Accelerating innovation in financial services with AI

The pace of technological change in the financial services sector is relentless with Finastra’s Financial Services State of the Nation Survey revealing that financial institutions are showing no sign of slowing down when it comes to deploying new technologies and improving their capabilities. Some 98% of financial institutions surveyed globally said they are actively taking steps toward change, recognising the urgency of preparing for technological disruption.

Adam Lieberman, Chief AI Officer, Finastra

This is particularly the case with artificial intelligence (AI) where uptake is accelerating. Our 2024 research found that twice as many financial institutions reported adopting AI or improving their capabilities compared to 2022.

Adoption and refinement of AI has accelerated markedly. Around two in three financial institutions (61%) have deployed or improved their capabilities in AI in the last 12 months. Furthermore, the proportion of financial institutions that have adopted or improved their Generative AI (GenAI) capabilities in the last 12 months has increased more than for any other technology, with 35% of financial institutions across markets saying they have done so.

It’s clear that financial institutions understand that the sector is now one defined by rapid technological transformation, and that slowing down could mean falling behind.

Increased personalisation

Last year’s research highlighted the perceived significance of GenAI in personalising customer offerings. Customer expectations are a driving force, with 44% of institutions saying personalisation is one of the primary expectations that customers have of them.

GenAI can analyse vast amounts of financial data to create personalised financial advice, support alternative credit-risk scoring, detect fraud, and predict market trends. This level of insight and automation not only improves operational efficiency but also enhances decision-making capabilities for both financial institutions and their customers, ultimately leading to a more efficient financial system.

Key personalisation use cases cited in our research include the use of chatbots that can accurately answer customer questions and provide instant support 24/7, as well as the delivery of banking services that align with customers’ values and the provision of personalised recommendations based on customers’ current finances. Top payments use cases include enabling customers to make instant payments suited to their specific needs, and the provision of customisable digital wallets to allow for personalised options and transaction categories.

By integrating advanced technologies into new financial ecosystems, institutions can meet rising customer expectations for personalised, secure, and accessible services. These systems are critical not only for enhancing the customer experience, but also for addressing larger goals such as financial inclusion.

Secure, transparent ecosystems

With AI evolving so quickly, many financial institutions find themselves grappling with how to keep up with security protocols, whilst ensuring customer trust is not eroded amidst the excitement of innovation. Some institutions are holding back from investing in new technologies for this reason, with data security concerns (36%) the most widely cited barrier to seizing the opportunities of technological and cultural change in the financial services sector.

This heightened focus on data privacy is driving the demand for secure, transparent ecosystems where GenAI can operate safely, making data protection a central priority in adoption. The answer is not to pass up on AI and risk getting left behind, given its significant benefits. Rather, the answer is to secure the benefits by using a robust ecosystem.

Where institutions are prioritising their spending

Whatever challenges organisations are facing, our research shows financial institutions are still taking measures to prepare for technological change. Learning and development is high on the priority list, with half of institutions taking steps to ensure their staff have the knowledge to be able to harness new technologies (49%).

Investment in technology is also key – with a similar proportion (47%) saying they are modernising all aspects of their operations including migrating to cloud and embracing API-led technology. These technologies are not just facilitators; they are the backbone of a secure, resilient, and adaptable financial future.

Cloud solutions provide the scalability, flexibility, and cost-efficiency required by today’s fast-paced industry. By moving to the cloud, financial institutions can store and process vast amounts of data quickly and securely.

APIs allow for the seamless integration of financial services, creating a more interconnected and efficient financial ecosystem. This interoperability is key to fostering innovation, as it allows financial institutions and third-party providers to collaborate and build new, customer-centric services.

While last year saw AI being used primarily in experimental or narrow settings, it’s now playing a critical role in areas such as process optimisation and operational improvements, with enhancing IT operations, automation, improving KYC and streamlining DevOps all showing net gains in focus, as well as enhancing the service experience, particularly through customer-facing tools like chatbots and virtual assistants.

The growth in investment of these more high-stakes use cases demonstrates increasing trust in GenAI – or at the very least, a clearer understanding of how to mitigate risks. Companies that invest in these technologies are unlocking new possibilities for innovation, customer engagement, and financial inclusion.

Sponsored by Finastra