Banks and Insurance Companies Expect 86% Increase in AI-related Investments into Technology By 2025

While AI is not widely in use by most financial institutions, new research by The Economist Intelligence Unit shows 86% of banks and insurance companies plan to increase AI-related investment into technology by 2025

AI is set to shape the future of the banking and insurance ecosystem, according to a new report commissioned by ThoughtSpot, the leader in search and AI-driven analytics. The report, “The Road Ahead: Artificial Intelligence and the Future of Financial Services,” conducted by The Economist Intelligence Unit (EIU), analyses the sentiments of 200 business executives and C-suite leaders at investment banks, retail banks, and insurance companies in North America, Europe, and Asia Pacific.

The study found that while there is a strong degree of confidence in the benefits of AI, the reality is that the technology is not largely in use: more than half of respondents say AI is not incorporated into their business’s processes and offerings, with only 15% saying the technology is used extensively across the organisation. However, the benefits that have already emerged combined with respondents’ plans to double down on AI investment in the short-term show this technology is slated to drive a massive wave of future growth for the financial services industry.

AI Drives New Growth for Financial Services

Banks and insurance companies perceive AI as critical to unlocking new growth opportunities and reducing costs. Respondents were clear AI will transform their business in a number of ways over the next five years, including spurring new products and services (27%), opening up new markets or industries (25%), and paving the way for innovation (25%). About one-third (29%) of respondents expect between 51% and 75% of their workloads to be supported by AI technologies in five years’ time.

In addition to driving future growth, AI technologies promise significant savings both today and in the future: 37% of respondents report that their organisation has reduced operational costs as a result of AI adoption and use, and another 34% predict that AI will lower their cost base over the next five years. When it comes to other benefits of AI, one-third of respondents each reported a greater use of predictive analytics (34%), increased employee capacity to handle workload volume (33%), and enhanced customer service and satisfaction (32%).

The Path Forward: Upskilling The Frontline Workers

Despite relatively slow adoption rates to date, the promise of AI holds clear with 86% of respondents saying they plan to increase AI-related investments into the technology over the next five years. However, greater AI adoption will ultimately be driven by how much financial services organisations invest into upskilling their workforce. This upskilling across the organisation is required to get real value from democratising insights.

According to the data, the industry is at a halfway point when it comes to upskilling their employees, with 49% of respondents saying training initiatives for employees to better understand AI are currently in place. Another 42% have plans to implement such training.

Read More: Google Cloud and ThoughtSpot Expand Partnership to Unlock Unprecedented Value with Cloud Analytics

“We’re already seeing the massive impact AI is having on financial institutions’ businesses by reducing costs, but more importantly, driving new growth. The rapidly rising AI adoption and training rates are a clear precursor of the AI revolution that is set to unfold over the next five years,” said Sudheesh Nair, CEO of ThoughtSpot. “AI is the new growth engine, and the key to unlocking its potential requires investing in talent. Financial services companies must train and reskill employees to capitalise on the productivity and innovation gains made possible by AI.”

“AI has the potential to truly transform the banking and insurance industries,” said Dr. Katya Kocourek, Managing Editor, Thought Leadership at The Economist Group. “The research shows the strides that are already underway and the path forward that will boost the industry to the next phase of AI adoption. Like any potentially transformational technology, it will not be a path without risks, but the impact on the future of banking and insurance is clear and promises to deliver a world of value.”

Investment Banks, Retail Banks, and APAC Firms Emerge as AI Leaders

Investment banks are deploying a higher volume of new AI applications on average when compared to their retail bank and insurance peers. They are also the most advanced when it comes to the implementation of training programs: 54% say they have already implemented training initiatives, compared with 46% in insurance and 48% in retail banks. Additionally, investment banks are most likely to use machine learning (63%) and image analysis (52%), whereas retail banks are more heavily tapping predictive analytics (71%) and virtual assistants (61%) within their organisations.

The report also found that banks and insurers in the APAC region are trendsetters when it comes to adoption, training and measurement. Sixty-one percent of all APAC respondents reported that half or more of their workload is supported by AI, compared with North America and Europe (both at 41%). Europe’s low usage rate is partly a reporting problem: almost 10% of European respondents either had no metrics to measure AI-application success, or they had not been measured for long enough to report on. By way of contrast, all APAC respondents had functional reporting metrics. Notably, APAC prioritises reskilling and training initiatives, with 75% of APAC respondents in this region expecting an increased investment in people over the next five years to learn more AI skills and arm them with resources compared to 59% in North America 37% in Europe.

The APAC and North Americans regions expressed the strongest optimism regarding plans for AI-related investment into technology: 90% of APAC and 89% of North American respondents say they plan to invest over the next five years, compared with 75% of European respondents. 

Challenges to Overcome

While the long term outlook for AI in financial services is bright, organisations do have concerns in realising those benefits. The research found 40% of organizations cite risk, specifically security as the greatest area of concern, more so than cost (39%), insufficient infrastructure (29%), and poor data quality (28%).

Only half (52%) are confident about their preparedness to address AI-associated risks like security, and 55% have developed policies, procedures and oversight processes for AI-based automation, highlighting the need to invest in solutions and policies that protect governance and security while mitigating.

Bekki Barnes

With 5 years’ experience in marketing, Bekki has knowledge in both B2B and B2C marketing. Bekki has worked with a wide range of brands, including local and national organisations.

The Future of Smart Buildings: Trends in Occupancy Monitoring

Khai Zin Thein • 12th June 2024

Occupancy monitoring technology is revolutionising building management with advancements in AI and IoT. AI algorithms analyse data from IoT sensors, enabling automated adjustments in lighting, HVAC, and security systems based on occupancy levels. Modern systems leverage big data and AI to optimise space usage and resource management, reducing energy consumption and promoting sustainability. Enhanced encryption...

The need to weave agility throughout the business

John Craig Swartz SVP at POWWR • 11th June 2024

With geopolitical tensions, more extreme weather events and the legacy of a global pandemic, it is more difficult for energy suppliers to preserve their margins and remain competitive than ever before. To thrive in the current climate, it is imperative that a supplier makes marginal gains wherever they can. Profitability within the sector today hinges...

Artificial general intelligence is closer than expected

AI expert Stuart Fenton • 10th June 2024

Whilst most of the attention around artificial intelligence (AI) thus far has been on ChatGPT, it is just the tip of the iceberg. In many ways, ChatGPT shouldn’t be thought of as true AI as it is – at its heart – just generative, learned behaviour. The future of AI, in contrast, is a system...

The State of Data Streaming

Confluent • 06th June 2024

Confluent survey: 90% of respondents say data streaming platforms can lead to more product and service innovation in AI and ML development 86% of respondents cite data streaming as a strategic or important priority for IT investments in 2024 For 91% of respondents, data streaming platforms are critical or important for achieving data-related goals

The State of Data Streaming

Confluent • 06th June 2024

Confluent survey: 90% of respondents say data streaming platforms can lead to more product and service innovation in AI and ML development 86% of respondents cite data streaming as a strategic or important priority for IT investments in 2024 For 91% of respondents, data streaming platforms are critical or important for achieving data-related goals

Grant Funding Awarded to Advance Cancer Therapeutics Discovery

Dr Alan Roth • 04th June 2024

The CRUK (Cancer Research UK) Scotland Institute and Oxford Drug Design, a biotechnology company with core expertise in AI drug discovery, have announced that their joint application for the MRC (UK Medical Research Council) National Mouse Genetics Network (NMGN) Business Engagement Fund has been awarded.