Nash Squared’s 2023 Digital Leadership Report reported that 86% of financial services firms were actively considering, piloting or implementing AI. Peter Weston and Paul Hunt assess the impact of AI on financial services sector jobs

When it comes to sectors that AI is likely to have a major impact on, financial services ticks so many boxes. Typified by high volumes of digital transactions, the sector is both information rich and, importantly because of regulation, information accurate. People are also a factor. Financial services is one of the highest paid sectors, and the case for getting machines to do what people do is highly appealing; at least for the board, although perhaps less so for the people themselves. In fact, though, AI is becoming more of a people opportunity than a threat.

It’s no surprise then that Nash Squared’s 2023 Digital Leadership Report found that 86% of FS firms are actively considering, piloting or implementing AI.

Myriad of FS use cases

The use cases for AI span the waterfront of their operations, whether that’s banking, investment management, insurance, payment services or other specialist parts of the FS ecosystem serviced by fintechs and other niche providers.

At the customer-facing end, AI is being used to power chatbots and virtual assistants to help customers carry out their business and improve the quality of the customer experience. We are also seeing the internal integration of AI chatbots into platforms such as Slack and Teams to help staff collaborate more efficiently.

AI is also a powerful tool for risk management (fraud detection and credit scoring), cybersecurity (supporting cyber engineers and analysts), regulatory compliance (automated reporting and KYC processes), and investment activities (algorithmic trading, robo-advisors).

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In insurance, a compelling use case is for underwriting and the pricing of quotes. This is really having an impact as cutting seconds off the time it takes to respond to a query can make the difference between securing a deal or not. Some insurance companies are now even basing the data and analysis function within underwriting, so that this then becomes the home to AI. There has always been an element of this, but the commercial possibilities of AI are now being viewed more widely as transformative for businesses.

One day, might we even see fully autonomous AI traders on trading floors, where milliseconds are even more crucial? One couldn’t rule it out, even though there will obviously be significant risk management and compliance hurdles to overcome in order to make that a reality.

Fuelling growth

The fact is that AI ticks the strategic boxes against probably the two biggest overriding priorities of most executives across FS: growth and regulatory compliance. By helping firms innovate and improve their products and services, it can be a significant driver of both volume and profitability. Meanwhile, in an age of increasingly stringent and demanding regulation, AI-driven regtech solutions are helping organisations automate their compliance checking and monitoring, reducing the risk of falling short and damaging corporate reputation.

For all of these reasons, we expect financial services to remain a leader amongst sectors in the deployment of AI. One of the big advantages that most FS businesses have is the quality of their data. This gives them an instant head start, which they have been exploiting. Firms have been actively using traditional AI like machine learning, natural language processing (NLP) and robotic process automation (RPA) for some years already.

They’ve also been utilising a wide range of platforms such as IBM Watson, Google Cloud AI and Microsoft Azure AI for their robustness, scalability and integration capabilities. Other platforms like Snowflake and Databricks enable FS firms to process vast amounts of data in real-time. As AI creates a new data ecosystem, there will be increasing opportunities for the monetisation of data through link-ups with third parties and related service providers.

Managing the challenges

Needless to say, there are challenges too. We have already touched on regulation and compliance. FS firms are highly conscious of the imperative to ensure that their AI deployments are in line with all rules and are ethical, free from bias and fair. If firms were to lose public and institutional trust over their use of AI, the consequences could be highly damaging. For that reason, strong governance processes, compliance frameworks and security protocols are mission-critical. It is also a reason why, in our conversations with clients, we see firms being cautious over allowing the use of open-source generative AI (Gen AI) tools like ChatGPT – preferring to develop their own proprietary systems instead.

We expect to see an emphasis from FS organisations on ‘explainable AI’ (XAI) – such that the process through which AI reaches decisions and conclusions can be explained in a transparent way, rather than remaining a black box mystery that awakens mistrust and suspicion.

Jobs are changing

Then there is the impact on people’s jobs. AI is becoming an enabler for staff in FS businesses, helping them become more productive and spend more time on value-adding aspects of their roles. It is speeding up work and the pace at which educated decisions can be made, but there’s a double positive because AI is learning and making not only quicker, but better decisions. Data Scientists and Analysts are becoming increasingly responsible for analysing the vast amounts of data generated by AI systems to derive insights, identify trends, and make data-driven decisions to enhance various aspects of banking operations, such as customer segmentation, fraud detection, and personalised marketing.

We also see the role of Customer Experience Designer being significantly changed by AI as it has the potential to revolutionise customer experience in banking, from chatbots and virtual assistants to personalised recommendations and predictive analytics. Customer Experience Designers will increasingly focus on leveraging AI technologies to create seamless and intuitive customer interactions across various touchpoints, such as mobile apps, websites, and in-branch experiences.

We see the main impact of AI as being to change the way in which people work rather than completely revolutionising job specifications. Nevertheless, one new role that is likely to become widespread across industries and sectors is that of Prompt Engineer, given how crucial prompts are to getting the best out of AI.

Banking sector: new/emerging roles

New/emerging roles include the following:

AI Ethicist/Regulator: As AI becomes more integrated into banking, there will be a need for professionals who understand the ethical implications and regulatory requirements surrounding AI usage. These individuals will ensure that AI systems are deployed responsibly and comply with relevant regulations, such as data protection and privacy laws.

AI Model Validator: Given the critical role of AI in decision-making processes within banking, there will be a need for experts who can validate AI models to ensure their accuracy, fairness, and transparency. These validators will assess AI models for potential biases and errors, particularly in areas such as credit scoring and loan approval.

AI Product Manager: As banks develop and deploy AI-driven products and services, product managers specialising in AI will be responsible for overseeing the entire product lifecycle, from ideation and development to launch and maintenance. They will work closely with cross-functional teams to define product requirements, prioritise features, and ensure alignment with business goals.

Inevitably, some roles may become replaced such as first line helpdesk positions and narrow/specialist coders – a broad skillset will be needed. Overall, however, AI should be a net positive as it will enable people to upskill, specialise and potentially move into higher paid positions more quickly.

Partnerships and innovation

It’s a competitive environment, as FS firms strive to keep ahead of each other and reap the benefits fastest while staying compliant in an evolving regulatory landscape.

Nimbleness, agility and a willingness to fail fast/learn fast are key – hence the rise of innovation hubs and strategic partnerships, which we expect to continue to proliferate within the industry.

Peter Weston and Paul Hunt are both Directors within Nash Squared businesses