When one of the major players in the AI world says that artificial intelligence is too important to be left to technologists, it's time to sit up and take notice. Manoj Saxena, Chairman at Cognitive Scale (and former General Manager of IBM Watson) told FundForum International in Berlin that the next three to five years would bring incredible transformation driven by AI. Yet, Saxena warned, most CEOs and Boards didn't understand artificial intelligence, nor its importance as a strategic business capability. Here's what they needed to know right now. "AI today stands for both'artificially inflated' and'amazing innovations'", said Saxena.
Increasing market competition and economic uncertainties are prompting banks to re-examine customer needs and business processes in order to improve service aptitude and operating efficiency. Banks' massive data accumulation in financial transactions, customer portraits, market analysis and risk control provide a great environment for AI to flourish. In 2018, Chinese financial institutions invested about CN¥160.4 billion (US$23 billion) in technology, an increase of 10 percent over 2017, of which AI hardware and software-related investment accounted for 10.4 percent. The banking industry was the biggest investor in AI-related applications, accounting for 70 percent of all market purchases. A wide range of software programs, including those tasked with precision marketing and intelligent risk control platforms, accounted for two thirds of Chinese banks' AI purchases.
China surpassed the U.S. in financial technology (fintech) investment for the first time in 2016, according to Accenture's analysis of data from CB Insights, the authoriative global venture-finance data and analytics firm. Fintech financing in Asia-Pacific doubled to $11.2 billion from $5.2 billion in 2015 while fintech investment in the U.S. was $9.2 billion and in Europe it was $2.4 billion. Global investment in fintech was $23.2 billion. The growth in total value of fintech investments was due mainly to a few very large investments in China and Hong Kong, where just 3 percent of the deals accounted for nearly 43 percent of total fintech investment globally. The two accounted for 91 percent of all the fintech deals in Asia-Pacific.
There has been extraordinary growth in funding for financial technology (FinTech) ventures in recent years, during which FinTech innovation, and especially disruption, has been a near constant focus of media and publicity. Worldwide, over $60bn of investment has flowed into the sector in the past 6 years1, with funding in 2016 at more than ten times the level in 2010. FinTech's growth has largely been driven by the possibilities of implementing technologies such as big data, cloud-based solutions, AI, and machine learning within the financial services industry. However, the growth of the FinTech sector is also partly due to the post-financial crisis environment in which the financial services industry has faced increased regulation, challenging firms to keep costs and fees low, as well as increased appetite for disruptive challengers to compete against entrenched players. While lending and payments related companies within the consumer banking sector remain the largest targets of FinTech investment, one of the fastest growing areas of funding is investment management.
While the term "fintech" has been around for years, it's worth taking a fresh check out the industry in the face of rapidly advancing technology and a mess of latest players. The financial technology industry encompasses technology-enabled firms offering financial services, also as entities providing technology services to financial institutions. Fintech companies use technology to support financial transactions among businesses and consumers. Technological advances, changing demand for financial products and competition in financial services are all driving a replacement wave of fintech startups and investments that have drawn attention to the industry in recent years. Startup companies are creating products and services to penetrate new areas of the economic system and to vary the competitive landscape.