How AI and Technology Are Reshaping Finance in 2025

The financial sector is undergoing a major transformation, driven by advances in artificial intelligence (AI) and digital technologies. From AI-powered financial advisors to data-driven lending for small businesses, these innovations are expanding access to financial services—but challenges remain, particularly in cryptocurrency regulation, as outlined in Fintech News.

At a recent conference hosted by the MIT Shaping the Future of Work Initiative, experts discussed key trends shaping the digital economy. Here are four ways AI and technology are changing finance.

1. Generative AI Could Replace Traditional Financial Advisors

AI is already used in budgeting apps and customer service chatbots, but its role is expanding. According to economist Randy Kroszner, generative AI may soon offer personalized financial advice, potentially replacing human advisors.

“I think that will become much easier,” Kroszner said, noting that AI could make tailored financial guidance more accessible to lower-income households. “With AI, it should make it much, much cheaper to [offer] something that’s bespoke for people who don’t have a lot of resources.”

However, AI isn’t perfect. While studies show AI can personalize advice, large language models still need supplemental tools for accuracy. Kroszner emphasized that users must ask the right questions and critically assess AI-generated recommendations.

2. Real-Time Data Is Helping Small Businesses Secure Funding

Historically, small businesses struggled to get loans due to limited credit history or inconsistent cash flow. But lenders are now using real-time financial data—such as transaction records—to assess creditworthiness.

“Small-business funding has become very data-heavy and data-driven, and there’s now much more cash-flow-based funding for small businesses than ever before,” said Antoinette Schoar, a finance professor at MIT.

Companies like Stripe Capital, Square Funding, and Amazon Lending are leading this shift in the U.S., while Alipay has revolutionized small-business financing in China.

“You can basically get funding from the Alipay platform based on the orders that they see come through, rather than just having to take a loan when you don’t have a credit score,” Schoar explained.

Kroszner added that granular transaction data helps lenders make smarter decisions, such as adjusting credit limits or interest rates.

3. Consumers May Trade Personal Data for Financial Perks

Could people exchange personal data for financial benefits? Kroszner suggested scenarios where insurers offer discounts in exchange for health monitoring.

“There are a lot of privacy problems with that, but someone might say, ‘I’m willing to make that trade-off to basically have the insurance company monitor my glucose level and monitor my [calorie] consumption on a real-time basis and then give me incentives for acting better,’” he said.

However, Schoar warned that such deals can backfire, citing research on credit card users who struggled with complex terms despite initial perks.

“What we have seen in the credit card market is that people are not fully rational and they often misunderstand themselves and their own self-control,” she said. “I very much hope that we will become better at helping them make better choices.”

4. Crypto Markets Are Becoming More Concentrated—and Risky

Cryptocurrency was once seen as a tool for financial inclusion, but the market is now dominated by a few major exchanges like Binance and Coinbase, raising concerns about systemic risk.

“We now have a market that is very concentrated,” Schoar said. “If we cannot ensure that enough players survive, then we might actually be at a place where a few very large players have true market power and extract a lot of rent.”

While crypto was initially a “free-entry nirvana,” the lack of regulation has led to consolidation, making the sector vulnerable to shocks from a single exchange’s collapse.

AI and digital innovations are democratizing finance, but risks remain—from data privacy concerns to crypto market instability. As technology evolves, policymakers and businesses must balance innovation with consumer protection to ensure an equitable financial future.