Financial Services Industry Archives

Navigating the Landscape: The Cost and Benefits of Generative AI Implementation | Blog

April 3, 2024

Generative AI (gen AI) can significantly benefit the BFSI industry. However, it can be an expensive investment, making it critical for enterprises to conduct a cost-benefit analysis before implementation. Explore the various costs and advantages associated with this technology in this blog, or get in touch to find out more.

Gen AI has recently gained considerable attention in the banking, financial services, and insurance (BFSI) industry. Many use cases that go beyond creating or summarizing content are being explored throughout the value chain.

Implementing gen AI can improve the velocity of change, increasing the overall efficiency of existing tasks. This technology can streamline operational processes, automate tasks, and enhance customer experience by fostering engagement through tailored experiences. Moreover, it can potentially drive innovation to create change or transformation by generating unexplored ideas, optimizing products, and identifying new market opportunities. Ultimately, this positions enterprises for continuous evolution and success.

BFSI enterprises have recognized the transformative potential of adopting gen AI, which undoubtedly can disrupt existing enterprise models. In the race to get the early advantage, enterprises face challenges as they reallocate funds from other projects and seek to secure new investments to finance new AI and gen AI initiatives.

Concurrently, cloud costs emerge as a significant concern that can potentially escalate when training AI models. However, the overall cloud cost impact from gen AI hinges on specific use cases and model architecture.

A cost-benefit analysis becomes imperative as gen AI-driven use cases are limited, and most can be explored through other AI technologies. This is particularly important because other relatively less expensive technologies can achieve comparable outcomes with similar efficiency.

While gen AI has generated a lot of hype and rapid investment, it’s not currently viable to implement the technology almost everywhere without understanding the cost implications for achieving the potential gen AI benefits. Let’s explore this further.

Exploring Cost and Generative AI Benefits

Below are some of the high-cost categories across the value chain to consider:

Infrastructure and compute

The computational backbone, encompassing graphic processing units (GPUs), tensor processing units (TPUs), and energy consumption, constitutes a substantial investment. Building and maintaining a powerful infrastructure is pivotal for running complex algorithms and training sophisticated models.

Model training or fine-tuning

Gen AI implementation comes with many fixed and variable costs. Training or fine-tuning gen AI models to meet specific requirements is intricate, involving significant computational resources, expert oversight, and time. These costs are substantial but also the foundation for the gen AI model’s efficacy and adaptability.

Data acquisition, preparation, and processing

Performance is heavily influenced by the data quality on which these models are trained. Collecting, cleaning, and storing data can come with high costs to acquire, prepare, and process diverse and high-quality datasets. Ensuring diverse and representative datasets while maintaining data quality standards can be challenging, ultimately impacting the accuracy and reliability of gen AI outputs. At the same time, acquiring high-quality data for training gen AI models and holistic data readiness initiatives can be expensive and require significant capital investments, especially if specialized or proprietary datasets are required.

Security measures

In a highly regulated industry like BFSI, where data and security are imperative, meticulous attention to security and regulatory compliance is critical. Implementing robust security measures cannot be compromised.

However, this adds costs for deploying cybersecurity measures, encryption protocols, and access controls to protect sensitive financial data, notwithstanding increased investments in security technologies, routine audits, and adherence to industry standards.

Considering that gen AI often relies on large datasets, managing personally identifiable information (PII) necessitates strict adherence to data privacy regulations.

Privacy-preserving techniques, anonymization processes, and implementing consent management systems to meet compliance requirements can be costly. On top of that, continuous monitoring and regular audits are essential to maintain compliance and security standards, contributing to ongoing operational expenses.

Integration and service

Not all models run independently and often require integration with existing systems. Seamlessly integrating gen AI into existing workflows and providing continuous support have financial implications. The processes of customization, compatibility checks, and uninterrupted service provision collectively contribute to the overall expenditure.

Regulatory compliance

Operating within a highly regulated BFSI industry with standards such as the General Data Protection Regulation (GDPR), the Health Insurance Portability and Accountability Act (HIPAA), and industry-specific regulations necessitates additional investments in compliance monitoring, data governance, and legal counsel.

Non-compliance with these regulations may lead to fines and legal consequences. As the regulatory laws for gen AI are still evolving, enterprises must be vigilant.

In light of the dynamic regulatory landscape, remaining flexible to accommodate incoming regulations is crucial.

Post-implementation

Following deployment, continuous monitoring and proactive maintenance of the systems are demanded to ensure gen AI’s sustained performance. Although this is an ongoing expense, these measures are pivotal for adaptability and longevity.

