Artificial intelligence (AI) is transforming the financial services industry, with banks, insurers, asset managers, and fintech companies deploying AI-enabled applications to assess risk more accurately, increase operational efficiencies, and reduce costs. Results from a new study by American tech firm Nvidia show that the adoption of AI in the finance sector is accelerating at a fast pace, with over half of the respondents indicating that they have deployed three or more of the 21 different AI-enabled use cases analyzed by the survey. The 2023 State of AI in Financial Services report also shows that the rise of generative AI, the form of AI capable of creating new content, is sparking a frenzy in the industry, with companies ramping up AI development to take advantage of this new technology.
The Imperative of AI in Finance
The adoption of AI in the finance sector is accelerating, and executive leadership teams are increasingly aware of the imperative. The 2023 State of AI in Financial Services report shows that 64% of respondents agreed that their executive leadership “values and believes in AI,” a figure that represents an increase of 78% YoY. More respondents also indicated that their leadership views AI as an important factor in their company’s future success, with 58% indicating so this year, compared to 39% in 2022.
Top AI Use Cases
The report also shows that finance professionals are now applying AI in a wide range of use cases. Natural language processing (NLP) and large language models (LLMs) top the list with 26% of respondents utilizing these applications. Recommender systems and next-best action, portfolio optimization, fraud detection, algorithmic trading, conversational AI, marketing optimization, and creating synthetic data for model creation/optimization are other use cases where AI is being applied with success. Interestingly, the report also shows that 12% of respondents said their company has deployed AI-enabled applications for use cases relating to the metaverse and virtual worlds, with aspirations to explore opportunities relating to employee training, new employee onboarding, retail branch simulation, and insurance risk evaluations.
Benefits of AI Deployment
Companies that have deployed AI applications into production said the technology has brought them real benefits, including improved productivity and cost savings. 35% of respondents said these applications have created operational efficiencies, and 20% said they have reduced the total cost of ownership. When asked about how much their companies saved, 36% indicated AI-enabled applications have helped decrease annual costs by more than 10%.
Investing in AI has also brought benefits that extend beyond financial impact. The survey found that AI has improved customer experiences, created new business opportunities, and enabled more accurate models.
AI is Already Widespread in Switzerland
The findings of the Nvidia report are consistent with those of other similar studies. A new report by consultancy Deloitte, which focused on the Swiss market, shows that AI is now widespread in the country. Almost 90% of the Swiss executives surveyed stated that they are aware of AI initiatives in their company, with almost half of these being in the finance function. The deployment of AI solutions is also well underway, with 75% of respondents indicating that AI solutions are being implemented.
The Rise of Generative AI
The release of AI-powered chatbot ChatGPT in November 2021 sparked a frenzy in the tech community and prompted most industry leaders to ramp up AI development. In fintech, a number of industry stakeholders are already speculating on the potential of generative AI in the sector. Venture capital investment in generative AI increased nearly 500% between 2020 and 2022 to US$1.37 billion, data from Pitchbook show. The VC funding frenzy is expected to carry on this year, with notable deals being announced in Q1 2023. Anthropic, an AI company that is testing a rival to ChatGPT called Claude, received a US$400 million investment from Google in February. Cohere, another competing generative AI startup, is reportedly in talks to raise hundreds of millions of dollars in funding. OpenAI, the research lab behind ChatGPT, inked a US$10 billion deal with Microsoft in January.
Though the generative AI space remains nascent, business analytics platform and global database CB Insights has identified more than 250 companies in the sector. OpenAI is currently the biggest player with a US$29 billion valuation, followed by Hugging Face (US$2 billion), Lightricks (US$1.8 billion), Jasper (US$1.5 billion), Glean (US$1 billion), and Stability AI (US$1 billion).
The Impact of Generative AI in Finance
Generative AI is expected to have a significant impact on the finance industry. Auto-generated personal loan offers with custom messaging based on contextual information about a particular customer, auto-generated insurance application forms based on data and information provided in previous applications submitted, AI-powered chatbots for 24/7 customer service and support, as well as forecasting and risk identification, are some of the most impactful use cases for generative AI in finance.
AI adoption in finance is accelerating, and the rise of generative AI is expected to have a significant impact on the industry. The benefits of AI deployment extend beyond financial impact, improving customer experiences, creating new business opportunities, and enabling more accurate models. As AI adoption becomes more widespread, companies will need to invest in the right infrastructure and talent to maximize its potential. The finance industry is at the forefront of the AI revolution, and its success in deploying these technologies will shape the industry for years to come.
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