The role of AI in an age of accelerated digital transformation in financial services
It is impossible to discuss the role of AI in financial services without highlighting that 2020 was hugely disrupted by COVID-19 and the ripple effect is expected to last for years. Financial Institutions digital transformation strategies previously defined for 2020 quickly unravelled, exposing the inefficiencies to react and respond quickly when the pandemic gripped the world at an unprecedented speed. The reality is AI is encountered by most people from morning until night.
There has been debate over the true definition of AI as the expectations on what is deemed as ‘real intelligence’ change so often. At a high-level, AI as a field can be described as any technique that enables machines to solve a task like how humans would.
It could be leveraging Machine Learning, which utilises algorithms to allow computers to learn from examples without needing to be explicitly programmed to make decisions; or Natural Language Processing, which is focused on generating meaning and intent from text in a readable, natural form, or Computer Vision, which is focused on extracting meaning and intent from visual elements including images and videos.
The rise of fintech and new technologies over the last decade has been significant and this has impacted how customers engage with organisations and in turn has transformed the financial services landscape. Changing customer expectations, fierce competition, increasing regulatory pressures and the strain to improve operational efficiency has seen the industry force itself into a reactive process where speed to market became even more vital for survival.. A new era of open banking has enabled systems to quickly and seamlessly integrate with new platforms and applications. Physical banks and paper systems are quickly being outdated and replaced by robust digital ecosystems, evident by the increasing emergence of new digital only challenger banks.
Digital transformation put simply is to rethink what we already create based on new technologies available. It is the process of modernising what we have done before. A digital transformation strategy must tailor an organisation’s response to crises, changing customer behaviour, and broader market conditions. It is here that AI can truly be leveraged.
Financial organisations are investing huge amounts of capital in digital capabilities such as chatbots, artificial intelligence (AI) and open APIs. The main advances over the past sixty years have been advances in search algorithms, machine learning algorithms, and integrating statistical analysis into understanding the world at large. The positive impacts that AI is having on financial services is growing.
Many companies and sectors lag in AI adoption. Developing an AI strategy with clearly defined benefits, finding talent with the appropriate skill sets, overcoming functional silos that constrain end-to-end deployment, and lacking ownership and commitment to AI on the part of leaders are among the barriers to adoption most often cited by executives.
AI presents technological opportunities like no other. Unleashed from the orbit of science fiction, this is a real-world technology that is ready to be implemented in any business – today.
The capabilities of AI technologies will continue to grow exponentially as vast data sets needed for training AI solutions become more accessible. The time to move on AI is now. Low barriers to entry will bring ever fiercer competition for AI talent, AI patents and AI capabilities.
AI adopted early will transform the way financial institutions organise, run, accelerate and achieve growth. By implementing new innovative technologies, financial organisations will endeavour to reduce costs and create better experiences for customers and employees alike. This requires organisations to completely rethink their overall business operations including their workforce, a cultural shift is required to embrace new ways of working and technologies.
The uses and capabilities of AI continue to grow and change every day. This article highlights essential factors and advantages to be considered and further exploration is encouraged. AI should not be thought of as a business tool or extension of technology but rather as a transformative cultural change that needs to be considered in a very broad, multi-dimensional context.