Leveraging AI to Transform Financial Services
Financial services are a leading force in the digital transformation of the economy, as estimates predict that the potential savings for banks from AI applications could reach $447 billion by 2023.
Citigroup reported that the financial services industry is the second-largest spender on AI services, trailing the tech sector. Various financial industry leaders have increasingly adopted analytics and big data as part of their AI operations, some of which include credit unions, banks, investment firms and fintech companies.
The advent of AI has profoundly changed traditional operating models of financial institutions, shifting strategic priorities and overturning the competitive dynamics of the financial ecosystem. As AI is used to simplify and optimize processes to accelerate performance in credit decisions, trading regulations and financial risk management, its vast impact on this field are starting to be seen.
Applications of AI in FSI
There has been some form of AI in the fintech ecosystem for decades. However, consumers did not benefit directly from AI until datasets and computing power grew large enough to show their true potential during the mid-2000s.
There is a plethora of data in the financial services industry. Transaction data, product sales, customer data and operational data are all used to manage the operations of an institution, with marketing and security operations some of the prime examples. Utilizing this data to identify patterns, create new efficiencies and harness new insights is one of the significant drivers of AI in the financial services industry.
Companies that are operationalizing AI understand that AI applications require continual data annotation. Consequently, these services and costs are built into their AI lifecycle plans. In a recent study by Omdia, Lenovo and Nvidia projected that AI software revenue for financial services use cases will grow from $2 billion in 2020 to $9.1 billion in 2025, totaling $32.3 billion spent in five years. By leveraging AI, the banking and financial industry can offer their clients more accessible, more convenient and safer ways to access, spend, save and invest their money.
Opening New Doors
Omdia’s quarterly AI enterprise contracts database shows that financial services are one of the key industries announcing AI contracts, particularly those for digital transformation initiatives.
The World Economic Forum (WEF) and Deloitte Global’s 2018 report on how AI is transforming the financial ecosystem also revealed that AI is changing the nature of financial services, weakening the bonds that hold together the parts of incumbent financial institutions and enabling the creation of entirely new business models.
Some of the key findings from the report that are highlighted to show the impact of AI acceleration on financial services include: (1) by transforming AI-enabled back-office operations into external services, organizations will accelerate their rate of improvement while making others dependent on these capabilities to stay competitive; (2) institutions can escape a price race to the bottom by using AI to differentiate themselves and (3) introduction of self-driving finance, where AI is a critical component of customer experiences, which automates many elements of a customer's financial life and enhances their financial outcomes.
Though Pinsent Masons fintech lawyer Luke Sanclon notes that companies in financial services should review data practices, including how they obtain, manage and use data, and if specific new processes are required to implement AI systems so that customers trust them, the systems are effective and meet all legal and regulatory standards.
Take a chance to leverage AI for your own business
If you are intrigued by the journey of AI, particularly regarding the way it is shaping and transforming the FSI, then make sure you secure your place at the AI Summit Austin & IoT World Expo, where leading industry experts will be sharing their insight, knowledge and expertise on this and much more.
Presented with the opportunity to gain further insights into the development and execution of financial AI services while connecting with experts in the AI industry, the AI Summit Austin will offer an unrivaled reach to decision-makers in the technology marketplace, leveraging more than 100 recognized brands trusted for research, information, education and networking.