How AI is re-shaping the financial industry: lights, shades and perspectives
Paola Papanicolaou · Edward Elgar Publishing eBooks · 2023
While Artificial Intelligence (“AI”) is quickly spreading across all industries, the financial sector has been amongst the fastest adopters of AI algorithms. By leveraging big data, AI is fundamentally changing the operating models and competitive dynamics of financial industry by enhancing its predictive power and decision-making process. In particular, AI has the potential to reduce time and cost of service and to support the development of client-centric strategies. AI can indeed help in creating contextualized hyper-personalized strategies for clients, adopting “human-like virtual interaction” while preserving customer satisfaction, increasing clients’ protection from fraudulent activities. On the other hand, AI is exposing the financial system to unprecedent hazards and uncertainties to be tackled by regulators. AI can be subject to human biases, it can trigger new systemic risks as well as new undesired dynamics such as algorithmic collusion. At the same time, it is necessary to define the building principles of AI such as ethics, privacy, explainability, and competition. All these factors are required to be collectively considered to unlock the promise of AI to build a better financial ecosystem for all.