.

The financial sector can tend to be reticent about adopting new technologies or methodologies, especially considering the regulatory scrutiny many financial institutions may face. Though AI can open up new frontiers that do not have deeply established guardrails in place, it seems that financial institutions cannot ignore the possibilities the technology might offer, especially as AI skyrockets in use and spread compared with other emerging technologies.

“It’s a boom versus a gradual ramp,” Gotsch said. “I guess the two technologies, for the just about 14 years that we’ve been running, I would contrast it to is digital currency and the cloud and they both went through interesting journeys.”

Digital currency, she said, started out with crypto, which went through phases where financial institutions felt they could not touch it, but then needed to learn about it. Then financial institutions wanted to know what the compelling use case would be for them. Regarding the cloud, Gotsch said financial institutions also took a gradual approach, first with a few taking early steps into using it followed by a mix of adoption across a 10-year effort.

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“In the early days of the lab,” she said, “the common question to these early-stage companies was … ‘Where are you building your solution?’ And the answer was, ‘On the Amazon cloud, of course.’” That might not sit well, however, with institutions that require solutions to be on-prem. Gotsch said much of the financial sector has looked into a dual strategy that includes private cloud within a third-party provider while some continue to maintain data rooms.

The lightspeed spread of AI, however, seems to have pushed the financial world to take notice and interest in ways they might leverage such tools. “It’s the generative AI and the putting it in the hands of kind of the average person that has dramatically accelerated -- that’s why I call it sort of a boom factor,” Gotsch said. “It was not a gradual increase in interest. It was, ‘Yeah, we’re doing things with AI,’ to ‘We’re doing things with AI! We want to learn things about AI.’”

For Accenture’s perspective, Murphy concurred with the depiction of the AI boom. “We see it as a pervasive technology that’s going to be providing value and leverage throughout the value chain of all of our industries,” he said. “One of the things that we started to see some good examples of in this year’s class and I think, and I hope we will see in next year’s and beyond is now, in addition to the companies being aimed at helping the financial institutions just execute well on base camp use cases …We see there’s high opportunity and great impact and value to be had.” This could include customer service and sales, marketing and content creation, or even such functions as copilots for regulatory compliance or underwriters, he said.