Artificial intelligence in the Financial Services industry : A study of future opportunities and risks

Abstract

The use of Artificial Intelligence (AI) in the financial services (FS) industry has transformed financial services and processes significantly in recent years. This thesis aims to unravel what future opportunities and risks are associated with the use of AI in FS industry in order to outline how key decision makers can successfully leverage AI at financial institutions and companies. The literature review presents a brief background to AI and its use cases in the FS industry and examines forthcoming regulatory changes outlined in the EU AI Act. The research method of the thesis is a qualitative study in the form of semi-structured interviews. The results of the study suggest several future AI opportunities, including improved financial decision-making, automation of manual tasks, increased operational efficiency and cost reduction, enhanced risk management and fraud prevention measures, personalized financial offerings, better regulatory adherence and the increase of AI enhanced financial services and processes in the future. The study also uncovered a number of future AI risks such as data availability risks, regulatory gaps, explainability concerns, reputation and brand risks, cybersecurity threats, concentration risks, the risk of embedded bias, data management risks, talent shortages, systemic risks and the risk of overreliance on AI. These insights indicate that key decision makers should prioritize efforts in risk management, ensure robust AI governance, adequately prepare for new regulations, invest in AI to remain competitive, innovate in favorable operating environment, maintain and train AI skilled professionals, enhance cybersecurity measures, invest in the modernization of legacy technologies, and to recognize the continued necessity for human oversight in financial services and processes to successfully leverage AI at financial institutions and companies