Disruptive digital technologies in the financial services industry

Artificial intelligence

Financial services companies are using AI in a wide range of settings. Along with the customer service chatbots mentioned above, they’re also deploying AI to automate loans and insurance underwriting. Among the three disruptive digital technology categories that are the focus of this survey, financial services executives expressed the greatest familiarity with AI.

By the numbers:

• 41 percent of respondents were “extremely” or “very” knowledgeable about AI. 
• 53 percent of those familiar with AI said their institutions are developing or have already launched commercial deployments or pilots of AI applications.

Risk quotient

AI is an emerging technology that carries risks. Poorly designed decision-making systems can generate errors and raise potential regulatory problems. Survey participants were wary about the technology’s cost and its potential to misfire. And some reported that they’re holding off until AI’s future clarifies.

Robotics

Robotics encompasses a broad spectrum of technology and, according to the survey, it’s making deep inroads into the financial services industry. Robots come in many forms, from physical devices such as customer service robots in retail settings to software robots that take the controls of business applications. Software robots are part of the growing field of robotic process automation.

By the numbers:

• 21 percent of respondents are not considering robotics
  
• 39 percent reported that their companies have initiated proof-of-concept programs or commercial implementations.
• 40 percent said their institutions are considering robotics.

Risk quotient

Implementing robotics involves a range of risks, which includes poorly designed automation that can increase processing errors. What’s more, displacing human workers can impact morale. It can also create gaps in roles and accountability as organizations transition to automated systems.
Respondents at institutions that are holding off on robotics programs cited a range of barriers, including cost and a failure to establish a strong case for how the technology can help.

Blockchain

Blockchain is at the forefront of emerging technologies that financial institutions believe could profoundly impact the way they do business. Many financial institutions are using blockchain to build a variety of platforms—such as payments and trade finance—and are beginning to engage with established cryptocurrencies.

• 35 percent of respondents said they were “very” or “extremely” knowledgeable about blockchain.
• 40 percent indicated that implementing blockchain at their institutions will be extremely important or critical in five years. 
• 13 percent stated that blockchain implementation will be extremely important or critical in the next 12 months.
• 23 percent of respondents familiar with blockchain said their institutions have launched or are developing pilot programs using blockchain applications.

Risk quotient

There is a wide range of risks to consider when evaluating blockchain. Here are two common blockchain risks:

• Value transfer risk: The peer-to-peer framework exposes participants to risks that would otherwise be managed by a central intermediary.
• Smart contract risk: Smart contracts can potentially encode complex business, financial, and legal arrangements on the blockchain. But aligning them with the many permutations, exceptions, and constraints that prevail in the real world is challenging.

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