3 May 2023
Artificial intelligence & financial services: cutting through the noise
Financial Services industry to be a leading adopter of Artificial Intelligence
We believe that the Financial Services industry will be one of the leading adopters of Artificial Intelligence (AI) technologies within its value chain due to the de-materialised nature of the products being provided, the large data-sets being created by customers and the existence of talent within the sector to lead the adoption of AI. Today there are several examples of AI playing a role across all Financial Services verticals (e.g. credit, insurance and payments) where adoption of the technology is leading to significant and demonstrable benefits to companies, including lower costs, additional revenues, as well the bypassing of current infrastructural limitations using alternative data for example. Currently, Financial Services account for 19% of total IT spend on AI and AI is expected to generate US$1.2 trillion of additional value for the financial industry by 2035.
AI to contribute significantly to global GDP
90% of the world’s available data was produced between 2016 and 2018 and increased AI adoption is expected to lead to a 1.2% increase in global GDP by 2025. Despite AI being an emerging technology for several decades, recent changes to the size of data being generated, the ability to process such data at low cost and advances in the statistical techniques underpinning AI (e.g. Deep learning), are currently driving a rapid acceleration of AI adoption.
Opportunity for growth market companies
In 2018, 83% of global investment in Artificial Intelligence across M&A and VC / PE was in the United States or China. With the exception India, we are unlikely to see governments and large corporations drive AI utilisation in the same manner as that being observed in the United States and China. This will create opportunities for private sector firms who either co-opt best-practice; develop capabilities in house; or purchase services from AI focused providers in other markets to develop larger “moats” against local competitors.
We hope that this paper provides a helpful insight into the state of AI for readers and contributes towards demystifying this broad field and its applications. It is our conviction that as computational capabilities and data generation continues to grow exponentially and understanding the basics of AI will become as important as knowing how to read and write.
Hype versus reality
In this white paper, we aim to parse the “hype” from the reality with regards to the explosion in investment and proposed applications of Artificial Intelligence across several industries over the last 24 – 36 months. We consider the various sub-segments that constitute modern AI and highlight real-world applications of AI in the financial services landscape, considering each of the following sub-sectors: Payments; Credit & Savings; Insurance and Capital Markets as well as Marketing and Customer service which cut across these sub-sectors.