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

As we reflect on the progress of 2023 and gaze into the future of 2024, the potential for AI's impact, especially in financial services and credit risk management, is immense. AI is an incredibly exciting field that has been rapidly evolving in recent years, with UK Finance reporting that “AI adoption in financial services is accelerating, driven by advances in predictive analytics and machine learning”.

As we reflect on the progress of 2023 and gaze into the future of 2024, the potential for AI's impact, especially in financial services and credit risk management, is immense. To kick off the year, here are two key predictions for finance and risk professionals to navigate this evolving terrain:

1. AI moves into the mainstream

2023 saw AI emerge into the public eye, largely propelled by the widespread adoption of generative AI tools such as ChatGPT.

In the financial services world, we've seen regulators warming up to the idea of AI driving everyday risk processes, measurements, reporting and associated activities. Both the PRA and FCA have notably incorporated AI into their discussions and publications, including the PRA's publication on Model Risk Management. This signifies a significant shift in regulators' attitudes, acknowledging the value of AI, while urging a cautious approach to manage associated risks. This removes the barrier that a lot of firms have had to the fuller adoption of AI.

Moreover, while historically AI adoption has been predominantly championed by the fintech industry, 2024 is poised to witness AI's evolution into the mainstream. I anticipate traditional technologies taking a backseat this year, paving the way for a surge in AI utilisation across the financial services sector.

2. The Impact of AI on Resourcing

While the contributions of data scientists and mathematicians to AI development are undeniable, a notable risk surfaces when these technical experts operate without adequate oversight. Others are needed to introduce a degree of scepticism about whether AI can grasp the intricacies of true understanding of the world.

The risks arise because their focus is often very much on short-term business benefit, without the wider business, social, and ethical issues being given the attention they deserve. In the wider world, that's not how product and services roll out works. In the pharmaceutical industry, for example, drug development encompasses rigorous testing and regulatory scrutiny, prior to it being released to patients; similar principles should underscore AI solutions and products.

Therefore, while those who know how to use AI will no doubt be in highly sought after in 2024, the biggest area of demand is going to be people who can undertake the oversight and validation processes.

Roles encompassing independent model validation, auditing, and navigating regulatory approvals are anticipated to experience exponential growth and will constitute a burgeoning area within the industry.

So this year is poised to witness a transformative journey for AI within risk management. This evolution positions AI as a cornerstone in reshaping the financial services landscape, presenting both opportunities and challenges for the industry's stakeholders.

To learn more about AI’s use in the financial services industry, including how to mitigate risks and seize growth opportunities, sign up to Jaywing’s free-to-attend webinar on the 13 February 2024. Register here.