Financial technology, or Fintech, is expected to be the sector of the industry that will lead the charge in regard to Artificial Intelligence (AI) adoption according to a global study.
AI jumped into popular interest with the emergence of ChatGPT and widespread utilization – much of it in amazement and some with a hint of caution. AI is now the hottest sector in innovative technology as just about everyone is rushing to incorporate AI or at least understand if it will put them out of business or destroy their job.
According to Moody’s Analytics, Fintech is the leading sector for AI adoption with 18% of Fintechs currently actively using AI, double the percentage of respondents across all surveyed sectors. Traditional banking trails Fintech, with 12% of respondents actively employing AI. Insurance, Asset, and Wealth Management take 3rd place.
Approximately 70% of survey respondents expect AI to be transformative or have a big impact within the next 3 years. Everyone seems to be excited about AI in risk and compliance, with 90% of respondents anticipating the integration of AI in these vital areas of operation.
To quote the survey:
“The message is clear that [the] use of AI is about strengthening and enhancing the work that risk management and compliance professionals are accountable for each day. The findings show that the places early adopters or those trialing AI feel the most positive impact are in replacing manual processes (17%); augmenting staff performance (27%); or a combination of both (56%). And a vast majority (90%) of early adopters report AI is positively impacting the work they do in risk and compliance.”
On the other side of the fence, just 21% of respondents indicated that AI is not being considered – at least not today.
32% of respondents state that AI has already had a significant impact, and 59% believe it has had a moderate impact. Just 2% claim there has been no impact at all.
As for the biggest concerns, and there are a bunch, Data Privacy and Confidentiality along with Lack of Transparency in decision-making, top the list. Hard to imagine when your bank or brokerage becomes self-aware. It could happen.
79% of respondents agree that regulation of AI is important and policymakers need to get at it.
Only 16% expressed concern about their job, but then change takes time.
The six key takeaway, according to Moody’s is as follows:
- 9 in 10 early adopters of AI report that it is having a positive impact on risk and compliance, delivering an impressive range of benefits
- Outside of the early adopters, most firms have yet to embrace the use of LLMs, but there is broad agreement: AI technologies, including GenAI, will deliver advantages for risk and compliance.
- With two-thirds of respondents describing their data as fragmented or containing inconsistencies, the poor quality of internal data could be a barrier to AI implementation if firms can’t get a firmer handle on it
- There is a stark gap between the lack of awareness of AI-related regulation and the common agreement that new legislation is needed; therefore, those in the industry need to engage in dialogue with regulators.
- As the clamor for AI-augmented solutions grows, vendors need to communicate how they ensure data security, explainability, and quality of outputs.
- Widespread adoption of AI is predicted in the medium term, though perhaps less quickly than in other business areas, so risk and compliance leaders who perceive there to be speed and efficiency gains to be had from the use of AI need to build their business case based on evidence from early adopters.
The potential for AI to improve financial services for both consumers and businesses is enormous, but it is something you want to get right the first time – and not fail and try again.