As artificial intelligence worms its way into healthcare, entertainment and nearly every other facet of business, financial service leaders expect they are next and see far-reaching effects roiling the industry within the next two years.
Almost four out of five senior executives at financial firms and fintech companies said AI will be of major strategic importance in two years, according to a survey released by the World Economic Forum and the Cambridge Centre for Alternative Finance. AI will expand beyond current applications and into purposes like cost reduction, changing revenue generation, process automation, risk management, customer service and client acquisition, the survey said.
Investors expect AI to have similar impacts on industries beyond finance, as everything from healthcare to manufacturing and education are using the technology to overhaul business models. Last year, 1,356 AI-related startups in the U.S. raised a record $18.5 billion, according to the National Venture Capital Association.
According to the survey, about two-thirds of the 151 respondents from 33 countries said they expected to be mass adopters of AI technology.
“AI is affecting the financial system at an accelerating pace,” Matthew Blake, the World Economic Forum’s head of financial and monetary systems, said in a statement. “Those firms that implement AI quickly look set to sprint ahead.”
Traditional financial firms will be hindered in their adoption of AI by the systems already in place and the way they have handled data in the past, said a report accompanying the survey. Switching to AI will bring a heavy cost and contain the risk of the technology being “bolt on,” limiting its advantages.
However, while fintechs will be able to start fresh with new systems that will have a lower cost, they don’t have an existing customer base, the report said. Building customer scale is proving to be “expensive and time-consuming.”
One worrisome note in the survey is that almost half the respondents predicted AI will exacerbate the risk of discriminating against minorities in the consumer lending market. That’s because already-existing biases in data sets will be propagated by AI and hard to root out.
Another drawback, the report said, is that respondents expect AI to eliminate as much as 9% of jobs in their organizations by 2030. That implies the loss of about 336,000 positions, the Cambridge Centre for Alternative Finance said in a post on the University of Cambridge Judge Business School’s website.
- Alphabet Inc. CEO Sundar Pichai said at the forum’s gathering in Davos last month that he believes that AI is more profound than fire or electricity.
- Alphabet’s Google was partnering with Citigroup and a local credit union at Stanford University on a financial services project that would offer checking accounts, according to the Wall Street Journal.