Artificial Intelligence Applications in Financial Services
Artificial Intelligence (AI) — the use of computers and algorithms to augment and simulate human intelligence — has arrived, and is starting to be used across the financial services industry. AI enables adaptive pattern recognition using large volumes of data and modern statistical methods to give the "best guess" answer to any narrowly defined and definitive problem set. However, the use of AI is not without its pitfalls — especially if due diligence and care is not properly exercised during its implementation and use.
AI is being introduced during a time of great change within the sector, and regulatory and legal regimes are playing catch up. We recently partnered with our colleagues at Oliver Wyman, Hermes Investment Management, and leading law firm Bryan Cave Leighton Paisner LLP, on a joint paper looking at AI as a tool within the financial services industry. The pros and cons of AI applications in three areas — asset management, banking, and insurance — are considered, as well as the issue of cybersecurity.
Some key questions that boards need to consider emerge from the paper, including:
- What is the company's AI footprint?
- Does the board have any oversight of the company's use of AI?
- What specific expertise will enable the board to oversee the use of AI? Does this exist in-house?
- Are there AI governance principles in place? If not, how will they be designed — if yes, how will they be assessed and implemented?
What is clear is that the rollout of AI within the financial services sector is going to require strong and effective management at board level.