Financial Services Are Being Shaped by Artificial Intelligence

Artificial intelligence (AI) is in the process of transforming a variety of models in the global financial services industry, a global survey jointly conducted by the Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School and the World Economic Forum suggests. The study, supported by EY and Invesco, demonstrates that AI is changing how financial institutions generate and utilize insights from data, which in turn propels new forms of business model innovation, reshapes competitive environments and workforces, engenders new risk dynamics and poses novel challenges to firms and policy-makers alike. The survey, which gleaned responses from 151 financial institutions, including both incumbent firms and FinTechs hailing from more than 30 countries, confirms AI as a crucial business driver across the industry in the short term. Notably, AI adopters do not appear to have specific modi operandi for implementing AI; instead, 64% expect to become mass adopters within two years, proving the growing potential of AI to stimulate innovation and growth across a wide range of business functions. FinTechs and incumbents alike are moving from mainly using AI to reduce costs to utilizing its capabilities for revenue generation, albeit pursuing different AI strategies to achieve this. Most incumbents primarily use AI to enhance existing products and services, whereas many FinTechs use it to create new value propositions, as shown in the chart below.