Artificial Intelligence (AI) will shift from cost reduction to revenue generation in the Financial Services industry, according to a new global study entitled Transforming Paradigms.
According to a newly released global AI in financial services survey by the Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School, University of Cambridge and the World Economic Forum, artificial intelligence (AI) is expected to become an essential business driver across the financial services industry in the short run, with 77 per cent of respondents anticipating AI to possess high or very high overall importance to their businesses within two years and 85 per cent of the surveyed financial firms having already implemented AI in some way.
The study, to be launched 4 February at an event
in London, was recently highlighted at the World Economic Forum’s Annual
Meeting in Davos and was co-sponsored by EY and Invesco. It also shows 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 per cent) of respondents
expect to become
AI mass adopters within two years, simultaneously using AI for revenue
generation, process automation, risk management, customer service and client
acquisition within two years, compared to a current figure of just 16 per cent.
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 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 nine per cent of all
jobs in their organisation by 2030 while FinTechs anticipate AI to expand their
workforce by 19 per cent 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 give way to new revenue streams and
transform business functions, it’s increasingly important for organisations to
focus on the long-term implications of AI adoption.”
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
FinTechs appear to use AI differently from incumbents,
with 40 per cent of FinTechs mainly utilising AI to create new products and
services rather than mostly improving existing products, compared to 15 per
cent of incumbents.
Selling AI-based solutions as a service is becoming a
distinctive business model, currently adopted by 45 per cent of FinTechs and 21 per cent of incumbents, which allows firms to capitalise on larger and more diverse datasets through digital platforms.
Novel insights are increasingly provided by using AI
to analyse new or alternative datasets such as social media and geo-location
data, with 60
per cent of respondents making use of such data in their AI applications.
Data quality and access to data and talent are seen as
major obstacles to implementing AI by more than 80 per cent of respondents.
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