The report is based on a survey of 424 senior executives from financial institutions around the world.
What is the survey about?
The use of AI is on the rise in the financial and various other sectors. In very simple terms, the term AI refers to intelligence exhibited by machine or software. AI is also an umbrella term encompassing several fields of research in computer science, all of which seek to enable computer systems to perform tasks that traditionally require human intelligence, such as visual perception and decision-making.
One branch of AI that the survey focuses on is “machine learning”. Machine learning provides computer systems with the ability to learn and adapt independently, based on algorithms and the analysis of data. Machine learning is increasingly deployed in several areas of the financial industry, most prominently in trading and financial research, but also in other areas such as investment advisory.
What does the survey tell us?
- The most dramatic changes brought about by AI and machine learning are expected to be felt in the areas of trading, financial analysis and IT. Other areas that will likely be significantly affected are risk assessment, credit assessment and investment portfolio management.
- On the positive side, AI is predicted to improve financial institutions’ risk management, e.g., through more in-depth assessment of risk in portfolios and more incisive, comprehensive and informed credit-risk assessment. Further, machine learning is predicted to have a positive effect on competitiveness in financial markets.
- On the flipside, the use of AI in the financial sector is said to bring about significant uncertainties and risks, such as the risk of malfunctioning algorithms, humans’ misuse of technology and concerns surrounding the security, privacy and quality of data. Survey respondents have also expressed great unease about the future regulatory response to AI as many doubt that regulators have the adequate knowledge and skills to stay abreast of new financial technologies and understand the potential implications of AI for financial markets.
- Survey respondents are also doubtful that organisations fully understand the legal risks associated with new financial technologies. Such risks include, for example, corporate liability as well as data protection and privacy risk.