What single change would financial services executives wish for from one wave of a magic wand? Broadridge posed that question to the C-suite executives participating in its latest Digital Transformation and Next-Gen Tech Study. The result was a clear: more artificial intelligence.
AI is already changing the way financial services companies operate, and that transformation is poised to accelerate as firms target further expansion and integration of AI as a top strategic priority.
It’s no surprise that an impressive 71% of the 500 senior executives in financial services participating in the study say artificial intelligence has significantly changed the way their companies work.
“AI and machine learning are constantly evolving and becoming more intelligent,” explains the CTO of a Japanese broker-dealer participating in the new study. “AI is aiding us in automation, smart decision making, enhanced customer experience, research and data analysis, error reduction and increased business efficiency.”
With AI having a real impact on both workflows and the bottom line, firms around the world are pushing past the early adoption phase and working to scale AI across their organizations. More than half of survey respondents name digital transformation as the most important strategic initiative at their company, and AI ranks as the most important technology within these strategies.
While AI has existed for some time, it is only recently that computing power and data lakes have developed the collective power to offer responses that resemble human engagement. This has occurred at the same time as more powerful algorithms have become widely available. Generative AI tools like Chat GPT (Generative Pre-Trained Transformer) allow context-trained computers to offer “human-like” responses. The fact that financial services firms are pressing forward with AI, while trying to establish guardrails to mitigate concerns about data privacy, transparency and other issues, shows just how potent they expect this technology to become.
Predictive analytics: A digital crystal ball?
Rapid advancements in AI and machine learning (ML) could someday make another wish come true for financial services executives. The executives in the Digital Transformation Study are looking for a crystal ball that can help them see into the future. Specifically, they would like the ability to anticipate customers’ needs five years from now.
Executives today have a tough enough job dealing with immediate challenges and keeping their firms resilient in a difficult operating environment. However, given the breakneck pace of change in technology and financial markets, financial services firms must also be able to look ahead and prepare for the future. AI is getting better and faster at analyzing information and predicting future trends. It might not be the same as a crystal ball, but predictive analytics have the potential to upend traditional business and strategic planning, and to unleash powerful new tools for investing, client service and other core business functions.
Data management
Of course, C-suite executives know that change does not happen by magic. Financial services firms are doing the hard work required for full AI integration. For most firms, that means overhauling internal systems and processes for managing data.
AI and machine learning tools require clean, normalized data. However, only 19% of firms in the study have reached an advanced stage of developing an integrated data platform across their business departments. Most firms are still working toward implementing a central data fabric with a common ontology. Given that slow progress, it’s no surprise that systems for seamless data management rank near the very top of financial services executives’ wish lists.
Next-gen technologies driving transformation
AI is central to digital transformation strategies, but it’s hardly alone. To the contrary, other next-gen technologies are also having a sizable impact on the industry and attracting big investments. For example, amid all the turmoil in crypto, dedicated teams inside financial services firms and fintechs are quietly going about their business rolling out blockchain-based products that solve real-life problems. Distributed ledger technology (DLT)–enabled tools are live in bonds, structured products, equities, repo markets, life insurance, mortgages, annuities and healthcare claims.
In fact, 60% of survey respondents think DLT and blockchain will become the core of financial market infrastructure within 10 years—albeit with some hurdles to overcome first. Sell-side firms already see the value of tokenized assets. The buy side will see benefits once more businesses adopt the technology and network value grows.
While next-gen technologies like these promise many benefits, they also have risks. Financial services companies will have to manage these risks intelligently to remain competitive—and to stay ahead of individuals and groups who will try to use these technologies for nefarious purposes. After all, if we leave new technologies like AI and Bitcoin
BTC
Making magic with sound strategy
Since magic wands are in short supply, financial services firms will need to adopt the right strategies to harness AI and other technologies. The Broadridge study revealed several practical steps that leading firms take to accelerate transformation with AI and other technologies. First among them is shared vision. Firms need to establish a clear vision and understanding among business leadership and technology leaders throughout the firm. At the same time, firms must create an environment that cultivates innovation. Companies at the forefront of digital transformation have established cultures that encourage experimentation. Finally, leading firms don’t try to go it alone. Instead, they drive transformation by collaborating with the best partners in tech and fintech.
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