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Artificial intelligence has already made a significant, positive impact on the financial services ecosystem and we can only expect this trend to accelerate in years to come. AI has the potential to radically transform businesses but only if they deploy it with appropriate diligence and care. A 2020 report by EY and Invesco anticipates that AI will expand the workforce in fintech by 19% by 2030 as the industry stands to be one of the largest to benefit from the efficiency gains and innovation the technology can bring through operational optimisation, reduction of human biases and minimisation of errors in anomalous data. Alex Housley, CEO and founder of Seldon, further analyses the recent changes in the role of AI and the impact it is set to have on the finance sector in years to come.

Talent Shortage Within FS

According to a report by Bloomberg, listings for AI-based jobs within the financial sector increased by approximately 60% from 2018 to 2019. This demand for workers with AI expertise is not only seen within the financial industry but across a variety of other professional sectors, such as e-commerce, digital marketing and social media. The jobs market has had little time to respond, resulting in a shortage in access to talent. A study by SnapLogic found that whilst 93% of UK and US organisations are fully invested in the use of AI as a priority in their business, many lack access to the right technology, data, and most importantly, talent to carry these goals out. This ‘skills shortage’ is a major obstacle to the adoption of AI in business, with 51% of those surveyed acknowledging that they don’t have enough individuals trained in-house to make their strategies a reality. Machine learning can offer benefits in many forms and different businesses have varying needs. There is no ‘one size fits all approach’ when adopting and deploying AI, which can make it a costly process for many organisations not equipped with the right tools.

Fortunately, there is ample opportunity to enhance the responsibilities of numerous roles within their organisation or let employees get on with more strategic work. SEB, a large Swedish bank, uses a virtual assistant called Aida which is able to handle natural-language conversations and so can answer a trove of customer FAQs. This means customer service professionals have been redeployed to focus on complex requests and their more meaningful responsibilities. Even employees currently working within the industry are looking to broaden their skills to become more versatile across new technology-driven roles. In particular, financial services companies are looking to upskill their data scientists and analysts. They have the base skill set required and can do tremendously well with the right engineering support. Deploying artificial intelligence within a business’s infrastructure means it can take care of mindless, repetitive tasks and free up employees to focus on other, more rewarding parts of the business, maximising automation and cutting costs.

There is no ‘one size fits all approach’ when adopting and deploying AI, which can make it a costly process for many organisations not equipped with the right tools.

Enhancing Fraud Detection

One of the biggest use cases of artificial intelligence within financial services is fraud protection. With the rise of online banking and the exponential growth of digital payments, banks have to monitor huge swathes of transactions for fraudulent behaviour. This huge influx of data points poses major issues for the human brain but actually maximises the effectiveness of ML systems. We’ve seen significant growth in the use of deep learning, with most major retail banks now relying on machine learning tools to recognise and flag suspicious activity. To keep up with the pace of criminals and comply with stricter regulations, service providers have to look beyond traditional methods and implement hybrid strategies built around holistic understandings of behavioural and anomalous data.

Indeed, research by AI Opportunity Landscape found that approximately 26% of funding raised for AI startups within the financial services industry were for fraud or cybersecurity applications, dwarfing other use cases. This number is expected to rise as fraud detection and mitigation continues to be one the highest priorities for customer-facing organisations as consumers increasingly hand over their data in exchange for services.

Better Serving Customer Needs

Financial services companies are increasingly leveraging artificial intelligence to deliver tailored services and products for their client base. For those banks mining data effectively, AI provides the ability to serve customer needs across multiple channels, and in some cases to grow operations at an unprecedented scale. Tools such as chatbots, voice automation and facial recognition are just a few of the ways banks are using AI to streamline and personalise the user journey for their customers. Importantly, consumers are increasingly literate in automated services and their expectations are constantly rising as the technology improves, meaning organisations must constantly adapt or risk being left behind.

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Chatbots and voice agents are also able to detect and predict changes in consumer behaviour, giving feedback on each interaction with a customer. All the results from customer touch-points are shared across the organisation, ensuring decisions and recommendations involving a human or machine are more intelligent and precise. Over time, these analytics mean businesses can make real-time decisions with their customers in mind, boosting engagement and personalisation.

In order to detect customer data from online purchases, web browsing and in-store interactions, banks must have AI in place to collect the data and automate decision-making. By adapting these technologies banks can connect their data, amplifying their offering effectively across all channels.

