Will AI Disrupt Our Financial Systems?

Artificial intelligence (AI) is poised to significantly disrupt the global financial services system--creating both new opportunities and increased vulnerabilities--according to a recent August 2018 report, The New Physics of Financial Services: How artificial intelligence is transforming the financial ecosystem, published by the World Economic Forum (WEF) in collaboration with Deloitte. WEF predicts the eventual fall and elimination of mid-sized financial service companies as AI will benefit scale-based players that can compete on cost, and present agile players with new market opportunities in underserved niche segments. According to DBR Research, only 7 percent of banks with assets between $1 billion and $10 billion dollars have deployed an AI solution, a sharp contrast to 48 percent of banks with greater than $50 billion in assets. WEF predicts that early adopters of AI will transform their back-office operations from a cost center to a revenue-generating external service as a cloud-based "software as a service" (SaaS) provider. For example, U.S.-based Blackrock, one of the world's largest asset managers, has developed a hosted proprietary risk-analytics and portfolio management platform called Aladdin that utilizes AI machine learning as a differentiator.