Parijat Banerjee is the Global Business Head for the Banking, Financial Services, and Insurance (BFSI) industry at LatentView Analytics.
Think about how differently customers interacted with financial institutions in the ’80s and ’90s. Back then, every withdrawal meant a physical visit to the ATM, and more complex transactions required queuing up at the bank. Fast-forward to today, and everything is on the customer’s phone, from account details to investments to even recommendations for where to invest their funds.
The transformative effect of artificial intelligence (AI) and analytics in finance is as monumental as the digital revolution of the ’90s, with reports predicting that AI could propel global banking industry profits to a whopping $2 trillion by 2028. In fact, Jarrett Bruhn, managing director and head of data and AI in global transaction services at Bank of America, called AI and machine learning (ML) the equivalent of the Industrial Revolution 4.0 in a recent media interaction. The next decade will see financial organizations move through a complex ecosystem driven by technological advancements, intense competition and ever-changing, high customer expectations. Let’s look at a few key trends shaping the years ahead.
Embedding AI In The DNA Of The Organization
A 2023 survey by Pew Research Center reveals that Americans are becoming more cautious about the role of AI in their daily lives, with 52% expressing more concern than excitement about its impact. Gaining public trust is particularly challenging when it comes to implementing new technologies in the financial sector. Traditionally, the financial services industry has always been cautious about adopting new technologies due to the critical need to ensure the highest standards of privacy and security. However, leaders are recognizing its potential across various areas, such as customer experience and risk management, and its impact on business.
Customer Experience
A few months back, Bank of America’s virtual assistant, Erica, surpassed assisting 42 million users in providing financial advice and assistance. Another banking giant, Morgan Stanley, has recently teamed up with OpenAI to build AI solutions to deepen client relationships. These recent moves by such stalwarts solidify how AI is now playing a central role at every touchpoint of the consumer journey. This will be the year when organizations have to figure out how to make such interactions with AI as smooth and natural as a human experience to provide intuitive, empathetic and efficient support.
Risk Management
While discussions on implementing AI in customer experience often get more attention, its role in operational risk management is just as crucial to help ensure secure and compliant operations. Areas like know your customer (KYC), anti-money laundering, credit approvals and mortgage approvals are where AI solutions can find a place to enhance speed and efficiency. However, this introduces a risk. When speeding up these processes with AI algorithms, organizations must also assess the associated risks to avoid significant financial losses, especially in high-stakes situations like approving large loans.
AI Agents On The Rise
While generative AI (GenAI) and its business impact have been a hot topic for a while, the spotlight is now shifting to AI agents. A Capgemini report says that 82% of organizations plan to integrate AI agents within one to three years. Though still at a nascent stage, these agents will act not just as support tools but also as strategic decision-makers. They can function autonomously in different areas, manage intricate, multiphase tasks and communicate seamlessly with people and other AI systems. Eventually, organizations will move toward plug-and-play agentic AI solutions to get jobs done more efficiently and drive greater autonomy in their operations.
Changing Nature Of Finance Jobs
An eye-opening report by Citi points out that the banking industry will be the most affected by the deployment of AI, with 54% of roles at risk for AI-led job displacement, while another 12% of banking jobs could potentially be augmented by AI. Though we are still quite far from witnessing fully automated systems, the integration of AI agents in organizations will impact job roles as customer service agents and analysts will shift toward strategy and the management of AI-driven systems.
This new development will demand a workforce skilled in both AI technologies and human-centric expertise. Even with such advancements, we will never achieve a completely automated system. There will always be a “human in the loop” to oversee operations and ensure ethical functioning.
Data Will Always Be King
Implementing AI at a granular level in core business functions and working in collaboration with AI agents are great ways for financial institutions to stay relevant and accelerate business agility. However, none of it will see true success without the right data foundation in place.
Strategic Approach To Strengthen Data Foundation
Ensuring Comprehensive Data Visibility
Right now, even large, data-driven organizations lack complete data visibility. To make AI impactful, visibility must be top-down, with clear access across departments. Trust in data comes from ensuring it’s accessible, well-governed and structured for accuracy, completeness and timeliness.
Focusing On Data Governance
Data governance is essential for ensuring the quality, integrity and security of data within an organization. Effective governance better ensures continuous monitoring, compliance with privacy regulations and protection against data errors or breaches. When data silos are streamlined across departments and systems, a lot of the existing challenges will start to disappear.
Building Accountability
The need of the hour is to have someone at the organizational level responsible for driving the data agenda. The last few years have seen the corporate craze for hiring chief data officers (CDOs), but organizations need to define the role and positioning of the CDO more purposefully. If the head of a commercial bank can command attention because they bring in revenue, the CDO must have a similar influence across the table.
As Andy Rooney once stated, “Everyone wants to live on top of the mountain, but all the happiness and growth occurs while you’re climbing it.” Over the next few years, financial services must shift from merely implementing technologies to fully integrating them, with a clear focus on data-driven solutions for improved efficiency and customer delight. One of the best ways to stay ahead of the curve is to set data foundations today for an agentic tomorrow.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?