Nearly 55% of banking and wealth management professionals believe artificial intelligence (AI), robotics and automation will shape the future of the global financial services industry. According to research by Avaloq, nearly 34% cited the increasing use of more open and collaborative platforms and 26% cited the rise of distributed ledger technologies and cryptocurrencies. The research also found that three of the top current areas digital infrastructures are delivering significant improvements in performance include: ensuring compliance under changing regulations, improved customer experiences and better cyber security. Superior customer experience was singled out as the most competitive advantage for institutions to have in five years' time. Nearly 41% of respondents cited this as their preferred competitive advantage and 19% for'operational efficiency'.
Ernest Hemingway was known for his stories about a lost generation, bullfighting, and big game hunting, but one does not generally associate Hemingway with ideas of innovation and disruption. When a character in the novel is asked "How did you go bankrupt?" he replies, "Two ways, gradually, and then suddenly". How better to describe the process by which innovation and disruption can creep up on an industry or an organization, resulting in a sudden shift in the landscape. Leading financial services firms are facing unprecedented pressures, from technologically savvy customers, from hard-pressed regulators to Washington DC politicians of all political spectrums, and from aggressive new market entrants. This wave of financial services innovation and disruption possesses serious potential to unsettle perhaps the most traditional and central industry in our economy.
Throughout history, banking has remained a closed industry, monopolizing the majority of other financial services. Total digitalization has brought changes to the industry. Fintech firms give users the right to choose an alternative. However, the PSD2 directive adopted in the European Union goes even further. It will disrupt the entire banking industry, completely changing the rules of the game worldwide through massive competition.
It's in the Bee Movie that we have our first encounter with the concept of Colony Collapse Disorder. The 2007 animated comedy film depicts the phenomenon of a mass disappearance of worker honey from the hive. In the film, bees, who generally, function as a very centralized organization decide to disappear from the beehive, leaving behind the queen bee. Without bees, the production of honey, fruits, agricultural crops, flowers and vegetables is hit because they are primarily responsible for pollination. Vittorio D'Orazio, Research Director- Banking and Investment Services, Gartner believes that the financial services industry is in the midst of a colony collapse disorder, as its delivery model changes in response to digital disruptions.
Artificial intelligence (AI) is poised to transform the financial services industry. But financial institutions are constantly grappling with identifying the right use cases for deploying AI. How can they ensure responsible deployment of AI and reap the benefits, while effectively navigating the associated risks? This report by Deloitte and the World Economic Forum explores the risks associated with deploying AI in financial institutions and presents strategies to mitigate them. We examine these risks through the lens of five frequently cited areas.