Banks and other financial institutions (FIs) around the financial services ecosystem are increasingly investing in artificial intelligence (AI) and machine learning (ML) technologies. Roughly 80 percent of banks with more than $150 million in assets have evaluated the use of ML, and many are already debuting new tools and features built with the tech.
According to projections, banks will invest as much as $57.6 billion in AI and ML by 2021 — and with good reason. Some experts believe that implementing AI technologies could save the banking industry as much as $1 trillion in revenue by 2030.
Moiz Kohari, senior vice president and chief technology architect at State Street Bank, said he’s seen the industry embrace AI and ML and believes the impact of these technologies is only just beginning to be realized.
Kohari discussed the State Street’s use of AI, his predictions for how the tech will impact the banking industry and why he believes AI, ML and other emerging technologies have the potential to transform nearly every inch of the banking industry.
“It has the potential to impact almost everything we do,” he said. “Almost every business unit within State Street is looking to leverage these capabilities in one form or another.”
AI Makes Its Presence Known in the Banking Industry
There is certainly plenty of hype surrounding AI and ML, and, according to Kohari, that hype isn’t without evidence. He pointed out that the vast majority of banks have at least begun working with AI internally, even if they haven’t yet rolled out a public-facing product or feature.
“I think most banks are already leveraging certain types of [AI and ML] capabilities,” he said. “And it’s something that, eventually, I think every financial institution is going to be leveraging at some level or another. It’s very difficult for me to think that this isn’t going to eventually impact every player in the marketplace.”
While many FIs are investing in AI and ML development, not all of them are doing so in the same fashion, Kohari said. Many companies in the space have looked to partner with technology developers in order to create products and features that leverage AI to serve their clients.
Even though partnering with FinTechs and other solution providers can help banks save time and money during the development processes, there are drawbacks to consider. After all, developing technologies in-house, rather than collaborating with an outside partner, allows FIs to have more control over the tech’s development and how it will be used. As a result, many banks — State Street included — have worked to assign AI development to their internal teams.
“We’re looking at creating a bunch of these technologies,” he said. “Because once you’ve created a particular type of capability, you have control over what you do with that capability, in a targeted fashion, and how it affects your business.”
A Beacon for the Future
For its part, Kohari said that State Street has eagerly embraced the potential of AI and ML and recently pushed the rollout of these technologies across all of the bank’s operations. These efforts have been made because of Project Beacon, the company’s long-term plan aimed at helping the company embrace digital technologies.
With Project Beacon helping to cut costs by digitizing as many areas as possible and implementing more automation processes, State Street Bank is projected to save $550 million from 2015 to 2020. So far, the company has worked to automate processes such as reconciliation and document review, but Kohari said the efforts have stretched over a range of different areas at the bank.
Last year, State Street unveiled Quantextual Idea Lab, a platform that works to use AI, ML and natural language processing to help clients organize and extract information from their research.
Automation and digitization aside, State Street is also working to use AI and ML technologies to help anticipate future problems.
Kohari explained how AI and ML allow the bank to detect potential anomalies or issues in real time, helping it better prepare for problems before they happen. These anomalies, he said, could range from getting information on servers that need to be repaired, updated or replaced in the near future, to unusual transaction data that could indicate market manipulation or even fraud.
The company is also working to use predictive analytics to foresee the potential success (or lack thereof) that different investment strategies could have over the long term.
Going forward, Kohari said he believes AI can positively impact nearly everything that State Street and other banks do on a daily basis.
It will be crucial for players in the space to be ready to adapt to new use cases, trends and technologies as they arise. FIs that aren’t agile risk falling behind.
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