Artificial Intelligence (AI) will be an essential business driver with broad adoption in the global Financial Services industry, according to a new global study entitled Transforming Paradigms:A GlobalAI in Financial Services Survey.
The study was conducted by the Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School and the World Economic Forum and was co-sponsored by EY and Invesco.
The study is based on 151 responses from 33 countries, with FinTech firms and incumbent financial institutions representing 54 and 46 per cent of the sample, respectively, providing a broad view of how AI will affect Financial Services in the next two to 10 years. Respondents included C-level executives and other relevant senior management across different Financial Services sectors. The research was jointly conducted in Q2 and Q3 of 2019 by the CCAF and the World Economic Forum. The study was recently highlighted at World Economic Forum’s Annual Meeting in Davos.
The study highlights that Artificial Intelligence (AI) is expected to be an essential business driver across the Financial Services industry. 77% of respondents anticipate AI to possess high or very high overall importance to their businesses within two years and 85% of the surveyed financial firms have already implemented AI in some way.
It also suggests Financial Services organisations will move away from mainly leveraging AI for cost reduction purposes to using it for new revenue streams. Nearly two-thirds (64%) of respondents expect to simultaneously use AI for generating new revenue potential, process automation, risk management, customer service and client acquisition within two years, compared to a current figure of just 16%.
The study further discussed perceived hurdles of AI adoption, emerging firm-level and market-level risks, as well as regulatory implications. The study also revealed that surveyed incumbent financial service providers expect AI to replace nearly 9% of all jobs in their organisation by 2030 while FinTechs anticipate AI to expand their workforce by 19% during the same period.
Matthew Blake, Head of Financial and Monetary Systems at the World Economic Forum commented, “The comprehensive and global study affirms AI is impacting the financial system at an accelerating pace. With the rising trend of mass adoption of the technologies throughout financial services, there will be a significant gap between firms that quickly implement AI and firms that lag behind.”
Bryan Zhang, Executive Director of the Cambridge Centre for Alternative Finance said: “This empirical research underscores the growing importance of harnessing AI in Financial Services, which gives new impetus for firms to develop a holistic and future-proof AI strategy.”
Nigel Duffy, EY Global Artificial Intelligence Leader said: “AI is transforming the financial services industry and we can expect widespread adoption to continue. As the technologies start to disrupt business models and transform business functions, it’s increasingly important for organizations to focus on the broader implications of AI adoption: trust in AI, workforce transformation, and how customer and stakeholder value can be radically re-imagined.”
Donie Lochan, the Chief Technology Officer of Invesco said: “The report highlights the amazing opportunity ahead of us in financial services for using artificial intelligence and machine learning to the benefits of our customers and our organisations. Technological advances such as leveraging intelligence to define investments for customers tied to their personalised goals, improving customer experience through the use of intelligent bots, additional alpha generation via insights from alternative datasets, and operational efficiencies through machine learning automation, will soon become the norm for our industry.”
The report’s other major findings include:
Nearly half of all respondents see a major competitive threat in ‘Big Tech’ firms leveraging AI capabilities to enter Financial Services.
FinTechs appear to use AI differently from incumbents, by creating AI-based products and services rather than mostly improving existing products.
Selling AI-based solutions as a service is becoming a distinctive business model for FinTechs, leveraging the economies of scale in AI by harnessing larger and more diverse datasets through universal digital platforms.
Novel insights are increasingly provided by using AI to analyse new or alternative datasets such as social media and geo-location data.
Data quality and access to data and talent are seen as major obstacles to implementing AI in Financial Services.
While views of regulatory influence on AI implementation diverge, most firms feel impeded by data-sharing regulations between jurisdictions and entities as well as regulatory uncertainty and complexity.
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