Reimagining Businesses with AI

CHAPTER 7Transforming Financial Services with AI

“We don't have to be smarter than the rest; we have to be more disciplined than the rest.”

—Warren Buffett

INTRODUCTION

The financial services industry is the bedrock of the world economy. It contributes nearly $20 trillion⁽¹⁾ out of the global GDP of about $90 trillion. Not only is this industry a major contributor, but every dollar of the economy moves through this industry. Banking, insurance, brokerage firms, and other such sectors are the various arms of the financial services industry. The COVID-19 pandemic has badly impacted the global economy and the various sectors like financial services. As the world starts getting back to normalcy after we figure out how to deal with the crisis, we all will be looking at the financial services industry to jumpstart the economy.

This industry historically has been one of the highest spenders on technology; average IT spend as a percentage of revenue is about 7%. This industry also has traditionally been one of the earliest adopters of technology. However, given the stringent regulatory environment that they have to work in, the size of the companies that operate in this industry, and the fast pace of evolution of technology in the last decade, the financial services industry also has a lot of technical debt to deal with, especially a large number of older banks that are still using very antiquated core banking systems.

This is an extremely data-rich industry and success in this ...