(accountancyDaily) -- Artificial intelligence (AI) is set to make rapid changes to the way financial services institutions attract and retain their customers, and will overturn traditional operating models and call for new collaboration amongst competitors, according to a report by the World Economic Forum based on research from Deloitte
The report looks at how AI will transform financial institutions by radically changing front- and back-office operations, creating major shifts in the structure and regulation of financial markets, and raising critical challenges for society to resolve.
Use of the technology is predicted to weaken the bonds that have historically held together financial institutions, while creating new ways of working.
AI enabled back-office functions will allow financial institutions to turn their centres of excellence into services, while pushing them to outsource most other capabilities.
Past methods of differentiation for financial institutions—such as cost, speed and access— will become less significant. AI will introduce a new set of competitive factors, such as the ability of institutions to offer tailored advice and to bring together large amounts of data for insights.
The Deloitte research suggests firms will adopt AI platforms can compare and switch between products and providers, offer increasingly personalised advice based on data, and use the technology to improve results and automate decisions.
The report also highlights AI’s potential to support cross-institutional collaboration on issues such as fraud prevention and anti-money laundering controls, which are often run inefficiently and ineffectively.
The research found that regulations governing the privacy and portability of data will shape the relative ability of financial and non-financial institutions to deploy AI, thus becoming as important as traditional regulations to the competitive positioning of firms. It says AI will necessitate a collaborative re-examination of principles and supervisory techniques to address the ethical concerns and regulatory uncertainty that are hindering institutions’ willingness to adopt more transformative AI capabilities.
Rob Galaski, Deloitte Global Banking & Capital Marketing Consulting leader, said: ‘AI is rapidly reshaping the attributes necessary to build a successful business in financial services.
‘As AI drives operational efficiency, economies of scale alone will not sustain cost advantages. In the future, financial institutions will be built on scale of data and the ability to leverage that data.
‘Increasingly bifurcated markets are already emerging where data sharing is critical to competitive success and first movers are positioned to distinguish themselves by delivering better advice, constant presence, and curated ecosystems. Firms that lag behind are finding that their old strengths may not keep them as competitive as they once were.’