AI in Financial Services – Is your business ready for it?
AI is the current topic on everyone’s lips. It’s creating a revolution in every industry and the Financial Services sector is no different. While AI has the potential to radically change your business, are you just jumping on the bandwagon? Do you really understand it, or have you actually thought through the best way to use it?
We explore why you should be more cautious, before throwing yourself in.
AI use in the Financial Services world is on the rise. The FCA and Bank of England’s ‘AI in Financial Services 2024’ report states that 75% of firms are already using AI in some form, and 10% are planning to use it within the next three years. However, is everyone just diving into AI as that seems to be the latest trend? It appears that too many companies are getting caught up in the excitement of AI without thinking it through properly. How many work meetings and networking events have you been to where everyone is chatting about AI and appear to know what they are talking about, but do they really understand it or are they just trying to save face in front of their peers? There are such differing opinions on what AI is and how it should be utilised. It is a huge topic and needs a great deal of understanding before trying to bring it into your business.
When planned and executed well, AI can make a significant impact on helping to make processes more efficient but there are worrying examples out there of businesses integrating new AI tech like ChatGPT to analyse data and it not being correct.
To make your use of AI effective you need to:
Think about what you want to achieve
Your starting point should always be your end goal. What problem are you trying to solve? AI should help you achieve more with less.
It could be improving internal processes, simplifying forecasting, better supporting clients by adding a chatbot to your portal or improving cybersecurity. If you know your end goal, then you can work backwards and strategically plan for how AI can help get you there. Is AI even the right tool to get you there? Every business is different. Only by setting aside time to talk internally about this will you be able to determine the right path.
Decide which departments would benefit most
There are many areas of a business that could make use of AI but that doesn’t mean you need to implement it everywhere at once. Should you use it just internally or for external facing tasks? Test the water with a particular department, bringing it back to your end goal and where AI is needed the most. Once you have proven your concept then look at what other areas could benefit and make a plan to bring AI across the business strategically.
Ask if your clients are ready for it
You may be keen to introduce AI into client facing areas, but is that what your clients want? Recent research by Avaloq showed that 55% of UK investors wouldn’t want any AI involvement in their investment advice and 38% may be happy for a hybrid method of AI plus the involvement of their wealth manager. Considerations like this are key before you plough ahead with an AI project that may be the wrong decision for your client and business. Clients still want the human touch and can tell when they are getting an AI generated response.
Think about the risk involved
Too much reliance and trust has been put into AI without testing the outcomes and whether the data it is producing is accurate. More due diligence needs to be put in place before going ahead with an AI project to ensure that it is fit for purpose. If you are working with AI data, then be sure to check it. If it is wrong then you will be risking the reputation of your business, as well as potentially clients’ money.
Carefully select what technology to use
With new AI technology being brought to market regularly, you need to carefully consider which is the best to use. Look at suppliers’ use cases and check which reputable companies are already using their solution. Are their reviews good? Will it comply with regulatory standards? What guarantees do they provide? These are all considerations that need to be looked at in detail before working with a third-party AI provider.
Research the costs, it may be more than you realise!
A lot of companies jump on the AI bandwagon without understanding the full cost to their business. There could be research and development considerations which add to the total that may not be evident at the start of the journey. How much internal resource will it take to implement and maintain? Will you need more infrastructure to host it on? Plus, any ongoing costs of using a third-party service or further development to keep it up to date. Full investigation of upfront and ongoing costs needs to be done to make sure you don’t bite off more than you can chew!
Check if it complies with regulation
There are a lot of regulatory considerations when it comes to implementing anything in the financial services realm, and AI is no different. You need to see how any AI tech you use complies with Data Protection, Privacy, Resilience, Cyber Security Rules, Consumer Duty, GDPR and Conduct, to name a few.
Work with a third party for advice and support if this area is new to you
If you feel totally out of your comfort zone with AI but would like to explore how it may help your business, then consider working with a third party to look at how it could benefit you. They can talk you through the areas where AI could improve efficiencies, the strategy to help get you there and any cost considerations.
AI is an amazing new development and will drastically change the way we work in the future. The companies that will massively profit from it will be the ones who fully understand the way it can help their business and have a strategic plan to implement it, not the ones who jump in headfirst and drown in the uncertainty of it. Which will you be?
