AI in Financial Services: Is it Hot or Hype?
The topic of Artificial Intelligence (AI) and advanced analytics is pervasive. If you Google “industry trends in Financial Services,” you’ll see a long list of articles talking about digital transformation happening in the industry – all fueled by the latest technologies, with AI at the heart of it. The subject is so prevalent that when a seasoned executive recently asked me, “Is this emphasis on AI all hype?” I was taken a bit off guard. So, how has AI become a core technology that promises powerful benefits and transformational rewards?
Before we dig into it, let’s define what we mean by AI. According to Investopedia…
“AI refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The term may also be applied to any machine that exhibits traits associated with a human mind such as learning and problem-solving. The ideal characteristic of artificial intelligence is its ability to rationalize and take actions that have the best chance of achieving a specific goal.”
AI technology continues to get better and better – not only in terms of functionality, but also in terms of affordability. Today, advancements in AI are driving change – good, long-lasting change – across the entire financial services spectrum.
In financial services – as in all business – there is a need for real-time visibility into data and complete transparency to support better decision making across the investment ecosystem. Family Offices, for example, who want better reporting, quickly discover that this can be a time and resource intensive endeavor. However, implementing new, cloud-based technologies not only help free up the finance team to focus on more strategic projects, but also allow for more affordable and less complex options.
Likewise, the insurance space is also experiencing transformative change with AI by putting massive amounts of data to optimal use. Insurers can now offer highly personalized policies, automate time-consuming back-end processes, and provide estimates with greater accuracy to customers worldwide.
- Insurify uses an always-on-call, virtual agent named Evia. Facebook Messenger’s Insurify instantly verifies customer data to compare real-time quotes from carriers in various zip codes and provide coverage recommendations. Its engine quickly finds the best insurance for each user based on that user’s profile.
- Lemonade provides paperless and personless renters and homeowners insurance using chatbots and AI to create policies and handle user claims via desktop and mobile. Customers can choose which nonprofit organizations receive underwriting profits as part of the company's annual “Giveback” initiative.
With the increasing number of technology vendors in market, it’s easy to feel overwhelmed and to be unsure where to start. Like most new ventures, it’s important to understand where you are and where you want to go with your finance team before you can make progress. Core questions to ask yourself are:
- What is your long-term strategic vision for you and your finance team?
- What are the capabilities you must have to get more real-time visibility, speed, accuracy, and peace of mind?
- What are the key challenges you must overcome?
- How can technology help?
Answers to these questions will help you pinpoint where you can improve processes and potential data quality issues. Plus, an open conversation with third party vendors on what is needed to improve upon financial and operational outcomes can help uncover more streamlined, cost-efficient ways to meet strategic objectives.
So, to the executive who asked me, “Is this emphasis on AI all hype?” My answer: “No, it’s real and it’s game-changing.” Based on just the few examples cited above, I’d say AI will only continue to become more intertwined in personal and professional lives. Regardless, for finance leaders in financial services not quite ready to make the leap into the world of AI and advanced analytics just yet, I’d say, it’s OK to proceed with caution. However, take the time now to know what your strategic vision is and determine what you need to achieve it. Then, explore how technology can help. Talk with finance peers who have recently made cloud-based technology investments, conduct research online, explore a demo or two. Whatever you do, be informed on what’s possible so that when you’re ready to take the next step, you’ll know what to do and why.
Sage Intacct empowers finance leaders in financial services to integrate data-driven decision-making across an entire organization, transforming the role of finance to forward-thinking analysts and trusted advisors. Learn more by viewing this newly released webinar: “AI and the Future of Financial Management.”
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