AI Expected To Transform Financial Services Industry within 2 Years

A new survey released by the World Economic Forum and the Cambridge Centre for Alternative Finance (CCAF) produced in collaboration with EY and Invesco found nearly two-thirds (64 percent) of financial services leaders expect to be mass adopters of artificial intelligence (AI) in just 2 years compared to just 16 percent doing so today. These firms expect to use AI for purposes beyond cost reduction including revenue generation, process automation, risk management, customer service, and client acquisition.

In Transforming Paradigms: Global AI in Financial Services Survey, over 150 senior financial services executives in both FinTech and incumbent financial institutions responded to a range of questions on the impact AI will have on the industry, concluding that there will be a significant gap between firms that quickly implement AI and firms that lag behind.

Currently, 60 percent of firms invest less than 10 percent of their research and development resources on AI despite evidence of accelerating returns. Payoffs have shown to be especially strong between investment levels of 10 percent and 30 percent as well as investment levels of 30 percent and >40 percent.

"The comprehensive and global study confirms that AI is affecting the financial system at an accelerating pace," said Matthew Blake, head of financial and monetary systems at the World Economic Forum. "With the rising trend of mass adoption of the technologies throughout financial services, those firms that implement AI quickly look set to sprint ahead."

The study has also revealed executive fears surrounding AI bias and marketwide risks, with over half of executives saying they expect mass AI adoption to worsen bias and discrimination within the sector. Other marketwide risks were also identified.

This is a worry, but 70 percent of respondents also believe they are at least somewhat prepared to mitigate AI bias risks. Generally, firms using risk and compliance teams in AI implementation are most confident about their chances.

The report also identified a difference between how FinTechs and incumbent firms are expecting to use AI in their businesses. For example, a higher share of FinTechs are creating AI-based products and services, employing autonomous decision-making systems, and relying on cloud-based offerings. Meanwhile, traditional financial services players predominantly focus on harnessing AI to improve existing products.

"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," said Bryan Zhang, executive director of the Cambridge Centre for Alternative Finance.

"AI is transforming the financial services industry, and we can expect widespread adoption to continue," said Nigel Duffy, EY global artificial intelligence leader. "As the technologies start to disrupt business models and transform business functions, it's increasingly important for organizations to focus on the long-term implications of AI adoption: trust in AI, workforce transformation, and how customer and stakeholder value can be radically reimagined."

"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 organizations," said Donie Lochan, chief technology officer, Invesco. "Technological advances such as leveraging intelligence to define investments for customers tied to their personalized 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."