Generative AI to boost productivity in financial services

07 November 2023 Consultancy.uk 4 min. read

Hype around generative AI and machine learning is continuing to buoy economic sentiment across Europe, with fewer than two-in-five financial services CEOs now expecting a severe downturn in the coming year. Amid this, CEOs are powering ahead with AI investments – with more than nine-in-ten now integrating the technology into their capital allocation for the coming period.

At the turn of 2023, the economic outlook appeared bleak for many of the world’s largest economies. Rampant inflation had slowed economic growth to a crawl, crippling consumer spending power and leaving the average household thousands of pounds worse off in the UK alone. Meanwhile, supply chain disruption and talent shortages left many firms wondering whether or not they could expand their offerings, even if the demand was there. Several reports accordingly suggested that business confidence was at its lowest since the 2008 financial crisis.

A lot has changed since then though; most importantly, the hype around AI has reached fever pitch. Soaring interest around platforms like ChatGPT, and their models for artificially generated content – including images, music files, articles and animations – led CEOs to believe that a new industrial revolution was on the cards, one which could exponentially increase productivity, and help realise cost-savings at the same time.

Generative AI to boost productivity in financial services

Source: EY

As the year has unfolded, inflation has slowed – though it remains high – while resilient labour markets have helped shore up consumer demand, leading to the global economy slowing less rapidly than feared. This, coupled with the mounting expectations of generative AI, has seen business confidence rise dramatically, particularly in the financial sector. A poll from EY earlier in the year found that 49% of European financial services CEOs expected a severe downturn in the coming period – but that has now fallen to 32%.

EY’s survey, which polled just under 100 European financial services leaders on their strategic plans, headline concerns and investment intentions. Overall the researchers found that they were quickly adapting their investment strategies to maximise the benefits that AI could bring to their businesses.

While the exact material nature of those benefits still appears cloudy to many firms, leaders are happy to place their trust in the innovation. A 94% supermajority of financial CEOs accordingly said that they were integrating AI into their capital allocation, while 51% of respondents were already actively investing in the technology, and 43% planned to make significant investments in AI in the next 12 months.

Generative AI to boost productivity in financial services

Source: EY, Pitchbook Data

The UK is currently the most enthusiastic financial services market, when it comes to the adoption of AI. Following the protracted Brexit process, many firms find themselves beholden to complex new trading measures that eat up both time and money when trading with the continent. It might not come as such a surprise in that case that the nation’s financial sector poured some $6.7 billion into technology that could deliver quality compliance work in less time. But that does not mean there aren’t concerns about its application.

EY EMEIA Data & Artificial Intelligence Financial Services Partner Patrice Latinne commented, “Europe’s financial centres are increasingly tapped into the disruptive capabilities that AI offers today. AI is infinitely innovative, which – while exciting – comes with challenges. Governance and transparency are increasingly crucial to the safe adoption of the technology, and ethics must remain central as firms progress their tech capabilities. With many firms and individuals maintaining an understandably cautious attitude, particularly towards generative AI, building confidence focused on the exponential value to be created will be fundamental to successful implementation.”

In particular, EY found that while leaders embraced the potential advantages that AI can bring to businesses and society, they still harbour major concerns about the potential risks of the emerging ’generative AI’ capabilities. A 55% majority of respondents said that more needs to be done to mitigate against AI ‘bad actors’ who could use the technology in harmful ways, such as by creating deep fakes or disseminating disinformation. Meanwhile, 52% said a stronger focus is required on the ethical implications of AI and how it could impact key areas, such as privacy.