A recent report by Deloitte revealed that banking institutions have increasingly been investing their money in machine learning and automation among other labor-saving, innovative technologies.
The London company’s 11th biennial risk management study, conducted in 2018 between March and July, involved 94 financial institutions drawn from various parts of the world.
The survey helps to shed some light into executive decision-making, primarily in an industry that is currently experiencing alarming challenges such as security breaches, budget cuts, and reduced global trade volumes.
“Financial institutions face [difficulties] posed by today’s more complex and uncertain risk environment,” Edward Hida, a partner with Deloitte’s Risk and Financial Advisory division and the author of the report, said. “With … a big focus on effectiveness and efficiency as the torrent of regulatory change has slowed … this will require institutions to rethink their traditional assumptions and employ fundamentally new approaches.”
A considerable portion of the executives surveyed see immense potential in automation.
In fact, approximately 29% of them claimed that their institutions are now utilizing robotic process automation— software that can automate tedious, repetitive tasks that were traditionally carried out by human operators— in a bid to manage risk data (25%), regulatory reporting (20%), and risk reporting (21%).
Analytics and big data are also a leading priority for banking institutions—40% reported that they use it—as is artificial intelligence (AI).
Approximately 19% and 25% of institutions claimed that they are currently using cognitive analytics and machine learning to improve accuracy and minimize costs, whereas 24% of the executives said that they are utilizing business decision modeling systems.
“These tools can reduce costs by automating manual tasks such as developing risk reports or reviewing transactions,” Hida said. “They can also automatically scan a wide variety of data in the internal and external environments to identify and respond to new risks, emerging threats, and bad actors … Digital technologies have the potential to fundamentally re-engineer virtually every aspect of risk management. Financial institutions are now at the early stages of this transformation of their risk management functions.”
Cybersecurity, including loss of sensitive data and attacks from hackers, was named by 67% of the executives as among the three risks that are expected to grow the most in terms of importance over the coming two years.
Nonetheless, half of the executives claimed that they believe that their banks were “very effective” or “extremely effective” in managing the particular risk.
Deloitte’s report comes several days after Gartner released its 2019 CIO Survey involving over 3,000 executives across 89 nations.
The Gartner survey discovered that AI implementation had increased by 270% in the last four years, reaching 37% in the past year.
The figure increased from 10% deployment back in 2015, which is not that surprising since, by some estimates, the business AI market is expected to be worth $6.14 billion, especially by 2022.
McKinsey Global Institute is convinced that labor will not only lead to a 1.2% growth in product for the coming decade but also assist in capturing an extra 20-25% in net economic benefits in 12 years to come.