As Artificial Intelligence (AI) permeates more and more aspects of our everyday lives, so too is it having an increasing impact on the financial services sector. According to leaders in the sector, financial services have now started to delve into the AI realm, and players in the sector have started to incorporate the technology into their long-term organisational plans.

A report by the World Economic Forum and Deloitte Global discovered that AI is changing the very physics of financial services, opening financial institutions’ doors to new operating models. The report – which was published last August and which surveyed over 1,000 executives from US-based financial institutions – found that the top 30% of financial services firms are those which are more capable of integrating AI into their strategic business models.¹

The integration of AI led to quicker delivery of revenue and gains, in terms of cost, when compared to their competitors. Such high-achieving firms, the report shows, undertake three key practices: they embed AI into their strategic plans with an emphasis on organisation-wide implementation; they focus on applying AI to revenue and opportunities to engage customers; and they adopt a portfolio approach for acquiring AI.²

Ways AI is transforming the sector

A number of areas were highlighted as being potentially transformed by AI, amongst them:

• AI-enabled back-office operations will be turned into external services for customers, thus accelerating the rate at which these AI capabilities learn and improve
• Customers’ experiences will be increasingly centred around AI, automating much of their financial lives and improving their financial outcomes
• AI will allow for collaborative solutions built on shared data, which will make non-competitive functions more accurate, quicker and better performing
• Regulations on the privacy and portability of data will shape financial institutions’ ability to deploy AI, with such regulations becoming as important as traditional regulations in terms of firms’ competitive positioning
• The most challenging aspect in terms of adopting AI will be the need for existing HR talent to transform to be able to manage the technology. Firms which don’t manage to transition their talent to match the technology could fall behind
• AI will create new ethical issues, requiring the re-examination of principles and supervisory techniques to address grey areas and regulatory uncertainties which make firms reluctant to adopt some of the technology’s more radical capabilities.

How common is AI use in financial services?

Another report published by Broadridge Financial Solutions – a technology provider to banks, brokers, assets managers and other businesses – which surveyed over 150 financial services professionals in the US, found that the sector’s most common use for AI is data mining, with 30% saying they use it for this purpose.³ This was followed by post-trade processing (20%), market analytics (13%), and trading systems (12%).

The vast majority of respondents (84%) said their company was in or past the level where AI has reached proof of concept, i.e. the stage where evidence shows that integrating AI is feasible. Almost 30% of companies said they had moved past that stage and now had AI pilot programmes, while 20% had AI in full production.

Only 10% said they had yet to make plans to use AI in the future.

Malta as the ultimate AI launchpad

Malta has, in the past months, made forward strides in establishing itself as a centre for AI. During the DELTA Summit in early October, which brought together world leaders in the area of emerging technologies, the government launched a national strategy aimed at making Malta the ultimate AI launch pad.

The strategy details what Malta’s plans are, in order to create the necessary legal and infrastructural framework which make the Island an attractive jurisdiction for AI companies and start-ups to call home. It also lays out the plans for investment in education in this emerging technology.

With the increasing relevance of AI and its likely transformative potential for the financial services sector, Malta looks set on embracing the technology and cultivating the framework to position itself as a leader in the area.

¹ https://www2.deloitte.com/us/en/insights/industry/financial-services/artificial-intelligence-ai-financial-services-frontrunners.html

² https://www.forbes.com/sites/louiscolumbus/2019/08/15/why-ai-is-the-future-of-financial-services/#b9773a138475

³ https://www.zdnet.com/article/financial-services-sector-forges-ahead-with-artificial-intelligence/