AI In FinServ: Love The Burn Of Rapid Reinvention
Big tech is finserv's new master in a massive new power shift
Financial Services (finserv) is struggling to “love the burn” they are feeling with the rapid adoption of AI, even though 70% of executives now see AI as a money maker.
The WEF acknowledges that AI's changes are “uncomfortable,” but it misses the big-picture power shift that is far harsher.
Finserv is now being dragged kicking and screaming by big tech into AI reinvention, which controls every bank and insurer in a massive power shift.
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This isn’t an overstatement. Big tech is now in charge because, except for a few global giants, virtually all banks and finserv are now 100% dependent on big tech for their AI transition.
This is putting unprecedented power in the hands of big tech and once again depowering finserv, which increasingly finds itself coming in second place in races with fintech and big tech.
Prior leaps in finserv technology, like the transition to mainframes, also created a reliance on tech companies, but they didn’t change finserv’s core business model.
AI is especially insidious, as it asks finserv to reexamine and reinvent its core business models according to its latest tech, putting big tech in charge.
Finserv and banks, in particular, need to “love the burn” of AI adoption, even if they know a second-place finish to their new master big tech is the best they can hope for.
👉The WEF’s KEY INSIGHTS
🔹 Finserv’s data-rich and language-heavy operations are uniquely positioned to capitalize on AI developments, and they have been doing so for years.
More recently, with the developments of generative AI (genAI), research indicates that 32-39% of the work performed across capital markets, insurance and banking businesses has high potential to be fully automated and 34-37% holds high augmentation potential. This has driven a significant increase in new AI investment.
🔹 In 2023, finserv spent $35 billion on AI, with projected investments expected to reach $97 billion by 2027.
With this sizeable investment, financial services are one of the most heavily invested industries in AI, with prominent use cases across the enterprise where automation and machine learning are streamlining tasks, reducing operational costs and improving accuracy.
🔹 Much of the existing AI adoption in finserv is focused on driving efficiency, but is now shifting towards revenue growth opportunities.
Backend applications will continue to be important; in addition, approximately 70% of financial services executives believe AI will directly contribute to revenue growth in the coming years.
🔹 The rapid maturing of AI and expanding list of uses, is pushing the industry towards reinvention at an unprecedented – and often uncomfortable – speed and scale.
As technological developments accelerate, the integration of LLMs, AI agents, and quantum computing will drive innovation and uncertainty in financial services. This shift will continue to challenge business leaders, policymakers, and regulators.
🔹 Looking ahead, finserv stakeholders must collaborate to address key risks such as data transparency, privacy, cybersecurity and the spread of misinformation.
Overcoming these challenges is essential to ensuring that AI can be leveraged effectively and responsibly across the industry, now and in the future.
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