The AI Book

CHAPTER 33The True Value of AI to Transform Push/Pull Wealth Management Offers

By Paolo Sironi¹

¹Author and IBM Industry Academy member

Financial services have been in turmoil since 2008 after the default of Lehman Brothers. The most recent years were marked by corporate restructuring, consolidation of regional banks, toughening of capital requirements, more demanding compliance rules, broad simplification of financial products and, last but not least, the emergence of a vibrant FinTech ecosystem fostering digital innovation. Essentially, the cost/income ratios of established firms appear unsustainable when compared to existing and future dynamics of economic, regulatory and digital frameworks. First, interest rate margins (lending operations) don’t seem to add a significant contribution to shareholders’ value in the Western world after the price for risk. Second, global payments are under continuous digital attack by Chinese technology champions and, most recently, by the Apple partnership with Goldman Sachs and Facebook’s Libra. Third, intermediation margins based on wealth management relationships (investment and insurance products) are also suffering from a progressive compression of commissions and embedded fees, affecting capital markets in return.

Many blame digital disintermediation, others artificial intelligence or exponential technologies to be the source for disruption. I honestly believe that this is not accurate. Current commoditization of financial products is ...