Continuous Adoption of Artificial Intelligence

Artificial intelligence and machine learning have already enhanced numerous capabilities for the financial sector, improving recommendations, customer experience, and efficiencies via  automation. AI will continue to dominate different parts of the financial sector, and the acquisition of machine learning and data science talent will become the norm. A recent survey from the World Economic Forum attests to this, with nearly two-thirds of financial services leaders expecting to be mass adopters of AI in two years compared to just 16% today.

Acquiring the right talent to drive machine learning and AI in organisations will remain a challenge as innovation is focused in different areas and new technologies are being implemented. In lockstep with this will be the constantly evolving regulatory landscape surrounding adoption of AI in financial services as each side races to match and often contain the other. However, the multiple benefits that come from implementing AI and machine learning are clear, and it will be a key area of focus and growth for businesses within financial services over the next decade.

The World Economic Forum recently launched its Global Platform for Geostrategic Collaboration to bring together leading policy research institutions (think tanks) to engage the global public on geostrategic challenges in a multipolar world.

The platform aims to fill the urgent need for leaders and experts to understand the world through the eyes of their counterparts in other regions and find better ways to strengthen cooperation.

Within this mission, the forum’s platform will bring together insurers, tech firms and governments together to find ways to tackle risks from new technology such as drones and driverless cars.

Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland, had this to say:

“The impact that technology has on our life goes far beyond convenience and speed. With new capabilities come a whole new range of responsibilities, and it is time insurers rethink their approach towards new products, such as drones and driverless cars, and the risks they bring to the table. Assigning liability becomes more and more of a grey area as complex technologies emerge, blurring the lines between the decision-maker and the enabler.

“It is therefore paramount insurers understand these changes are transformational for the entire industry, and old rules cannot be applied to these emerging risks. The way we collect and share data, and the impact of IoT for instance has the potential to revolutionise the industry. It can also offer a great opportunity to scale up to those insurance providers who will seize the moment.

“This represents an important state of change. We will need to learn to co-exist with machines, and both the risk factor and future changes will have to accommodate this. Incorporating new technologies such as driverless cars will not happen overnight – a carefully thought out set of rules of integration needs to be in place. Of course, this will add risk and insurance complexity.

“Ultimately, new technologies represent a business change for the better; revolutionising not only the way in which an insurance organisation company works but the services they can provide to customers by embracing a future in a digital world.”

The World Economic Forum has warned that future generations will be haunted by the effects of a global pension crisis that is brewing today. The FT's Josephine Cumbo speaks to Michael Drexler, head of financial and infrastructure systems at WEF, about what can be done.

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CubaFlagSenior Cuban officials told participants at the 10th World Economic Forum on Latin America that the government is eager to receive foreign investment, and has taken measures to make Cuba an attractive investment destination. The meeting was a historic one for the country, which has recently initiated diplomatic relations with the US after half a century.

The Forum took place in Riviera Maya, Mexico from 6th – 8th May 2015. Main topics on the agenda were financial resilience, vigorous economic growth and poverty alleviation.

The Forum was also the first time Cuban officials have addressed foreign investors at a World Economic Forum meeting. The country’s delegation noted that Cuba has put in place transparent, stable regulatory framework for foreign businesses, with agriculture and biotechnology key sectors for future investment.

“Mexico is a strong supporter of the modernisation efforts under way in Cuba,” said José Antonio Meade Kuribreña, Secretary of Foreign Affairs of Mexico. Mexican businesses, building on the long-standing friendship between the two countries, are leading the way in investing in Cuba. A trip last year of 68 Mexican business leaders to Cuba has already resulted in 50 investment projects.

Cuba is especially interested in attracting investment in agriculture, since the country currently spends heavily on food imports. Even though all land belongs to the state, private investors can acquire 99-year leases and own everything built on and produced by the land. In other sectors, such as biotechnology, healthcare and tourism, Cuba has competitive advantages that should attract investment, Rivas said.

Lina Pedraza Rodríguez, Minister of Finance and Prices of Cuba, said that the country urgently needs to modernise its economy so as to protect the achievements of the Cuban Revolution. For that it requires foreign investment, including from the United States. “Cuba is open to investment from the United States. It has never been closed.” She said that her government has achieved a stabilisation of macroeconomic indicators, is engaged in productive negotiations with its foreign creditors, and is moving to eliminate its dual currency system. The state will maintain its leading role in the economy, but private and foreign companies can operate with their property rights secure.

