Industries are changing as a result of generative AI, which includes ChatGPT and other platforms that make processes more straightforward, effective, and user-friendly.
However, the advantages are accompanied by some significant hazards in the highly regulated financial services industry. Therefore, this new technology must be used sensibly to preserve stability and confidence.
Although technological advancements are nothing new to the financial services sector, generative AI offers a new and complicated environment. Reports or scholarly opinion pieces, which are typically speculative and devoid of empirical facts, are frequently the source of insights into its potential.
The recent research by Emmanuel Mogaji, Associate Professor in Marketing, Keele University, was motivated by the above-mentioned knowledge gap. He investigated the opportunities and difficulties of incorporating generative AI into financial services by speaking with bank managers and industry professionals, while also exploring how the consumer experience is changing as a result of this revolutionary technology.
Generative AI is much more than just utilising DALL-E 3 to create graphics or ChatGPT to generate text. To customise products like loans, investment plans, or insurance policies for a customer, it can be used to analyse their financial history and behaviour. Additionally, generative AI can be used to quickly decide whether to approve loan applications.
A customer may be used to obtaining product information via the chatbot at their bank. 42 million customers have interacted with Bank of America’s virtual financial assistant, Erica, in over two billion engagements.
However, we are still unsure about who is accountable for the recommendations and goods that generative AI makes. Does the AI itself, bank management, or leadership bear responsibility?
For instance, it is unclear if generative AI will provide a consumer with appropriate and reliable financial advice. Biases and a lack of sophisticated comprehension and judgement are cited by critics. Nevertheless, wealth managers view it as a useful “second pair of eyes,” and it has the potential to develop into a trustworthy resource for private investors as well.
Artificial intelligence has the potential to improve the efficiency and accessibility of wealth management. Robo-investment platforms use AI to create personalised investment strategies and manage portfolios based on risk tolerance and financial goals. Without the need for direct human supervision, this method lowers expenses and provides portfolio monitoring around the clock.
However, AI technologies need to be accurate and dependable due to the high stakes and strict requirements of the financial sector. The issue still stands: is it ever possible to completely guarantee this degree of assurance and trust?
Obtaining individualised financial services is expected to be based on personalisation. Mogaji’s previous study examined the use of AI techniques to create customised advertising campaigns and marketing emails.
The potential for customised financial products and ads is enormous, given that banks can access a variety of client data sets and use AI’s creative ability. But at the same time, it gets harder to strike a balance between privacy and relevance.
Furthermore, legitimate use of AI is not limited to banks and other entities. An era of deepfakes that deceive or cause customers to question what is real could be ushered in by generative AI’s ability to create false or misleading advertisements.
Customers must be vigilant and assess marketing messages closely as this environment changes. Scams may appear more sophisticated thanks to AI, but standard precautions like confirming that communications originate from reputable websites, emails, or accounts remain valid.
“Watch out for poor grammar, ‘act now’ haste tactics, and altered URLs (such as ‘paypa1.com’ with the digit 1 in place of ‘paypal.com’). An online advertisement does not necessarily belong to you just because it features your name. AI might have created it to persuade you to click, which could have had devastating results,” Mogaji noted.
Customers must pay close attention to how they interact with advertisements, tools, and technology because this is a new environment for them. Even though financial services are strictly regulated, customers should make sure they are only using the legitimate resources that their bank offers.
Furthermore, even while ChatGPT can provide guidance, its creator, OpenAI, will not be held accountable for the suggestions it provides. It is far better for the customer to interact with his or her bank’s chatbot if he or she wants to use AI. The person may thus be certain that the information he or she is receiving is coming from a reliable source.
Banks are held accountable for fulfilling legal and compliance requirements in the regulated financial services industry, which includes their usage of chatbots. This guarantees that businesses uphold industry norms and laws, safeguard customers, and deliver accurate and trustworthy information. For generative AI in general, this is not necessarily the case.
Additionally, regulators have a responsibility to inform and reassure consumers about the new developments in generative AI. The Advertising Standards Authority and the Financial Conduct Authority need to make sure that adaptable frameworks are in place so they can keep up with the quick developments in artificial intelligence.
This will entail striking a balance between innovation and consumer safety by developing precise standards for the creation, application, and supervision of generative AI systems.
There is no turning back the generative AI genie. Customers must take the initiative to interact with this new and rapidly developing technology since it will continue to become an increasingly important part of daily life.
AI transforming financial services
Generative AI’s potential to revolutionise financial services is clear in applications such as personalised financial products, automated wealth management, and real-time loan approvals. The technology’s ability to analyse vast datasets and deliver customised solutions can redefine how financial institutions interact with their customers. Yet, as promising as these capabilities are, they introduce complexities around accountability, data privacy, and ethical usage.
One of the most pressing concerns is the question of responsibility. This remains unresolved, leaving both consumers and institutions in a state of uncertainty. Financial advice and decisions made by generative AI must be transparent, unbiased, and accurate. However, biases inherent in AI models, combined with their lack of human judgement, pose risks to the reliability of such systems.
Generative AI’s role in marketing and customer interaction further underscores the need for vigilance. While it can craft personalised advertising and financial products, it also has the potential to create misleading or deceptive content, eroding consumer trust. The rise of deepfakes and AI-generated scams further complicates the landscape, making it imperative for customers to approach digital communications with heightened scrutiny. Financial institutions, in turn, must prioritise the ethical use of AI to safeguard consumer confidence.
Regulatory bodies have a critical role to play in this evolving environment. By establishing clear and adaptive guidelines, they can foster innovation while ensuring consumer protection. Institutions such as the Financial Conduct Authority and the Advertising Standards Authority must develop frameworks that address the unique challenges posed by generative AI, from ethical use and compliance to mitigating risks associated with misinformation and fraud.
While generative AI offers immense convenience, users must remain cautious and ensure their interactions are limited to verified and trustworthy platforms. This includes relying on bank-endorsed chatbots and tools rather than third-party AI systems that may lack regulatory oversight.
Ultimately, the successful adoption of generative AI in financial services will hinge on collaboration between stakeholders. Financial institutions, regulators, technology developers, and consumers must work together to address ethical, operational, and technical challenges. This will require an ongoing commitment to transparency, education, and innovation.
Generative AI is here to stay, reshaping industries and daily life in profound ways. In the financial sector, its potential to enhance services and accessibility is undeniable. However, its transformative power must be wielded responsibly to protect consumer interests and maintain trust. By striking the right balance between innovation and regulation, the financial services industry can harness the full potential of generative AI while safeguarding the principles of fairness, transparency, and accountability.
Awareness and collaboration will be the keys to unlocking the benefits of generative AI while mitigating its risks. There is no turning back—only the opportunity to move forward wisely.