The Cambridge Centre for Alternative Finance and World Economic Forum, with support from EY and Invesco, shed light on the evolving landscape of AI-enabled financial services.
AI (artificial intelligence) is expected to turn into an essential business driver across the financial services industry in the short run, according to a new global survey.
The survey, jointly conducted by the Cambridge Centre for Alternative Finance (CCAF) and the World Economic Forum, with support from EY and Invesco, sought to shed light on the evolving landscape of AI-enabled financial services.
Based on responses from 151 firms from 33 countries, the survey found that 77% of respondents anticipate AI to possess high or very high overall importance to their businesses within two years.
While AI is currently perceived to have reached a higher strategic relevance to fintech firms, incumbent financial institutions hope to catch up within two years, the report said.
About 64% of respondents anticipate they will employ AI within the next two years in all of the following categories – generating new revenue potential through new products and processes, process automation, risk management, customer service and client acquisition.
Currently, only 16% of respondents employ AI in all of these areas, with risk management being the usage domain with the highest current AI implementation rates (56%), followed by the generation of new revenue potential through new AI-enabled products and processes (52%).
AI is expected to become a key lever of success for specific financial services sectors, namely the asset management sector, where it is expected to turn into a major driver of investment returns.
Meanwhile, lenders widely expect to profit from AI-enabled credit analytics, and payment providers expect to harness AI for customer service and risk management.
Compared to incumbents, fintechs appear to be using AI differently, using it to create AI-based products and services, employing autonomous decision-making systems, and relying on cloud-based offerings. They are also more widely selling AI-enabled products as a service.
Incumbents predominantly focus on harnessing AI to improve existing products, which might explain why AI appears to have a higher positive impact on fintechs’ profitability, the report said.
In all sectors and entity types, quality of and access to data and access to talent are considered the main obstacles to implementing AI, with each of these factors indicated as a hurdle by more than 80% of respondents.
Almost 40% of respondents feel that regulation hinders their implementation of AI, whereas just over 30% perceive that regulation facilitates or enables it.
In particular, organisations feel most impeded by data sharing regulations between jurisdictions and entities, but many also deem regulatory complexity and uncertainty to be burdensome, the report said.
Generally, firms’ assessments of the impact of regulation tend to be more positive in China than in the US, UK or Europe.
Many firms are involving risk and compliance teams in AI implementation. Those that do tend to be more confident in their risk mitigation capabilities, the report said.
Nearly half of all participants regard bigtechs leveraging AI capabilities to enter financial services as a major competitive threat.
The full report is available here.