It’s been decades since algorithmic trading transformed Wall Street with its high-frequency trading, and years since the financial services industry began to integrate artificial intelligence in areas such as fraud detection, lending decisions and robo-advisory services.
Yet the recent explosion of generative AI tools like ChatGPT – providing human-like text on seemingly any subject and any style so successfully it easily conquers the vaunted Turing Test – has opened the floodgates of possibilities.
The advent of such a power language processor like ChatGPT – open source and available for public use – threatens to upend various parts of the financial services industry, spanning beyond areas such as chat bots and robo-advisors to even the workforce needed in something as skilled as coding.
As artificial intelligence reaches a crucial tipping point – and AI bias lingers – whether the proper private and public controls are put in place ahead of the technology’s dizzying progress becomes even more urgent yet challenging.
In a recent Nvidia survey, 78 percent of financial services companies said they use at least one kind of artificial intelligence tool.
The benefits have been clear: over 30 percent of those surveyed said AI increased annual revenues by more than 10 percent while over a quarter saw AI reduce costs by more than 10 percent.
In broad strokes, AI is employed in financial services in four categories:
1. Fraud detection and compliance
2. Credit risk analysis
3. Chatbots and robo-advisers
4. Algorithmic trading
Even before ChatGPT entered the public consciousness, artificial intelligence had already transformed much of what financial services do.
Across the board, investment in AI grew tremendously in financial services this past year; though none of the use cases surveyed by Nvidia in 2021 saw more than 14 percent industry penetration.
In 2022, nine of the 13 use cases tracked saw investment from more than 15 percent of the industry.
Investing in AI is by now essentially a requisite to stay alive in financial services, especially as operational efficiency becomes more crucial.
But while even the laggards have jumped in on the AI revolution, it might be most appropriate to frame this ubiquity as one marked by some leaders surrounded by many who only possess a basic understanding of how their AI really functions.
“In surveys, banks will say, ‘Oh, yeah, we do use AI to some degree.’ But when they’re asked, ‘how well do you understand it?’… there’s not that same degree of response. It’s one thing to apply it, but it’s another thing entirely to go ahead and blindly apply a one-size-fits-all algorithm,” said Bonnie Buchanan, director of Sustainable and Explainable Fintech Centre at the Surrey Business School.
According to the Nvidia survey, among the features that saw the biggest jump in investment in 2022 was conversational AI.
Truly advanced conversational AI electrifies the public precisely because it ventures into cognitive fields so unlike the confined and programmed capabilities machines have until now been limited to.
ChatGPT’s mastery of language processing in styles ranging from 2nd grader to erudite scholar to even coding languages signal to experts like Buchanan not simply an acceleration of what’s come before, but a true alteration of the course we’ve been on.
In ChatGPT’s own words, the immediately apparent benefits to financial services will be in areas such as automating customer service tasks and generating insights and analysis for banks to make better-informed decisions while helping to detect fraud.
