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Percentage of reported significant AI-induced increases in profitability by current R&D ... [+] expenditure on AI (Figure 2.17 in Survey)

A significant number of financial industry executives from 151 financial institutions in 33 countries report that within the next two years they expect to become mass adopters of AI and expect AI to become an essential business driver across the financial industry. This information was collected as part of a survey on AI in Financial Services conducted by the World Economic Forum in collaboration with the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School and supported by EY and Invesco. The objective of the study was to understand the opportunities and challenges that will result from mass adoption of AI in Financial Services.The research was published in a 127-page report entitled Transforming Paradigms A Global AI in Financial Services Survey.

Highlights from the Survey

Financial Services sectors represented in the survey sample(Figure 1.2 in Survey)

Insights from the Survey

Perceived strategic importance of AI over time (Figure 3.1 in Survey)

R&D expenditure spent on AI (Figure 2.15 in Survey)

The Widening Technological Gap

The report addressed the widening technological gap between high and low spenders as high spenders increase funding for AI R&D. Researchers speculated that AI supremacy might be determined between high-spenders vs. low-spenders rather than incumbents vs. disruptors.That prediction may be true, but consider that in the last 10 years investment in the FinTech industry has exceeded $350 billion dollars. During the same period a similar amount of funding was invested in other industries such as AI, healthcare, and aerospace. There have been a number of breakthroughs in these other areas but not that much in FinTech. The amount of money invested in FinTech has not yielded so significant results compared to other domains. In the last 10 years FinTech received more investment but accomplished less with it.

Long term AI supremacy in financial services is likely to result from a combination of factors including technical prowess, domain knowledge, and AI friendly senior management driving AI strategy. The companies most likely to achieve AI supremacy will be the ones capable of attracting interdisciplinary teams that have deep experience in both AI and financial services who can design, build, and implement AI-powered novel FinTech solutions. Companies with AI-friendly executives will demonstrate how the effective use of AI can increase a company's valuation. The presence of AI-friendly CEOs in financial services could be an indication that a company is more likely to succeed.

Development teams with experience using Data Science and AI will understand both its potential and also its practical limitations at this stage. Experts with specific domain knowledge in FinTech will be able to understand the real-world processes that they are modeling, and be able to develop superior products. Companies that achieve leadership in FinTech 2.0 will be the ones that are able to build teams that have experience in both AI and financial services.

FinTech, AI, and data-driven technologies will converge into a single advanced technology

The Convergence of FinTech, AI, and Data-Driven Technologies

In the near future, FinTech, AI, and data-driven technologies will converge into a single advanced technology. Next-generation financial companies will use engineering methods with integrated systems to treat business, finance and technology as a single unit with complementary parts. The resulting FinTech 2.0 will offer unprecedented potential for growth and disruption.The 7 Components of FinTech 2.0 are:

In the HealthTech space, the application of data science and AI has already enabled P4 Medicine (personalized, predictive, precision, participatory). The integration of data science, AI, and FinTech will result in P4 FinTech (personalized, predictive, precision, participatory). AI will enable personalized financial products optimized for individuals. Several cycles of feedback between the user and the AI system will deliver products specifically tuned to each individual. This level of AI enabled personalization is already standard in progressive medical clinics and soon will be incorporated in progressive FinTech. Companies using AI enabled FinTech 2.0 will surpass low tech FinTech companies and financial institutions using outdated technologies.

Financial Inclusion

In the next few years FinTech 2.0 will provide financial inclusion for people over 60 many of whom have been excluded in the past. There has never been a bank focused on the needs of people over 60. With FinTech 2.0, financial institutions will be able to explore this untapped multi trillion market. The AI-enabled Longevity Economy is an opportunity for the Financial Industry. Soon AI-powered FinTech companies and Longevity Banks will provide services designed for people 60+ who want to optimize their wealthspan. The global spending power of this demographic is $15 trillion per year, and is expected to grow to $27 trillion by 2026.Very advanced FinTech technology is already emerging in London and AI tools for FinTech 2.0 are already in development there.

Longevity Banks

Clients of Longevity Banks will have more time to accumulate wealth, will have a longer investment horizon, and will benefit from compounding.These banks will utilize AI to develop and deploy fully integrated AgeTech-WealthTech solutions to grow their clients healthspan and wealthspan simultaneously and in a coordinated way, enabling elderly people to have a higher quality of life in their golden years. Integrated FinTech and HealthTech will help older people manage their health and wealth simultaneously. Financial services innovators will use AI to provide personalized financial products that provide a comprehensive view of investments, taxes, insurance, and regulation without unneeded complexity. This will appeal to 1 billion people over 60 who make up the wealthiest part of the financial system.

The complete report is available here: Transforming Paradigms A Global AI in Financial Services Survey.

Margaretta Colangelo is co-founder of Longevity Bank which is expected to launch in Switzerland later this year.

Read more:
Mass Adoption Of AI In Financial Services Expected Within Two Years - Forbes

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