WEF East AsiaThe milestone launching of the ASEAN Economic Community (AEC) gives South-East Asian nations the opportunity to take the region to the next level of development, though there are significant challenges ahead, according to the Co-Chairs of the 24th World Economic Forum on East Asia, held in Jakarta, Indonesia, April 19-21, 2015.

The AEC creates a single regional common market of Asean countries with a free flow of goods, services, investment capital and skilled labour.

“There is an eagerness to make this work and put all the elements in action to move forward, have a level playing field, a much bigger market and grow the pie significantly in the next few years,” said Hans-Paul Bürkner, Chairman of The Boston Consulting Group.

The theme of the World Economic Forum on East Asia 2015 was “Anchoring Trust in East Asia’s New Realism”. Building trust among all stakeholders and in institutions will be crucial if ASEAN is to succeed in reaping the full benefits of regional integration.

“People have lost trust in the ability of markets and business to create wealth and to fairly allocate opportunities,” observed John Riady, Executive Director of the Lippo Group in Indonesia. “So it is important for business to reflect on its role and the role that it can play in society. But this is important not only for business. No matter who we are – whether in government, education, media or NGO – this is an important time to reflect on stewardship, how we can be better stewards of what we have been given, and how we can rethink what we are doing and better structure our institutions to reflect the realities of our world.”

Teresita Sy-Coson, Vice-Chairperson of SM Investments Corporation in the Philippines, said that the discussions at WEF East Asia had highlighted the major challenges ahead for labour mobility. “There is now an understanding of the importance of the freer movement of human capital,” she said.

William Lacy Swing, Director-General of the International Organisation for Migration (IOM) in Geneva, agreed: “It is quite clear that, with the very exciting regional integration going on here, human mobility will be increased and expedited as a result. We have to look at it as both a challenge and opportunity. Migration is not a problem to solve; it is a reality to be managed.”

Petro Poroshenko, President of Ukraine

Petro Poroshenko, President of Ukraine

President Petro Poroshenko of Ukraine told participants at the World Economic Forum Annual Meeting that despite the aggression his country faces, Ukraine is strong and unified. “Ukraine has become stronger. Ukraine has become more democratic. And Ukraine has become more European,” he said.

In a special session on The Future of Ukraine, held yesterday at the Annual Meeting, Poroshenko said that last year’s presidential and legislative elections were free and fair. He added that these elections showed a highly unified country, while polls indicate that support is stronger than ever for the country’s territorial unity and for integration with the European Union.

Poroshenko said that last year was “the most difficult in our history”, with parts of the country occupied by foreign troops. However, he also saw strong motives for optimism that peace can be achieved. He noted that shelling has fallen dramatically since a December agreement that called for “artillery silence”.

Poroshenko asked for the international community to continue its support of Ukraine, with political solidarity, with economic aid, and with the provision of defensive military technology. “We are not only fighting for our territorial integrity and independence, we are fighting for European values,” he said.

Ukraine is fully committed to economic reform, Poroshenko said. “We want to create a new country, free from corruption, with independent courts and the rule of law. We want to build a new climate for investment.” The country is already cracking down on corruption with a new anti-corruption bureau, and it is reducing bureaucracy. It is working to achieve energy independence from Russia through a mix of conservation, new suppliers and a clear, transparent energy market that will increase domestic shale gas production.

Poroshenko said that in Davos he has received several promises of major investment, as well as many expressions of support for his country. “I am thankful for this support. It is what Ukraine needs,” he said.

The Global Impact of China's Economic Transformation: Li KeqiangChina’s economy will not suffer a hard landing even as it braces itself for a further slowdown this year, Li Keqiang, Premier of the People’s Republic of China, told delegates at the World Economic Forum in Davos, Switzerland, yesterday.

“The Chinese economy will face downward pressures in 2015,” Li said in a keynote speech at a special session of the Annual Meeting. “But the Chinese economy will not head for a hard landing.”

He added that the government will press on with structural reforms, which include liberalising its services sectors, promoting mass entrepreneurship and innovation, protecting intellectual property rights and deepening its capital markets. “We will move towards the path of reforms. This way we can shift gear without losing momentum and achieve medium- to high-speed growth, and medium- to high-level developments.”

Using the analogy of a skier at Davos, he promised that China will “go at the right speed, keep balance and be courageous”.

Premier Li’s address came a day after the country announced its slowest growth rate in 24 years, with full-year GDP at 7.4% in 2014. The government has prepared the nation to embrace the “new normal” as it focuses on quality rather than speed of growth, and shifts its focus from an export-investment led model to one that is more reliant on consumption and the services sector.

