Finance is headed for AI mass adoption — and soon
Despite the hype, many organizations are facing an AI “reality check” this year. Everyone is buying into the technology’s promise, but difficulties in implementation are leading many firms to roll back plans.
The finance sector might be the exception to the rule though. According to a new report by the World Economic Forum (WEF) and Cambridge Centre for Alternative Finance (CCAF), organizations here are confident they are already reaping the advantages.
Just shy of two-thirds (64 percent) of financial services leaders expect to be mass AI adopters within the next two years, exploding from just 16 percent today. Aside from cost reduction, applications span revenue generation, process automation, risk management, customer service, and client acquisition.
More than 150 industry leaders from both fintech and incumbent financial institutions took part in the report, Transforming Paradigms: Global AI in Financial Services Survey. Findings painted a picture of an industry already well ahead with the technology. But they also highlighted a distinction between the use of AI by the new wave of fintech disruptors and industry incumbents.
A majority of fintech firms are developing AI-powered products and services, with the aim of automating decision-making and offering more variety in cloud solutions. Legacy firms, meanwhile, are using AI to strengthen financial services and systems, and expect their employment rates to drop by 9 percent within the next 10 years as a result of automation.
According to research by Accenture, banks adopting AI expect the technology to help cut IT operations costs by between 20-25 percent. As more operations are automated, AI will also allow bank employees to spend more time on “exceptional work”, or the 20 percent of non-routine tasks that drive 80 percent of value creation.
From a customer experience (CX) standpoint, AI could greatly enhance products. Predictive analytics could track spending patterns and help banks set credit limits; real-time sentiment analytics could provide customer support cues, while AI can also be used to identify fraudulent activities. TechHQ recently spoke to Revolut on how it uses machine learning to tackle FinCrime.
While other industries struggle to get to grips with AI and machine learning technology, particularly in discovering viable applications, the finance industry is already flexing its AI muscle. Indeed, 77 percent of respondents are anticipating AI to have significant importance in their businesses within two years.
With so many use cases for the technology — in improving products, experience, and internal operations — there’s plenty of room to innovate. But the growing digitization of the industry opens doors for further disruption: nearly half of respondents saw a new and significant competitive threat emerging in tech firms.
On the study’s findings, WEF Head of Financial and Monetary Systems Matthew Blake, said: “The comprehensive and global study confirms that AI is affecting the financial system at an accelerating pace.
“With the rising trend of mass adoption of the technologies throughout financial services, those firms that implement AI quickly look set to sprint ahead.”