Bringing AI to bear on financial services

Irish Examiner

6 hours ago

Fintech companies have transformed the financial services world through the application of digital technologies; AI and GenAI are likely to bring about further disruption and transformation in what is already a fast-moving sector.
Keith Power, a partner at PwC Ireland, says technology is by now fundamental to the functionality of the financial services sector. As it becomes more sophisticated, this not only opens up a world of possibility but also introduces new risks.
'Digital banking platforms, algorithmic trading and regtech solutions are embedded across the sector,' he says. 'As these technologies are critical to daily operations, they can become front of mind when a technical issue occurs that has a negative impact on consumers. Consider, for example, the interruption to global financial markets caused by the Bloomberg outage in May this year.'
Keith Power, a partner at PwC Ireland.
The benefits for consumers of this tech evolution are manifold.It almost goes without saying, for one thing, that customers can access financial services products much faster and more conveniently than in the past 'Consumers can apply for finance, invest in the stock market, and purchase cryptocurrency using digital platforms,' says Power.
'Such technology also allows for diversified options for consumers, which can be tailored to their own preferences. This represents not just a benefit for consumers but also an opportunity to capture market share for those organisations that adopt the technology quickly.' Power also notes that pillar banks have been plagued with legacy issues that have affected customers in the past.
'Embracing transparent technical processes will help these organisations prevent these issues from occurring again,' he says.
While digital disrupters that have entered the market in recent times have raised the bar in terms of customer experience, Power points out that these are also leaner organisations, giving them a lower cost base.
'With the emergence of GenAI, the pillar banks have an opportunity to close the gap even further, not only in the areas of customer experience, but also to help them to become more efficient, particularly in their back-office operations,' he says.
Owen Lewis, KPMG's head of banking and capital markets.
Owen Lewis, KPMG's head of banking and capital markets, agrees: 'With AI, GenAI and cloud-native platforms maturing rapidly, we're seeing a shift from incremental digitalisation to full-scale transformation.
This trend is only accelerating. Most firms are moving from experimenting with use cases to enterprise-wide scaling to understand how to bring real value and how to scale this.' Fintech firms enable faster product development and more personalised services, and tackle specific issues such as greater financial inclusion, notes Lewis.
'For traditional banks, this can be a catalyst for rethinking legacy models and unlocking new value through new business models, customer interactions and, of course, enablement through a more personalised and humanised interaction with GenAI,' he says.
And while initial GenAI use cases focused on personal productivity, Power believes the capabilities of agentic AI are truly game changing: 'Agentic AI gives organisations the ability to completely reimagine their business processes, and organisations are already beginning to realise this opportunity, moving from piloting and experimenting with GenAI to adopting it at scale.'
For example, he says, the use of technology, and GenAI in particular, can allow financial services firms to deal more easily with the ever-increasing regulatory requirements that organisations face, freeing up resources to focus on more value-adding activities.
'Also, real time fraud detection on a large scale has been difficult to achieve, particularly in payment platforms,' he adds. Leveraging AI-driven models can help to analyse transactions and detect patterns and behaviours at scale for significantly enhanced fraud detection.
GenAI is now being strategically deployed in areas such as client onboarding, regulatory compliance and even internal knowledge management, says Lewis.
'The key is responsible deployment, thinking about the value that can be generated and how it can be scaled. Customers will want to know if they are interacting with a real person or AI, and banks will need to think about how this is messaged and managed,' he adds.
Indeed, consumer trust in AI is one of the challenges the industry faces even as it continues to embrace it. Julianne Ressel is working on a joint PhD at the University of Limerick and TH Cologne in Germany. Her research concerns consumer trust in AI in the insurance industry. Ressel notes that while 'trustworthy AI' is something of a buzzword, in reality this may mean different things.
'Automation efforts that are considered AI have been part of processes in insurance for a long time but it has become more visible in recent times,' she explains. 'We see people use the trustworthy AI label to mobilise uptake and decrease resistance.' However, failure to embrace digital and AI transformation will ultimately lead to firms falling behind says Power.
'Those that are slower to adopt AI and embed AI in their processes will lose market share, particularly to the newer digitally native firms in the market,' he says. 'And while the financial services sector is keen to adopt AI technologies into their business, it is critical that robust AI governance structures are in place, and that staff in these organisations are educated in terms of the capabilities of these tools.'
Lewis agrees and notes the rate of change of the underlying technology platforms also poses a significant risk in itself: 'As firms look to industrialise solutions, they need to do this with technology and alliance partners so that their business can mature along with the technology rather than get locked into a solution that rapidly becomes outdated.'