This article describes most of the AI activity occurring within financial institutions and fintech suppliers then compares and contrasts the two. It also identifies the challenges associated with deploying AI:
“Financial services were one of the first sectors to understand the promise of the Big Data revolution, and the wave of new technology that has come with it – including Artificial Intelligence (AI). AI is a powerful tool that is already widely deployed in financial services. It has great potential for a positive impact if companies deploy it with sufficient diligence, prudence, and care.
AI is on its way to becoming mainstream in Financial Services within the short term. FinTech companies are more widely leveraging AI to create new products and services while Incumbents mainly use it to enhance existing ones. A larger share of FinTechs is pursuing a more product-oriented approach to implementing AI, by selling AI-enabled offerings as a service.
In contrast, Incumbents tend to focus more on leveraging AI capabilities to foster process innovation within existing product portfolios. There is a trend towards AI mass adoption, with half of all AI Leaders having simultaneously implemented AI in several key areas such as generating new revenue potential, process automation, risk management, customer service, and client acquisition. All AI Leaders expect to be mass adopters within two years, solidifying the hypothesis that there are significant economies of scale in the application of AI in Financial Services.
While FinTechs currently place more emphasis on the strategic importance of AI to their business, the majority of both Incumbents and FinTechs expect AI to become a significant business driver within two years.
AI has the potential to super-charge financial services and transforms the way services are delivered to customers. It could allow more informed and tailored products & services, internal process efficiencies, enhanced cybersecurity and reduced risk.
Approached properly this can provide significant benefits for the firm, its customers and wider society. Disruptive technology is a fact of life and it is not the strongest businesses that survive but the most adaptable to change.
While innovation in finance is not a new concept, the focus on technological innovations and its pace have increased significantly. Fintech solutions that make use of Big Data analytics, Artificial Intelligence, and Blockchain technologies are currently introduced at an unprecedented rate. These new technologies are changing the nature of the financial industry, therefore creating opportunities for Fintech startups to offer more inclusive access to financial services.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group