Artificial Intelligence (AI) – everyone has heard of it in some capacity or another, whether it be for creating art or for students to allegedly cheat on their exams, but what can it mean for finance?
According to some, the answer is simple – a great deal. In fact, the financial sectors have been one of the most long-standing users of AI, implementing the technology for essential tasks such as risk management and fraud detection, among other areas.
The past year has seen the popularity of AI tech rise exponentially, most visibly in the form of ChatGPT. However, governments, fintechs and financial institutions alike have been busy looking at the wider macro-economic picture.
Observing that the macroeconomic environment in 2023 includes rising interest rates, high inflation and geopolitical uncertainty, Eric Huttman, CEO at MillTechFX, an FX-as-a-service provider, notes that this has ‘presented more than a few challenges for businesses’.
In the face of these challenges have been opportunities for ‘problem-solving products’ though, Huttman asserts. He projects that ‘generative AI in particular is likely to be a key growth area for fintech over the next 12 months’.
He continued: “The pace of change and innovation in 2023 was rapid and whilst global regulators are working hard to keep up, the onus is on organisations using the technology to act responsibly and manage the risks.
“At MillTechFX we have already begun applying AI to speed up compliance and administrative processes and we’re excited to explore further applications within our business.”
Whilst many have looked to the opportunities, some are looking to the potential downsides however. A well-known example of AI-wariness was the Hollywood writers’ strike, for example.
Many big-screen and small-screen writers have been citing concerns throughout the year that AI could potentially destroy their livelihoods, calling for greater regulation of the technology.
So has this been seen in finance? No less a significant institution than the Bank of England has joined the debate. Earlier this month, the Bank’s Financial Stability Committee (FSC) stated that it would continue assessing ‘the financial stability risks of AI and ML in 2024’.
The Bank’s Governor, Andrew Bailey, did stress, however, that AI was not out of control in a science fiction sense – the Governor decided to reference the Stanley Kubrick classic of 2001 rather than the perhaps more aggressive and high-octane scenario of James Cameron.
“We obviously have to go into AI with our eyes open,” Bailey said. “It’s not out of control in the sense of 2001: A Space Odyssey. It’s actually that the thing is so complicated in many of its forms that understanding exactly what the black box delivers is very hard.”
Others, however, remain optimistic. Speaking to Payment Expert following the AI Safety Summit – attended by PM Rishi Sunak, an enthusiastic fintech advocate – Riccardo Tordera, Head of Policy and Government Relations at The Payments Association spoke favourably of the UK’s position on AI.
“AI is still in its nascent stages, and the UK government’s approach of allowing the industry some flexibility to operate while adhering to established principles is commendable,” he said. “This approach aligns with the UK’s position as an open and welcoming environment for innovation.”
In Tordera’s view, the UK has set itself up as a ‘thought leader’ in the field of AI. Comments such as this will likely come as a relief for the government, which has put support for technological innovation at the heart of its economic plans.
In the Autumn Budget theChancellor of the Exchequer, Jeremy Hunt, pledged £500m to support tech growth, in particular AI. The UK’s leaders want to see the country become a leading global hub for fintech, and some stakeholders believe this goal is far from unattainable.
“The UK is home to a dynamic fintech ecosystem which has shown strong resilience during this tough period,” Mittman concluded.
“Momentum has not slowed and heading into 2024, it’s vital that the fintech community continues to work together to drive the industry forward and build trust to increase adoption among end-users beholden to legacy processes and providers.”