In his address, Li also suggested that China would eschew stimulus measures through monetary easing but instead step up investments in targeted areas, including health, clean energy and transport, as well as provide support to the country’s small and medium enterprises, create employment for young people and optimise income distribution.

The Premier said China’s economic slowdown reflects the profound adjustments in the global economy and is consistent with its larger economic base. A growth at 7%, he pointed out, produces annual increase of $800 billion (€690 billion) at current prices, larger than a 10% growth five years ago.

On the internationalisation of the renminbi, Li explained that as China’s international trade increases, more countries are demanding the use of the Chinese currency to settle trades and investments. The pool of offshore renminbi has gradually expanded in recent years. Li said China is committed to opening up to the world but the internationalisation of the renminbi is going to be a long-term process.

forumlogolargeThe Confederation of British Industry (CBI) is calling for delegates at this week’s World Economic Forum in Davos, Switzerland, to focus on global issues and work to kick-start the world economy.

Rain Newton-Smith, Director of Economics, CBI, speaking at the event, said: “As we dig out our snow boots and warm coats, and prepare to join the World Economic Forum's Annual Meeting in Davos, now is a time to focus our minds on global issues. We're a few years into the global recovery, but the benefits are not being felt by everyone. Youth unemployment is over 50% in Spain and Greece. And in many of the advanced economies, while employment growth has picked up, real wage growth is lagging behind. Households aren't feeling an improvement in their pockets,” she said.

According to the CBI, the UK is now enjoying a healthy recovery, with growth of around 2.5% expected this year; and employment in the UK now stands at 30.8 million, a record high. But at the same time, the average household has seen its income drop by 6% in real terms since the financial crisis.

“The key to addressing this is to improve productivity and skills, so companies can grow faster and pay their workers more. In the UK, while job growth has been strong, productivity growth has fallen 15% below its pre-crisis trend. There's an urgent need to raise productivity, which is a crucial part of addressing living standards and promoting sustainable growth. Improving productivity is not just a UK issue but a global one - with slower but more balanced growth, China will need to keep focusing on innovation as it moves to a more services-led economy with the urban consumer at its heart,” Ms Newton-Smith remarked.

CBI says that the focus on productivity needs to go hand in hand with improving skills. As the new wave of innovation hits, jobs are becoming more skilled. By 2022, half of all jobs in the UK will need workers who have some form of higher education. As such, businesses need to focus on helping their people build careers.

Innovation is higher in more open economies, according to 2013 research by the Centre for Economic Policy.

“Countries grow fastest when they trade with and learn from one another. There's no doubt that China's phenomenal growth has been driven, in part, by its ascension to the World Trade Organisation and its success in moving up the value added chain,” said Ms Newton-Smith.

“With several large trade deals on the global agenda, there is a real opportunity to boost growth for everyone. An ambitious Transatlantic Trade and Investment Partnership could boost the UK economy alone by £10 billion (€13 billion) every year. Reducing tariffs and boosting trade in services has tremendous potential. It's important that we seize the opportunity and get the global economy kick-started.”

Matteo Renzi, WEF2015Italy’s Prime Minister, Matteo Renzi, called for politicians around the world to seize the day and tackle complex risks head-on, at today’s World Economic Forum, taking place in Davos, Switzerland.

“Not to see the risks is stupid for a politician, but the transformation of risks into opportunities is the quality of leadership,” he said. “The economy is important, but without political leadership, we are not in a condition to invest in a different world.”

The Prime Minister acknowledged that new risks abound, but he said that if leaders around the world can invest in the future “not as a problem, but as an opportunity, it will resonate with a very important message – carpe diem”. He told participants that new reform in Europe is important and that a key point for a “new Europe” is the idea of a future focused on the ability to invest in the new generation and not simply to maintain the traditional approach where the future is a problem.

According to Mr. Renzi, Europe’s economic direction needs to change. “At the G20 summit in Brisbane last November, every country spoke about the need to invest in growth,” he said. “Europe and the Eurozone spoke only about austerity. It is important to pay attention to budgets, but it is also important to invest in a new relationship with citizens.”

The next 12 months are critical, Mr. Renzi said. “Europe must eliminate the red tape of bureaucracy or it will be finished.” European Commission President Jean-Claude Juncker’s massive investment plan to boost jobs, growth and investment, announced last November, must be implemented. Renzi also pointed to “the new role” for the European Central Bank, which is expected to unveil a plan this week to boost the Eurozone’s flagging economy.

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