Artificial intelligence spend in financial services industry is expected to post strong growth, driven by increased budget allocation of mid-tier companies

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Spend on artificial intelligence (AI) in financial services has recorded strong growth in recent quarters. According to TechInsight360’s Global AI Survey, over 44% companies (mid-tier and large enterprises) in financial services industry plan to increase spend on AI by over 30%. Over 67% believe that AI will offer competitive advantage in the future.

Artificial Intelligence (AI) spend in banking and finance industry is expected to record a CAGR of 29.9%, increasing from US$ 5.2 billion in 2018 to reach US$ 32.2 billion by 2025.

The scope of AI has crossed the boundaries of wealth management and trading in equities which were among the first segments to use AI in a commercial way.

Innovative services in customer interfaces and automation of operations such as payments, fraud detection and risk modelling are the new areas where AI is being leveraged. More importantly, the increase in AI spend is happening across developed and emerging markets. Over the forecast period, TechInsight360 believes AI based product innovation will be driven by emerging markets.

In China, Ant Financial (created for Alipay) has been leveraging AI to provide small loans to people without accounts. Ant Financial use their customer’s spending history and friends’ credit scores to assess their credit worthiness. It determines if a loan should be granted through advanced machine learning algorithms and customized programmable chips which can compress massive user data. Across emerging markets, this is a growing area with a number of start-ups coming up in low end consumer lending.

In US, Aladdin, the risk management arm of Blackrock provides advanced risk analytics and cohesive portfolio management tools that leverage machine learning to assist a range of asset managers and insurers. It is expected to provide 30% of the firm’s revenues by 2022. Based on open source technology and Hadoop, it uses natural language processing to process thousands of documents and come with a sentiment score on the entities the articles mention. Aladdin also uses its social media feed to get insights on news events. For example, it helps to make a real time investment decision by amalgamating data from social sites that can stimulate a market frenzy.

Brighterion, a Mastercard company, is using AI to detect fraudulent activities. It analyses complex data by taking a virtual representation of the card holder that learns from the customer’s activities. It detects cards that act abnormally and alerts banks. It can also warn the cardholder to check its banking activities.

The Royal Bank of Canada has developed an AI powered NOMI tool for its retail customers to help them better manage their finances by tracking their spending and suggesting opportunities for saving. For its automotive dealership clients, it provides them with demand-forecasting tools that complement its existing credit products.

In Germany, the state run Sparkassen Bank uses AI to read handwritten forms and then input the information systematically in the Sparkassen credit unit. In order to evaluate the same, they use a neural network that has been trained to recognize handwriting. It currently has a recognition rate of higher rate of 98 %. The country’s other listed bank, Commerzbank, along with the start-up, Retresco is further developing a prototype that can not only recognize, but also write texts.

India’s leading bank, HDFC, has developed an AI powered banking chatbot called EVA. It uses natural language processing to understand the queries posted by the user and come up with relevant information. Another private sector banking giant, ICICI, has deployed robotic software that focusses on automating while collar office work. These software robots capture and interpret detailed information from multiple systems to recognize key patterns. They then operate business processes across multiple applications to execute activities.

In UAE, most banks are engaging into developing conversational AIs, which involves natural language processing and supervised learning techniques employed on robots. Mashreq bank has indicated to improve its return on investment through cutting down its workforce by 10 percent by the end of the year by replacing around 400 employees with bots.

The African Development Bank is using AI for financial inclusion. It uses deep learning methods to detect frauds because machines can track large volumes of data more effectively. It is also heavily investing in chatbots to increase customer engagement and save costs.

To know more and get deeper understanding of AI in financial services industry, click here.