How AI is Transforming Banking and the Trading Floor (Part 2)
As well as helping the banks that like to say yes, AI can help with banks that have to say no.
Goldman Sachs recently invested in a startup called Kensho that uses AI to decipher unstructured data such as online articles and social media, to spot trends. This can lead to banks being able to identify potential customer financial problems that might force the bank to withdraw credit.
Finally, with security being an ongoing concern for banking customers, it will come as no surprise to learn that 70% of FS executives are using AI technology to detect and deter security intrusions, according to data from our study. Perhaps more than ever before, with hackers using increasingly advanced tools, it’s technology’s turn to strike back. AI is a vital part of the battle.
The View from the Boardroom: AI in the Black
Investment in AI can bring support for innovative customer solutions and operational improvements, but what about its effect on profit margins? Can it drive revenue and growth? The answer is yes. In fact, based on the TCS research, banking and FS executives found that investment in AI helped them reduce production costs by 13%. Additionally, executives reported a 17% average revenue increase in the area of their AI initiatives.
It comes as no surprise that financial services staff are reaping the rewards of AI. In 2015, the average bank or FS firm spent $77 million on AI initiatives. Remarkably, four companies TCS surveyed spent at least $1 billion.
Beyond cost savings and investment, the industry must address AI’s impact on jobs. This isn’t unique to banking and FS, of course, but interestingly executives reported in our study that AI investment will in fact lead to significant job creation. Companies will have to add new jobs in order to develop and manage these developing technologies, which will necessitate new skills and approaches.
The banks we surveyed said AI resulted in an average increase of 10% in jobs in 2015 in the departments using the technology. They projected that number should increase to 13% new jobs on average by 2020, and 16% by 2025 – many of which don’t yet exist today.
There’s no doubt that AI is driving the banking and FS markets of tomorrow. This is according to executives who said that AI will be crucial to their ability to compete in the coming years. Some 59% said this technology was highly important to drive competitiveness.
Yet there are also challenges that must be addressed. For example, banking and FS executives admitted that managing the security risk of AI systems is of paramount importance. Other issues like the challenge of developing AI tools that were able to improve decision-making were also reported as potential buffers to the technology’s development.
Investing in the right AI technology can have a major impression on operational efficiency, but its success boils down to the customer impact above all else, and like any technological innovation, the best results will be realised only if they are improving the end user’s experience. So if AI can save time by pointing a consumer in the direction of the most appropriate financial product, then great. But if it gets in the way of a seamless experience and frustrates end users, then there’s a problem.
Ultimately, perhaps the best lesson to take from the TCS study is that the technology’s long term success will be defined by how AI enhances a customer experience or enables a banking employee to service a customer better. The good news is that it looks like AI has the capacity to do this in spades.