You can transform financial services with AI

Artificial Intelligence (AI) is transforming the financial services industry, driving innovation and efficiency across various sectors. As financial institutions increasingly adopt AI technologies, they are reshaping their operations, enhancing customer experiences, and improving their risk mitigation and decision-making processes. The global market for generative AI in financial services is projected to grow significantly, with a compound annual growth rate (CAGR) of 27.3% from 2023 to 2033.¹ The integration of AI is not just a trend; it represents a significant shift in how the financial services industry operates, positioning organizations to respond to market changes with agility and precision.

AI adoption in financial services is an ongoing journey that requires planning, execution, and maintenance. To effectively harness the power of AI for long-term success, financial institutions can follow a structured approach encapsulated in three phases: Enable, Embed, and Evolve.

Three phases of AI integration: Enable, Embed, Evolve

To maximize the benefits of AI, financial institutions should take a phased approach to adoption:

Enable

This initial phase focuses on laying the groundwork for AI adoption across key areas of the business. Organizations should focus on developing a clear AI strategy that will enable them to automate routine processes to drive efficiencies across the business. Some examples include:
Establishing a data infrastructure: High-quality, structured data is crucial for AI models to generate accurate insights and predictions. Organizations should invest in data governance, cloud computing and AI-compatible infrastructures.
Automate processes: AI and machine learning algorithms can help streamline repetitive tasks which can ultimately reduce costs and free up time for employees to invest in higher-value work.
Detect risk and fraud: AI analytics can enhance fraud detection and regulatory compliance by identifying anomalies in real time, reducing financial and reputational risks for financial institutions.

Embed

Once the foundational elements are in place and AI is adopted across key areas of the business, financial institutions can embed AI across their core functions, integrating it into existing workflows, products and services. This transformation enhances operational efficiency, customer experience and can create new revenue opportunities such as:

Personalized banking and wealth management: AI can power chatbots and recommendations to offer customers hyper-personalized financial advice, services and product recommendations.
AI in underwriting and claims processing: Insurance organizations can leverage AI to improve risk assessment and automate claims processing, which can ultimately reduce turnaround times and increase accuracy.
Predictive analytics for market insights: AI models can analyze vast datasets to predict market trends which can help financial institutions make data-driven decisions and mitigate risks.

Evolve

The final phase of AI integration encourages organizations to continuously innovate and adapt to market disruptions. This phase promotes the development of new business models and ecosystems that leverage AI to deliver seamless value. Here are some ways the financial services organizations can promote innovation and long-term growth:

AI-driven product innovation: Organizations can develop AI-powered solutions such as advisors, smart contracts and risk models to create new revenue streams.
Regulatory adaption and ethical AI: As AI adoption grows, financial services organizations must ensure compliance with evolving regulatory frameworks and prioritize responsible AI practices to maintain customer trust and transparency.
AI won’t replace human expertise: AI doesn’t replace human decision-making skills, but it can enhance their ability to process information and provide strategic insights. It is critical that financial services organizations balance AI with human expertise to optimize their business.

As AI continues to evolve, financial services organizations that proactively adopt and scale AI technologies will likely gain a competitive advantage. By following the enable, embed, evolve framework, organizations can navigate AI implementation and transformation with confidence, ultimately driving sustainable growth and innovation.

How KPMG can help

As the financial services landscape continues to evolve, we can help financial institutions leverage AI to achieve their strategic objectives and maintain a competitive edge in an increasingly digital world. KPMG’s professionals are committed to harnessing the power of AI which enables us to deliver innovative solutions that meet the unique challenges faced by the Financial Services industry. Unlock the value of AI with KPMG.

^{1. Generative AI in Financial Services Market Size, Market.us, November 2024}

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