AI uptake rises in financial services despite data challenges

Artificial intelligence (AI) is increasingly being adopted by financial service providers and insurance firms in the UK and the US, according to research by leading data analytics and digital operations and solutions company, EXL. The findings, disclosed in a report entitled '2024 EXL Enterprise AI Study: Bridging Strategy and Operations', reveals an intriguing landscape of AI adoption, while also highlighting some fundamental bottlenecks.

The report shows that 91% of financial service firms in the US have initiated AI projects in the past year. However, only 36% have managed to implement AI at an enterprise-wide level. According to the study, primary barriers causing this lag are data silos and concerns about the operational risks of AI. It also noted that among firms that have adopted AI at a limited scale, 74% indicate that data silos are hindering wider implementation.

A focus on marketing and business development (47%), risk management/fraud detection (43%), and internal operations such as claims management (42%) topped the list of priorities for firms that have integrated AI on a larger scale. Furthermore, Generic AI (GenAI) has been implemented by 54% of respondents. Yet, despite these advancements, worries persist about algorithms operating outside intended parameters (44%), the potential for new regulatory standards (43%), data security (42%), and chances of biased decision-making (42%).

Vivek Jetley, Executive Vice President and Head of EXL Analytics, underlined, "Virtually every business leader recognises the enormous potential in AI, particularly GenAI, and they are committing significant resources to build new solutions." However, Jetley signalled data management as a key obstacle, saying, "Data is still too siloed and often locked in legacy systems, so businesses need help integrating that data so they can unlock the full power of AI."

Additionally, the study illuminates the scenario in the UK, where 89% of banking and insurance firms have launched point solutions and proofs of concept using AI in the past year, despite facing similar data-related constraints. Nearly half (47%) of the firms agreed that their organisations are minimally data-driven, pointing to a necessity for improved data operations before an AI rollout.

Kshitij Jain, EMEA Practice Head & Global Chief Strategy Officer of EXL Analytics, stated, "Our findings demonstrate that industry leaders recognise the transformative potential of AI for their businesses, but it's also clear that they are under significant external pressure to implement the technology." Jain also warned that rash investment due to regulatory pressure could hinder the effective implementation of AI, which flourishes best in companies prioritising data quality, architecture, and governance.

The research findings from the US and UK studies also suggest an approach for Australian financial services leaders to incorporate AI into their operations. This involves not only spending on the technology but also bolstering data quality and governance, and employee training to optimise the benefits AI can bring, while also mitigate potential risks.