AI revolutionises financial services

16 September 2024

Written by Retirement Line

The financial services industry is undergoing a significant transformation as artificial intelligence (AI) becomes an integral part of operations.  

Companies like Standard Life are at the forefront, according to Andy Young, head of digital and user experience at Phoenix Group. The company is actively testing AI tools to enhance customer experience, aiming to provide more personalised and responsive services. 

One such example is the Standard Life team experimenting with a chatbot designed to answer common customer questions. This new tool aims to build on existing virtual assistants by offering more personalised and detailed responses, as well as anticipating customer needs before they arise.

The team is also exploring an AI tool to streamline their compliance process, aiming to speed up publication times. Currently, manual reviews can delay content by several days, with one in five drafts needing revisions due to missing required information. The AI tool would assist by checking drafts against FCA rules and offering suggestions before it reaches human review.

The finance industry’s positive view of AI

A report in November 2023 by UK Finance and Oliver Wyman found that most UK financial institutions have a positive view of AI, recognising its potential to increase efficiency and enhance customer experiences. Over 90% of those surveyed are already using AI successfully in their operations and are benefiting from its implementation.

It isn’t just firms getting behind the advancements. Even the industry’s regulatory body, the Financial Conduct Authority (FCA), is taking steps to embrace the future of technology. 

In a recent speech, the FCA announced that it is using AI-based models to help tackle fraud. Its Advanced Analytics unit is employing new supervisory technology (suptech) to safeguard consumers and markets. For example, they have developed tools that can scan websites and monitor social media to detect and review potential scam sites. 

Furthermore, the Bank of England is using AI "to support and enhance [its] capabilities" including in predictive analytics, and data analysis, according to legal website Travers Smith.

Facing the challenges of AI

AI's potential to revolutionise everything from customer interactions to behind-the-scenes operations is clear, but this integration is not without its challenges. The FCA has been vocal about the necessity of robust governance frameworks to manage these risks. They emphasise the importance of transparency and risk management in AI-driven systems.

In April 2024, the FCA and the Bank of England released updates on their approach to AI. Firms using AI should now be prepared to explain their use of the technology to regulators. This includes detailing how they identify, assess and manage the risks associated with AI. Clear communication with regulators will be essential to ensure that AI is used responsibly and in compliance with regulatory expectations.

In a recent publication by the FCA called ‘AI Update’, the regulator said: “We are focused on how firms can safely and responsibly adopt the technology as well as understanding what impact AI innovations are having on consumers and markets. This includes close scrutiny of the systems and processes firms have in place to ensure our regulatory expectations are met.”

The report by UK Finance found that 95% of firms surveyed said they account for AI-related risks in their risk framework. Meanwhile, 60% said they have started building an approach to model bias and fairness. Their key concerns include compliance with FCA Consumer Duty guidelines, customer risks, cybersecurity, data privacy and intellectual property infringement. 

As AI becomes more common in financial services, clearly it is important for regulators and companies to work together. The goal is to allow innovation to grow while ensuring regulatory procedures are adhered to in order to protect the consumer’s best interest.