Harnessing the Potential of AI in the Financial Services Industry
Successful AI initiatives require support from management, strategic alignment, and full compliance with an evolving regulatory landscape.
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[Image source: Pankaj Kirdatt/MITSMR Middle East]
Financial institutions of all sizes are exploring ways to incorporate AI — from the largest banks with in-house developer resources to regional and small banks and credit unions that can add capabilities via vendors.
According to the Bank Director’s 2023 Technology Survey, 56% of bank executives and board members said they had discussed allocating budget or resources to AI.
Most were exploring use cases that touched on customer service, fraud detection, and/or prevention; additionally, around 50% saw enhancing sales capabilities or credit underwriting as potential applications.
Big global banks have experimented with AI for years, dedicating time, resources, and staff to solve various problems. Now, community banks and credit unions have the opportunity to examine how AI can help their own organizations — whether that’s fighting fraud, serving customers, or generating efficiencies. However, successful AI initiatives require support from management, strategic alignment, and full compliance with an evolving regulatory landscape.
FinXTech released Artificial Intelligence: A Real-World Approach report that explores potential opportunities and real-life use cases for AI in the financial services industry, how financial institutions can implement the technology and regulatory and ethical considerations.
Here are the key findings:
- Banks and credit unions are adopting AI as solutions become more flexible and widely available. Customer service and fraud detection/prevention are the top two use cases financial institutions are exploring.
- Generative AI — trained on large data sets and can produce text, images, sounds, and video — has gained broad interest. Regulators have also flagged its use as a concern, particularly due to data privacy and consumer protection issues.
- Given its broad potential use within the industry, individual financial institutions must develop their own approach to using AI.
- Many banks and credit unions are assembling cross-functional teams to identify and develop use cases for AI. Financial institutions will likely work with vendors to implement AI solutions, requiring additional due diligence.
- AI solutions rely on data, requiring organizations to enhance their data management and privacy protocols.
- Regulators are paying attention to AI, but their stance on the technology will evolve as they learn more about its impact on the financial services space. Ahead of specific rules and regulations, institutions should consider creating their own ethical framework as part of their approach to AI.
Keen to know how emerging technologies will impact your industry? MIT SMR Middle East will be hosting the second edition of NextTech Summit.
