AI will change pretty much everything. The question is, are we, as a society, ready to handle the changes? Especially industries, which are viewed by the majority of people as “analogue” and conservative. The Financial Services industry is one of them. Or is it?
Actually, Financial Services are quite high tech and have been for some time. Payment platforms are very complex, as are banking platforms, and let’s not even get started on trading desks. Most financial institutions, though, simply don’t draw much attention to their technological advancements. So, while most end users still think a bank is merely a vault with lots of money, the Financial Services industry has evolved into a complex system and is definitely ready for the new age of AI.
Going About It Intelligently
There already are many companies, which develop trading and other financial algorithms for daily use. However, as advanced as they might seem, they are still only scratching the surface of what’s truly possible. In fact, even the World Economic Forum (WEF) recently published a report in which it emphasizes that AI “is fundamentally changing the physics of financial services.”
“It is weakening the bonds that have held together the component parts of incumbent financial institutions, opening the door to entirely new operating models and ushering in a new set of competitive dynamics that will reward institutions focused on the scale and sophistication of data much more than the scale or complexity of capital”, the report says.
Long story short, it’s going to be quite the challenging journey. The WEF also advices that financial institutions have to be very careful with AI: “A clear vision of the future financial landscape will be critical to good strategic and governance decisions as financial institutions around the world face growing competitive pressure to make major strategic investments in AI and policy makers seek to navigate the challenging regulatory and social uncertainties emerging globally.”
What To Expect
The WEF has several forecasts and expectations of what is going to happen. Some of the major benefits of AI coming into the Financial Services are:
- Lowering costs, especially for back-office operations
- Accelerating the completion of requested operations and services
- Improving decision making
- Tailor-made customer experiences with personal guidance and advice
- Collaborative solutions for shared problems
Of course, there are a lot more benefits, which will come out as the technology advances. But there are also some new challenges, which the Financial Services industry will inevitably face.
One of them will be data partnerships. Data will rule, so being able to use as much of it as possible, will be vital. That will also mean even better security, customer transparency and flexibility. Also, the market will endure quite the stress, and therefore companies will have to be very quick and agile with new offers and solutions to keep customers engaged.
Another change is that AI will lead to the creation of core company structure transformations. Financial institutions will have to become part-tech companies in order to be in line with the changes. This means that they will have to look for new talents and compete for IT professionals on the same level as tech companies.
Of course, then there are the regulators, who will surely bring many new rules as AI comes into the forefront. There are ethical dilemmas as well. Financial companies will have to be ready for some backlash from users at first and will have to be ready to properly explain to them the new technologies. This can potentially slow down the rate of introducing new services, which, in turn, will make competing with other players even more difficult. So, companies will have to be proactive at all levels, at all times, in order to make sure that all of them can progress together.