28 Jul The increasing importance of AI in financial services
A sea change is currently underway within the financial services industry, brought about by a collision of factors including mounting regulatory obligations, consistently rising expectations of consumers, increased competition from new market entrants, and heightened sophistication of digital threat. In its recently published research brief, Narrative Science explores the challenges and opportunities of AI adoption in financial services.
Adoption of Artificial Intelligence (AI) technologies is becoming increasingly common across a wide range of industries, and the financial services space is certainly no exception to this new norm. The Rise of AI in Financial Services – a new research brief published by pioneering Advanced Natural Language Generation (NLG) start-up, Narrative Science – offers a brief yet thorough review of the opportunities and challenges associated with AI adoption in financial services by combining the company’s own research with the results of a survey carried out by the National Business Research Institute with 112 executives.
AI adoption in financial services
“It is an important time for financial services companies to understand how AI may fit into their strategy as the rate of competition and innovation accelerates across the business landscape.”
Artificial Intelligence is a blanket term that refers to a vast ecosystem encompassing several categories and techniques, as visualized in the figure above. Within the financial services space, established firms are generally in the early stages of AI adoption. Just under one third of the aforementioned survey respondents indicated they used AI technologies, such as recommendation engines, predictive analytics, and voice recognition and response. Among those respondents that had not yet adopted AI tech, typical hesitations included fear of failure, uncertainty about the novel nature of the tech, and security-related concerns.
Despite its growing prevalence, many obstacles remain for firms looking to implement AI tech. A central challenge to AI adoption is siloed data pools that have arisen from the conventional divisions in business. Another important obstacle hindering the use of AI tech among financial services firms is an overall lack of available data science talent. In addition to these issues, regulatory hurdles also remain an impediment to further AI growth. In its research brief, Narrative Science suggests that these hurdles can best be overcome through increased transparency within the industry.
There is much to be said about the benefits of innovative AI technologies. Online wealth management services that provide automated, algorithm-based portfolio management advice – referred to as robo-advisors – are a fitting example of AI technology that is helping to enhance customer services. Other benefits of AI include improved productivity gains through automation, as well as the acceleration of fraud detection and minimisation of risk. The figure pictured below offers a look at the top reasons that financial services firms adopt AI-powered solutions.
Want to learn more? To read or download a copy (PDF) of the Narrative Science report – The rise of AI in financial services – click here.