How is Generative AI Transforming the Financial Industry?

How is Generative AI Transforming the Financial Industry?

by November 22, 2023

The rise of Generative AI has been nothing short of remarkable. Many envisioned it as a powerful force for good from its inception, while others harboured concerns about its potential negative implications.

Generative AI, with its ability to create content autonomously, has found its place in the financial industry, offering innovative solutions to age-old challenges.

A panel of experts, comprising Ali Dalloul, Vice President at Microsoft; Coen Jonker, Co-founder and Chairman of Tyme Group; Akio Isowa, Senior Managing Executive Officer and Group Chief Digital Innovation Officer at
Sumitomo Mitsui Banking Corporation (SMBC) provided insights into the transformative impact of Generative AI in finance at the Singapore Fintech Festival 2023.

Democratising AI for financial institutions

Generative AI

Ali Dalloul, Vice President at Microsoft

Ali Dalloul, representing Microsoft, outlined the company’s three-dimensional approach to AI.

The first dimension involves making AI accessible to customers and partners, focusing on product development, services, and global infrastructure. Microsoft’s commitment to security, ethics, and responsibility is evident in its second dimension.

In particular, they have made significant strides in the fight against financial crime, leveraging AI to combat a problem that costs the global economy over US$5 trillion (SGD 6.71 trillion) annually.

By sharing AI-driven fraud detection scores with financial institutions, Microsoft contributes to the industry’s security.

The third dimension at Microsoft is focused on ensuring compliance with complex regulatory frameworks. Microsoft helps translate intricate legal and compliance requirements into understandable language through AI.

Generative AI

Coen Jonker, Co-founder and Chairman of Tyme Group

Beyond these efforts, Microsoft employs advanced biometric AI technologies to detect synthetic voices used in identity fraud, saving organisations substantial sums of money.

Collaborating closely with regulators ensures their products align with industry standards and compliance requirements.

Coen Jonker, Chairman of Tyme Group, shared how they leverage Generative AI to improve customer engagement in their digital banking firm. Tyme Group, operating out of the Philippines and South Africa, focuses on predictive analytics to offer customers the following best action, effectively enhancing customer value.

Incorporating a chatbot powered by Generative AI has significantly increased customer engagement and net operating income.

Generative AI

Akio Isowa, Senior Managing Executive Officer and Group Chief Digital Innovation Officer at SMBC

Akio Isowa, representing SMBC, highlighted the bank’s use of Generative AI to assist CFOs in analysing and visualising data for informed decision-making.

Their AI system generates tailored analytics results and recommendations for CFOs in a user-friendly, conversational manner. This innovative approach streamlines data-driven decision-making within the bank.

Challenges and considerations in implementing Generative AI

While Generative AI offers tremendous potential, it also presents challenges and considerations, particularly in the context of financial institutions.

Legacy infrastructure, data platforms, and technology can hinder the adoption of modern AI solutions. Overcoming these legacy barriers requires substantial investment and commitment from leadership.

Regulatory compliance is another critical consideration. Financial institutions must navigate complex regulatory frameworks and engage in a constructive dialogue with regulators to balance technological innovation and regulatory requirements. Educating both customers and institutions about AI’s capabilities and limitations is essential.

Additionally, ensuring the security and ethics of AI systems is paramount. Transparent, fair, inclusive, accountable, and secure AI models are fundamental principles that guide responsible AI development.

The panel agreed that collaborative efforts across industries, governments, and technology providers are necessary to stay ahead of evolving threats posed by bad actors who also leverage AI.

Navigating accuracy challenges and hallucinations in AI

One of the foremost concerns when implementing Generative AI in finance is accuracy and the occurrence of AI “hallucinations.”

Hallucinations refer to situations where AI generates outputs that deviate significantly from the original intent of the conversation. Addressing this challenge is crucial for ensuring the reliability of AI-driven financial applications.

Ali emphasised the importance of standardisation in AI processes. While standardisation can provide consistency, it may not align with AI’s inherently customised and personalised nature.

To mitigate hallucination risks, AI models must be fine-tuned and monitored rigorously. Microsoft employs several strategies, including content filtering, alignment techniques, and third-party benchmarking, to ensure that AI outputs align with the desired outcomes.

Coen underscored users’ need for education and understanding. Employees and stakeholders must comprehend the capabilities and limitations of AI tools.

Generative AI should be seen as an augmentation of human capabilities rather than a complete replacement. Safety brakes and human oversight are crucial, especially in highly regulated industries like healthcare.

The evolving role of Generative AI in finance

How is Generative AI Transforming the Financial Industry?

Generative AI’s impact on finance extends beyond improved efficiency. It plays a pivotal role in promoting financial inclusion and sustainability.

Conversational interfaces powered by Generative AI can facilitate conversations in multiple languages, making digital services more accessible in emerging economies.

Moreover, Generative AI can provide specific information and guidance on environmental, social, and governance (ESG) regulations, aiding financial institutions in aligning with sustainability goals.

Akio said the significance of adaptability and continuous learning for employees in the financial sector. Traditional roles are evolving, and financial professionals must embrace change and cultivate a growth mindset. The ability to communicate effectively and work collaboratively in a tech-driven environment is becoming increasingly vital.

The future of jobs in finance

The panel also touched on the evolving roles and skills required in the financial sector due to the changing landscape brought about by AI.

Ali said adaptability, a growth mindset, and agility are essential for employees in this new AI-driven era. Traditional roles like data scientists are evolving, and the ability to work effectively with AI tools and collaborate with others is becoming increasingly important.

Aiko added that energy, creativity, and a hunger for learning will set individuals apart in this rapidly changing environment. The panel agreed that AI tools like ChatGPT won’t replace jobs but can augment human capabilities.

While challenges exist, the collaborative efforts of industry leaders and responsible AI development promise a brighter, more secure future for finance.

In the ever-evolving world of finance, Generative AI is a formidable ally that, when wielded responsibly, can drive positive change, foster innovation, and secure the financial industry’s future. As we journey into this AI-powered era, collaboration, education, and responsible development will be the cornerstones of success.