It’s difficult to overstate AI’s impact on the financial services sector. Banks and financial services firms have been early adopters of AI, and generative AI has upped the ante. The industry is using AI to reshape every aspect of operations, from customer service to the back office.
Financial services firms have long struggled to differentiate themselves from their competitors. The fact that banking and other financial transactions are largely performed online increases the challenge. Gen AI enables banks and financial services firms to deliver more personalized services and to profitably serve less affluent clients.
Gen AI also enables financial services firms to boost their bottom lines by reducing costs and waste. A key aspect of this effort is fraud prevention — AI-powered tools can detect anomalies in user behavior to rapidly identify fraudulent transactions. Gen AI can also reduce costs by automating many routine tasks. Firms with brick-and-mortar operations can monitor and control their facilities to increase energy efficiency, strengthen physical security and more.
The benefits are so great that banking and financial services firms expect to increase their AI budgets by 25 percent in 2025, according to a new study from Infosys. This would represent 16 percent of their total technology budgets. However, just 12 percent of these firms have a comprehensive AI strategy. A more strategic approach would enable the financial services sector to better capitalize on AI to increase revenue and optimize costs.
Gen AI Use Cases in Financial Services
Streamlining Processes
To sustain continued growth, financial services firms need to democratize services and reach the broadest possible customer base. Gen AI helps enable that by automating tasks such as loan processing and basic customer service. AI-powered tools can slash the amount of time employees spend searching for information, summarizing documents and generating reports, enabling them to spend more time with customers. Gen AI is especially adept at fraud detection and creditworthiness assessment, minimizing risk while improving profit margins.
Enhancing Customer Service
Today, many bank customers interact with AI-powered virtual assistants without even realizing it. The latest gen AI chatbots are more conversational and can answer a broader range of questions than legacy tools. As such, AI can speed problem resolution, enhance customer service and free up live agents to handle more complex inquiries. AI also enables more personalized customer service by analyzing customer behavior, preferences and transactions. Financial services firms can use machine learning tools to provide personalized advice to mass market customers at scale.
Market Research and Analysis
Many financial services firms have siloed data sources that make research difficult. AI tools can cut across these silos to aggregate information and conduct in-depth market research. AI-powered tools can analyze diverse data sets, reports, company filings and other sources, quickly identifying and summarizing key information so investment analysts can make better decisions. Gen AI can also help analysts stay up to date with earnings, performance and other key metrics.
Gen AI Challenges in Financial Services
The old saying “garbage in, garbage out” applies to the use of gen AI in financial services. If poor-quality data is used in gen AI models, the output will be inaccurate and unreliable. This is a serious challenge in an industry that demands accuracy and reliability. Financial services firms must ensure that all data used as AI inputs is properly validated.
Gen AI requires a significant amount of compute power. Many organizations will need to implement AI-capable services and modernize their network and storage infrastructure. AI also consumes a lot of energy and generates a lot of heat, and organizations will need to ensure that their data centers can handle the load sustainably.
Like all industries, the financial services sector faces an increased threat of cyberattacks as well as the risk that sensitive data will be exposed. This creates governance and compliance challenges for a sector that must meet strict mandates for data security and privacy. Financial services firms must also ensure that AI does not improperly affect fairness and transparency.
How Cerium Can Help
Cerium’s gen AI practice covers all aspects of planning, design, implementation and support. Our team can help financial services firms develop an overarching AI strategy and implement the right tools for every use case. We can also have data platform and data analytics specialists who can help aggregate, correlate and cleanse data and ensure it’s secure and protected.
Contact us to schedule a confidential consultation.
