The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

For businesses, it is key to increasing automation and reducing costs, all while improving user experience and customer service.

The latest breakthrough is artificial intelligence (AI), which has quickly progressed from sci-fi pipedream to widespread integration. In financial services, we are already seeing both predictive AI – for data analysis and forecasting – and generative AI – such as content creation and reporting. 

Given its meteoric rise, the use of AI has raised some concerns, not just for industry, but for politicians, policymakers and the general public. During a recent presentation at Target Group HQ, Charles Roe of UK Finance explained how the trade body is working with the industry to understand the potential risks and challenges, but also the potential applications for this exciting innovation. 

Challenges

A big challenge is that AI is developing much faster than both regulation and legislation can keep up with. While only fleeting, Labour’s first King’s Speech did refer to AI legislation, with many predicting a move away from the current ‘light touch approach’ to something closer to the EU’s new AI Act. 

This new regulation sets out comprehensive requirements and a legal framework for the development and use of AI. 

There are also internal challenges for firms mitigate, particularly to avoid poor customer outcomes. Key to this is establishing risk protocols and robust processes that limit any incorrect outputs, biased outcomes or cybersecurity and fraud threats. While open to the use of AI, the FCA has been quick to remind firms of these threats and the requirements of Consumer Duty.  

Of course, it’s not just industry that is utilising AI, but criminals too. Charles explained the prevalence of deep fakes and AI-generated phishing campaigns. Criminals are using AI to pretend to be a bank, encouraging customers to transfer money to fraudulent accounts.

Opportunities

In contrast, Charles was able to share some positive applications UK Finance has seen. In particular, AI is supporting work in identifying vulnerable customers. There is potential for AI to assess interactions to see where customers are hesitant or perhaps not navigating or transacting as smoothly as expected. Any errors or challenges could be picked up, with AI making recommendations, or potentially moving clients from a self-serve to a support option.

Given the considerable onus placed on financial services by the FCA and Consumer Duty to identify vulnerable customers and deliver better outcomes, this is promising. Not only will it help to identify clients in potential difficulty, but the data generated will help to deliver a greater and more personalised service and will ultimately help to achieve better outcomes for many customers. 

Many firms are playing to the strengths of AI, particularly predictive AI and its ability to analyse data, identify trends and patterns to assimilate data and forecasts far quicker. We’re seeing this most prominently in fraud detection, risk and compliance. 

Enhancing capabilities

AI, working in tandem with robotic process automation (RPA) is transforming servicing operations too, helping to drive innovation in business process outsourcing (BPO). Rather than firms having AI as a foundation to integrate new processes and responsibilities, BPO providers are able to use AI to enhance existing capabilities, technology and in the case of Target, deep sector knowledge and expertise. 

Outsourcing these duties to a third-party means employees don’t need to spend hours on repetitive tasks. Instead, these tasks can be completed in high volume and with real accuracy in a fraction of the time. This increases available bandwidth within teams to deal with heavy duty, high value customer interactions and activity. 

A welcome by-product is that clients secure the right outcomes faster and receive a far better service, enabling firms to deliver a true competitive advantage.