The beginning of the road for AI in finance, the best is yet to come

AI is just one of several technologies that banks and other financial institutions are using to improve internal processes and bring new experiences to their customers. This is borne out of necessity: if traditional industries don’t embrace advanced technologies in the right use cases there is a real chance of disruption. Why would HSBC, for example, let a challenger like Starling Bank out-innovate them?

Both the large and emerging players in the finance industry are opening their arms to AI. AI-based chatbots, for example, are increasingly be used as the first point of contact for customers. This point was reiterated by HSBC’s AI programme manager, Sebastian Wilson, during a recent roundtable hosted by Information Age — big banks are not standing still, because they realise the incredible level of service and personalisation that can be achieved when technology is used in the right way. It’s easier for the disruptors, they don’t have data silos and they’re largely based in the cloud, but the incumbents have resource.

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AI targeting

“Banks are also using AI to develop and target specific customer groups with highly personalised rates, offers, and pricing,” according to Jonathan Shawcross, managing director of Banking at Gobeyond Partners.

“Targeting key life events (such as buying a house) is nothing new in financial services. However, AI can improve the simplicity, speed, and precision of this marketing. In turn data generated is then used by the technology to ‘learn’; further improving targeting and consequently deepening customer relationships over time.”

The best is yet to come

There is no doubt that the finance industry is in the midst of a transformation, largely because of advances in technology and the increased competition between the Davids and Goliaths of the world. But, there is a real sense that best is yet to come — “the truly transformational applications of AI is still very much ahead of us,” believes Shawcross. “We should expect to see large financial institutions really beginning to deploy highly intelligent, fast learning systems to reduce friction in both sales and service experiences.”

Kam Dhillon, principal associate at Gowling WLG, agrees that while there is greater innovation in the financial markets, “the use of AI in finance is currently nascent”.

AI in finance is on the map

The CTOs and technology leaders of financial institutions do not have their heads in the sand. They know how important AI will be to their organisation’s business model moving forward. In one way this is represented by the emerging job functions at both the large incumbents and the smaller disruptors. Lloyds Banking Group has a head of robotics, automation and AI operations, and Starling Bank has a head of AI. In every business in the finance sector, no matter the size, there will be growing teams dedicated to AI and related technologies.

“AI has enormous potential to redefine how financial services firms work, how they create products and services and how they transform customer experiences” — Shawcross

AI in finance will grow in importance as it represents a significant opportunity to improve the online customer experience; less effort, more personal and faster resolutions. The technology is also able to leverage the huge amounts of customer data that is stored in the finance sector, which now thanks to PSD2 and Open Banking will be able to shared between third parties, to customise marketing messages and in turn, enhance sales hit rates.

On the other side of profit and loss, Shawcross says that “AI also represents an opportunity to cut costs and reduce risks. Given interest margins show no sign of improving in the short term, CTOs remain under huge pressure to reduce costs. On the cost side, robotics can be used successfully to automate low complexity processes. Whilst, on the risk side, AI can help financial institutions reduce fraud and money laundering risks through pattern detection, voice and image recognition.”

There is certainly a cost and risk benefit to adopting AI, but at the same time there are also risks presented by the technology, “on a practical, ethical, legal and reputational level,” according to Dhillon. “AI is complex and multifaceted and must be managed effectively. Subsequently, it is crucial that firms fully understand the technology used in AI and the governance around it,” she explains.

The AI ethical play is a conversation that needs more visibility as the technology pervades every industry, not just finance. After all, without trust there is no innovation.

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Implementing AI

Shawcross advises organisations to invest time into understanding how to seamlessly integrate robotic and human processes. “Firms,” he says, “must be mindful of when robots should hand over to humans, for instance when discretion or decisions are required or during more complex processes.”

The big fear, as robots take over simpler processes and tasks, is that employees will be made redundant. As the technology advances and becomes more capable, organisations — now — need to think about how to upskill their people alongside this acceleration.

“The automotive industry is a great example and one that financial services firms could take inspiration from,” suggests Shawcross. “By using this model they can help their teams become skilled technicians who oversee the work of robots, intervening when issues arise rather than performing the tasks themselves. This human transformation requires CTOs to work closely with their business and HR counterparts early in their planning cycle to enhance chances of success.”

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...