Use of artificial intelligence technology in financial services to grow: report

Firms are increasing productivity and personalizing the client experience with AI.
DEC 19, 2016
Financial services firms are beginning to deploy artificial intelligence technologies to make themselves more efficient and better than their peers — and those without a strategy should develop one now, according to a new report. “It is the early days of AI in the financial services industry, but the technology is increasingly going to be more important to organizations to innovate and remain competitive,” said the report by tech firm Narrative Science. Nearly a third of financial firm executives said their business has adopted some early AI technologies, such as voice recognition and response, predictive analytics, and recommendation engines, which are tools to predict what a user may like among several given items. Firms are using it to boost customer engagement, improve productivity, accelerate fraud detection and minimize risk, and help consumers improve their spending decisions, it found. Although the definition of AI varies among experts, the Narrative Science report broadly considers it technology that emulates human tasks that require intelligence, said Kim Neuwirth, the firm's director of product management and a financial services expert. (More: Tools financial technology companies plan to bring advisers in 2017) One reason that use of AI is expected to grow within the financial services sector is because of the scale of the data the industry handles. “A lot of these technologies have been around, but what makes them useful today has been explosion of data,” Ms. Neuwirth said. “AI is more actionable and better with larger data sets.” Additionally, the use of AI to automate certain routine and manually intensive tasks “can be a game changer for the industry,” she said. In fact, 13% of firms said increasing worker productivity was the reason they've deployed AI technologies, the report said.
Reasons financial services firms use artificial intelligence
Source: “The Rise of AI in Financial Services,” by Narrative Science, Dec. 2016.
Use of AI to enhance customer engagement should be top of mind in the wealth management sector, where personalized communications and advice are being provided by digital wealth management services, or robo-advisers, Ms. Neuwirth said. Most digital advice platforms leverage AI in some capacity, she said. (More: Financial advisers must adapt quickly to competition from robos to stay in business: CFP Board) The wirehouses have been quick to respond with their own efforts to engage clients automatically and at scale, she said. Two big roadblocks to implementing AI are that data is often siloed between divisions of firms and the lack of data science experts to analyze and explain the data, according to the report. For AI to work well in the highly regulated financial services business, it also will need a level of transparency to satisfy regulators and allow the user "to audit decisions made by intelligent systems,” the report said.

Latest News

Advisors expect revenue boost this year as Secure 2.0 provisions kick in
Advisors expect revenue boost this year as Secure 2.0 provisions kick in

Most retirement plan specialists anticipate gain of up to 10%.

Debt has become a way of life for working Americans, report warns
Debt has become a way of life for working Americans, report warns

And they would have to work extra hard to pay it off.

Stock fragility near record levels, stirring memories of dot-com bubble
Stock fragility near record levels, stirring memories of dot-com bubble

BofA strategists highlight rising volatility's risk to largest US stocks.

Is Microsoft debt now safer than Treasuries?
Is Microsoft debt now safer than Treasuries?

DoubleLine PM raises an interesting, if uncomfortable, question.

Judge green lights Trump's federal workers buyout offer
Judge green lights Trump's federal workers buyout offer

Unions can't sue because they are not directly impacted.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.