Blog: How Artificial Intelligence Is Already Disrupting Financial Services – Barron’s
Artificial Intelligence Photograph by Nik Gaffney
Digital technologies drive business disruption. Today, artificial intelligence (AI) is at the forefront of financial industry disruption, allowing these firms to look differently at operations, staffing, processes, and the way work is done in a human-machine partnership. In PwC’s 2019 AI survey of US executives, financial services executives said they expect their AI efforts to result in increased revenue and profits (50%), better customer experiences (48%), and innovative new products (42%).
AI encompasses an array of technologies, from fully automated or autonomous intelligence to assisted or augmented intelligence. Financial firms are already deploying some relatively simple AI tools, such as intelligent process automation (IPA), which handles non-routine tasks and processes that require judgment and problem-solving to free employees to work on more valuable jobs. Banks have been using AI to redesign their fraud detection and anti-money laundering efforts for a while, and investment firms are starting to use AI to execute trades, manage portfolios, and provide personalized service to their clients. Insurance organizations, in turn, have been turning to AI—and especially machine learning (ML)—to enhance products, pricing, and underwriting; strengthen the claims process; predict and prevent fraud; and improve customer service and billing.
But before financial institutions can reap all of AI’s benefits, they must first overcome challenges, including security, privacy, bias, and regulatory issues. The greatest challenge may be the need to win customer trust: ensuring that AI systems are trustworthy is the top challenge of 40% of the financial industry executives in our 2019 AI survey.
Many of these leaders plan to improve the trustworthiness of their AI initiatives in 2019. Sixty-four percent of them plan to create AI models that are explicitly transparent, explainable, and provable; 60% intend to improve AI security with validation, monitoring and verification; and 54% expect to improve governance with AI models and processes.
Another challenge facing financial institutions is the shortage of workers with the tech skills and expertise needed in today’s AI-enabled business world. Currently, almost a third of the financial executives in the AI survey are worried that they won’t be able to meet the demand for AI skills over the next five years. Almost 60% said they plan to implement AI-inclusive continual learning initiatives to upskill their employees. Slightly over half of respondents intend to develop a workforce plan that identifies the new skills and roles AI deployments might require.
On its own, AI is a potent technology, but its power grows exponentially when it’s combined with technologies such as analytics, blockchain, and the internet of things (IoT). An impressive 60% of the financial industry executives we surveyed said integrating AI and analytics to gain business insights was one of their top 2019 priorities. Another 40% cited AI’s convergence with other technologies as a key effort this year.
Of course, the finance industry isn’t the only sector looking to AI to innovate, improve customer experiences and boost profits. For example, in the 2019 AI Survey, just as many healthcare leaders (45%) as financial services industry executives expect AI to improve decision making. And while leaders in media & telecom (54%) and consumer goods (52%) agree with financial services executives (50%) that using AI can increase revenues and profits, only 33% of finance industry executives said they expect AI to create more job roles than it eliminates.
One of the biggest AI differentiators for financial services, compared to other industries, is that finance executives believe AI will create new privacy challenges (49%), second only to healthcare leaders at 51 percent. Of course, healthcare (55%) and finance services (52%) are also the most concerned about managing risk, fraud and cybersecurity threats. Perhaps that’s one reason that, in our survey, financial services (64%) along with energy and utilities (67%) are the most likely industries to create transparent, explainable and provable AI models to enhance customer understanding, which is critical as customers increasingly demand visibility into how businesses use their data.
As businesses across sectors embrace AI, it will continue to offer unique opportunities, challenges and inherent risks to every industry. However, financial services remain leaders when it comes to creating AI solutions that balance customer experience and profitability with trust and transparency.
Scott Likens is an Emerging Technology Leader at PwC.