« HOW BANKS CAN BOOST THEIR PERFORMANCE WITH AI »: A WHITE PAPER BY ICTLUXEMBOURG

Morpheus Cup 2018
15 mars 2018
BRUXELLES PRÉSENTE SON INITIATIVE POUR L’IA
8 mai 2018

ICTluxembourg just released its first White Paper of the year focusing on the impact of Artificial Intelligence in the Banking Industry. This white paper is among the first efforts to explore the potential of Artificial Intelligence (AI) and Machine Learning in Luxembourg. Developed by ICTluxembourg, the paper seeks to raise awareness, knowledge and contribute to Luxembourg’s emerging ecosystem in this technological area.

Being the member of ICTluxembourg, the Luxembourg Bankers’ Association (ABBL) is the professional organisation representing the majority of banks and other financial intermediaries including also FinTech firms established in Luxembourg. In addition to being the voice of the whole sector on various matters in both national and international organisations, the ABBL actively contributes to fostering the uptake of novel technologies by its members.

One of the main objectives of the ABBL and its dedicated Digital Banking and FinTech Innovation Cluster is to support its members in achieving the digital transformation of their business. This type of digital journey as well as the embracement of FinTech innovation are of greatest importance to the future of banks and other financial services providers. ABBL’s activity spans across various technological domains with the special attention paid towards AI where the adoption of this technology by banks and other financial services firms has just begun.

« AI as a phenomenon emerged for the first time in 1960s. However, only now we are witnessing its impressive resurgence especially in the financial services sector thanks to the combination of several demand and supply factors, namely: sophistication of algorithms and computing power, availability of data and respective infrastructure, high potential of cost reduction and revenue gains, accelerated competition and the compliance pressure coming from regulators and supervisors. Examples of the application of AI and Machine Learning are numerous and touch upon various areas of the financial services sector: sentiment indictors, trading signals, AML / ATF and fraud detection, credit scoring, insurance, chatbots, capital optimisation, risk management models, market impact analysis, trading, portfolio management, regulatory compliance (RegTech) and etc. AI adoption will have multifaceted positive impact on financial institutions, financial markets consumers and investors. However, there are potential risks of AI in financial services which are still to be explored. Examples of such risks relate to third-party dependencies due to network effects and scalability, the issue of “auditability” and ethics of AI and machine learning algorithms. Meanwhile, the technology has a huge potential for the financial sector. Further AI adoption coupled with addressing the inherent risks of this technology will be one of the cornerstones of making the financial sector more agile and in line with the demand of customers, investors, employees, regulators and other stakeholders » highlights Marc Hemmerling, General Counsel Digital Banking, FinTech & Payments, Member of the Senior Management, ABBL.

« Robo-advisory will continue to grow – with penetration rates rising fastest among younger clients and those based in emerging markets – but won’t replace human contact anytime soon, especially in sectors like wealth management. Instead, we are going to see an increasingly hybrid approach: clients will benefit from the robo-advisor’s capacity to analyze reams of data with total objectivity and the human advisor’s ability to listen to another individual, understand their hopes and fears, and earn their trust » adds Stefan Van Geyt, Group Chief Investment Officer at KBL European Private Bankers.

« It’s only the very beginning. If you think of all the “natural biases” that lead most of us to do mistakes in our financial decisions (take a credit, chose a pension plan, invest for the long-run), AI has the potential to better support any individual in its pursuit of wealth and happiness. Those biases have been perfectly explained by this year’s Nobel prize in Economics, Richard Thaler and other thinkers in behavioural finance. Thanks to digital tools powered by AI, we can empower the consumer or the private investor to “map” his financial future according to his current choices. Complex financial products can be simplified or at least presented in a more intuitive way, leading to clearer alternatives between risk and return. Another great example has been found in the U.S. where it is proven that families who are lacking financial education end up with bad mortgage credit conditions if they rely on a “human” credit broker. The bias can be reduced to nihil if the same category is allowed to choose and negotiate their credit though digital tolls », explains Thibault de Barsy, CEO, Keytrade Bank.

Click here to download the White Paper.

Source: ICTluxembourg