Microsoft insight: digital disruption of fintech through AI

Kate Rosenshine, Cloud Solution Architect Manager of Data and AI at Microsoft, discusses the impact AI promises for the financial services industry and how firms can build trust in the technology.

Amongst the wealth of emergent disruptive technologies set to revolutionise financial services, artificial intelligence (AI) offers perhaps the most diverse range of opportunities to the sector. Kate Rosenshine, Cloud Solution Architect Manager of Data and AI at Microsoft, spoke with FinTech Magazine about the impact AI will have on the financial industry and how best to establish trust in the technology among consumers.

How do you see AI transforming the financial industry in the next two years?

Artificial intelligence is becoming an ever more important part of our lives. AI is already integrated into many aspects of our everyday applications, as many of us are already familiar with AI-infused search engines, digital personal assistants and recommendation systems. Whether it is powering a new generation of self-driving cars, guarding us against fraud or helping doctors better diagnose health conditions, AI’s transformational abilities will continue to be felt throughout our society in increasingly ubiquitous and innovative ways.  

Within Financial Services, 61% of the industry is already either currently using AI or plan to adopt AI applications within the next 12 months. Over the next few years we will see more of these organisations embarking on their AI journeys, creating subsequent change in the industry that will be felt like never before.

The sector is already leading the charge in the use of AI technologies such as machine learning in fraud detection, virtual assistants for enhanced customer interactions and Big Data analytics for improved decision making and risk management. These technologies are empowering the industry and improving both customer and employee experiences alike through product innovation, with evidently much more to come.

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AI and cloud-enabled systems, which break the barrier to easily access huge amounts of computational power, already empower financial institutions to leverage a continuously growing amount of data from a wide variety of sources. AI algorithms, which have vastly improved in their accuracy and speed, can be applied to this data for a wide range of applications, from forecasting future events and behaviours more effectively to enabling actionable insights. These AI-powered tools can help firms to conduct ‘what-if’ analyses (which are critical in terms of forecasting the effects of potential changes in business strategies) with increased accuracy, better manage risk and adherence to compliance and regulatory requirements in an increasingly complex landscape, and empower customers to make smarter, data-driven decisions.

Leveraging the benefits and power of AI is a necessary choice for organisations in the financial industry, as our research finds that organisations already on the AI journey are outperforming others by up to 5% on factors like productivity, performance and business outcomes. This is a huge positive impact for any organisation’s bottom line, especially in the financial industry in what is quickly becoming one of the world’s most complex and competitive landscapes.

Over the next two years customers, will continue to have more choices and will become increasingly attuned to their power over their financial decisions. It will be crucial for organisations to start harnessing the power of AI to innovate and evolve, especially as AI will become more embedded in our core systems. It will be only those that continuously and fully embrace AI that will be able to bring truly innovative experiences to their customers and employees.

How do you believe that smaller financial companies should build trust of AI with their customers – is this harder to do than for a major bank with a loyal existing customer base?

As more and more critical AI systems come into our lives, organisations of all shapes and sizes will have an increasing amount of responsibility towards our society. Some of these organisations have already started to face pressures with regards to data privacy and security, leading to an increasing lack of consumer trust and reputational crises. Therefore, when organisations, large or small seek to embrace AI they must take an ethical first approach and recognise their great responsibility. So how do they do this?

First, it is important for financial organisations to establish a clear set of ethical guidelines and frameworks around the use of AI to instil confidence and build trust. A recent House of Lords report titled ‘AI in the UK: ready, willing and able?’ highlights the need for “ethics to take centre stage in AI’s development and use”, and our research shows that those who begin their AI journey by creating core ethical values are 28% more likely to seek to improve the world and make life better in the UK.

Building public trust in AI will be an important factor in allowing both organisations and consumers to benefit . With this, financial organisations must create new systems and control measures to ensure they are transparent as to where and how they are using AI to make decisions, as well as prevent unintended consequences and malicious misuse of these technologies.

More than ever, companies need to make a conscious effort to help people understand AI through public education. AI will need to be accessible to everyone, and the public will also need to be educated to ensure that we are focusing on solving the right problems and not inadvertently creating biases in our systems. While major banks may have larger existing customer bases, AI and its transformational abilities are unprecedented and so organisations of all sizes must adapt to being more open. Only then will they gain people’s trust and only then will the use of AI really flourish and transform the financial industry.

From the impact of workers to data protection and security, taking an ethical approach to AI is essential to building trust. According to our research, those organisations that start their AI journey with an ethical and transparent first approach can outperform those that don’t by up to 9% - an opportunity that no organisation can afford to miss.

This article first appeared in the February edition of FinTech Magazine.