The financial-services industry is rapidly adopting Artificial Intelligence (AI), thus taking a key step on the road to staying competitive while complying with new regulations. Once the transition has been made, the amazing benefits of AI solutions are immediately apparent. More about this journey of opportunity and tremendous potential.
The financial-services landscape is rapidly transforming
Hundreds of startups are reinventing traditional banking using Machine Learning Algorithms to improve and expand, for example, credit offerings, insurance options, personal finance services, and regulatory software. Financial Institutions are collaborating with startups to improve customer service and expand with new products and services. These new entrants and Fintechs are highly agile and cloud enabled, putting enormous pressure on traditional financial services institutions to develop new business models across the different products/services. On top of that, regulations such as PSD2, as well as the Open API economy, are driving the new Banking-as-a-Service model.
AI as a key enabler to accelerate the digital transformation
Artificial Intelligence (AI) is rapidly changing how financial institutions operate, manage data, and interact with customers. A blend of three advanced technologies—machine learning, natural language processing and cognitive computing—AI has begun a revolution of profound implications. Most banks have already had a glimpse of AI’s transformative power in the form of chatbots, robo-advisors, and Robotic Process Automation (RPA). Many financial institutions acknowledge that AI is a key enabler in accelerating their digital transformation, allowing them to keep up with changes driven by regulators, changing customer preferences, and advancing technologies.
Changing operating models and shifting competitive dynamics driven by the rapid adoption of AI
According to the IDC, worldwide revenues for cognitive and artificial intelligence (AI) systems will reach $12.5 billion in 2017, an increase of 59.3% over 2016. A compound annual growth rate (CAGR) of 54.4% is projected through 2020, when estimated revenues are expected be more than $46 billion. Heavily regulated markets such as banking and securities investment services are among the early growth drivers, representing a quarter of worldwide spending on cognitive/AI solutions. Stringent compliance requirements are key drivers for these segments, providing innovations in fraud and risk detection.
Taking advantage of advanced analytics tools with a focus on forecasting future events and behaviors allows businesses to conduct what-if analyses to predict the effects of potential changes in business strategies. Predictive analytics, data mining, big-data analytics, and location intelligence are just a few categories of advanced analytics. Additionally, companies in this sector are adopting cognitive-based program advisors and recommendations to better match products to clients.
AI solutions are thus central to creating significant value—from streamlining and automating financial process tasks to delivering data analytics and insights that allow bankers to make informed decisions with speed and accuracy. This results in an increase in profitable growth, decrease in risk, business model scale and will provide customized service to the always-on customer. Artificial Intelligence thus provides the tools necessary to meet the challenges and opportunities of the ever-shifting financial landscape of the 2020s and beyond.