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    Fintech, Smart Contracts and Blockchain Powered by AI

    As in the insurance industry, artificial intelligence (AI) technology is being rapidly adopted in the financial services industry (Fintech) and other highly regulated and compliance-heavy industries (Regtech). For example, AI has been used to make decisions on offering financial services to consumers and businesses, detecting fraud and automating “Know Your Customer” reviews, as well as anti-money laundering reviews. AI has also streamlined contract reviews for a heavily contracts congested industry, so that banks can better predict which terms have a higher risk of default or have a higher compliance red flag.

    One significant area of Fintech that may benefit from AI in the coming years is blockchain and smart contracts. Currently, smart contracts are gaining prominence because of the emergence of blockchain technology and the popularity of cryptocurrency. In particular, there is more acceptance of the verification of transactions on a public or private blockchain. A blockchain is a sophisticated technology for a distributed ledger that, in theory, more securely records transactions. Smart contracts are programs that execute based on parameters agreed by two or more counterparties. Smart contracts may either be coded entirely in standalone software, coupled with a traditional agreement, or partially governed by rules agreed to by the parties. Smart contracts have been used or are proposed to be used in various industries, in particular, the banking industry.

    AI technologies that can be applied to smart contracts range from rule-based systems such as expert systems designed to make decisions based on rules and input, to more adaptive systems, such as neural networks, knowledge graphs and logic. One area important for smart contract is natural language processing (NLP). AI and NLP could be used with smart contracts in at least two aspects: to negotiate and agree to terms on behalf of people and to generate the smart contracts. These contracts may be programmed to negotiate terms for price and quality of certain goods using well-known AI game-playing algorithms. Parameters can be established for certain gap filler terms, such as ranges of price and range of quality that can be adjusted dynamically, and fixed inputs by users for various types of goods. But they are no panacea. Care should be taken, for example, to record that an offer and acceptance to the terms of the agreement have been provided by the smart contract, and AI-powered negotiation acting as agents on behalf of real people, as offer and acceptance is one of the cornerstones of a binding contract.