Talent related costs

Enterprises may incur expenses related to recruitment efforts, training programs, certification courses, and retention strategies to attract and retain top talent in the competitive gen AI landscape. As gen AI continues to evolve and play a pivotal role in digital transformation initiatives, businesses must carefully consider and budget for talent costs to ensure successful implementation and utilization of advanced AI technologies.

While investments in gen AI and related technologies are crucial, enterprises must also invest in their human capital by empowering employees with the skills and knowledge needed to thrive in today’s digital age. Effective leadership and a commitment to upskilling and reskilling will drive successful technology adoption and foster an organizational culture of innovation and agility.

The outlook for cost reduction efforts

While gen AI comes with a high cost, the landscape is evolving daily. Technology companies are substantially investing in developing proprietary AI chips and more efficient architectures, a strategic shift that aims to diminish reliance on expensive alternatives.

Enterprises can also explore a micro use case-led approach to implementing gen AI, deploying small, focused areas where gen AI can deliver clear and measurable benefits. Targeting smaller tasks allows for quicker development and deployment of gen AI solutions, leading to faster ROI (Return on Investment). Micro use cases provide opportunities to test and learn from gen AI implementations, enabling continuous improvement and informing future deployments. Smaller projects require less time and resources compared to developing a large, complex gen AI system.

Moreover, the gen AI domain is experiencing a notable training cost reduction, with some solutions claiming a remarkable 50% reduction. These advancements signal a significant stride toward enhancing AI’s capability and affordability, marking a pivotal turning point in the technology’s ongoing evolution.

While the costs associated with gen AI implementation are evident, the benefits in specific uses can significantly outweigh the expenses. Balancing financial considerations and the innovation potential is key. Enterprises must align their AI strategy with business objectives to position themselves at the forefront of innovation and competitiveness.

To discuss gen AI in BFSI, please reach out to [email protected], [email protected], and [email protected].

Looking for use cases for gen AI? Check out our LinkedIn Live on Distinguishing Gen AI Hype from Real Application, or read our latest research on generative AI and its adoption potential.

The Capital One Merger with Discover Potentially Signals a Shift in the US Banking Landscape | Blog

February 26, 2024

Capital One’s planned US$35.3 billion acquisition of Discover Financial Services would combine two of the largest credit card companies, creating the most dominant US credit card firm. This deal holds the potential to significantly impact the banking and financial services (BFS) IT services market and providers. Read on to learn the looming risks and what to pay attention to.

Acquiring Discover would give Capital One access to a credit card network of more than 300 million cardholders. If the Capital One merger clears antitrust regulations, the combined entity would become the sixth-largest US bank by assets and a leading card issuer and network provider for the US payments market.

Let’s explore the following four implications of the Capital One merger on the BFS technology and IT services sectors.

Increased deal activity will help banks sharpen their focus on core operations

Macroeconomic uncertainty and rising interest rates slowed financial services dealmaking in 2023. However, S&P predicts regional and community banks will be interested in mergers of equals this year. In these challenging times, banks want to understand the potential synergies of the merged entities clearly. They also require deeper due diligence than in the past, as exemplified by the failed merger of TD Bank Group and First Horizon.

Traditionally, acquisitions were an opportunity to enter new product lines and geographies, gain new capabilities, and achieve cost savings and operational efficiencies through technology modernization and streamlining processes and systems.

Recent banking sector acquisitions underscore a clear strategic focus on directing resources to targeted areas. Banks are divesting or seeking partners for non-core or insufficiently scaled units that lack a distinct competitive edge and demand substantial investment.

Investments in data and Artificial Intelligence (AI)/Machine Learning (ML) will rise

Our analysis indicates that merger and acquisition (M&A) activity among regional and community banks will increase, driven by the need to achieve greater scale. This strategic move is essential for these financial institutions to compete effectively with larger players, particularly as customer engagement transitions from physical to digital platforms.

By joining forces, these banks will be better positioned to develop new competencies in data management, AI/ML, open application programming interfaces (APIs), and advanced analytics, aligning with the growing digitalization of banking services. The merged entities will benefit from larger resource pools, facilitating improved alignment between skills and talent.

Service provider portfolios will likely reshuffle

Discover and Capital One have traditionally relied heavily on outsourcing to two or three major service providers. In mergers, providers with significant contracts with both entities typically stand to lose revenue because spending by the merged entity will not be as large as it was under the separate relationships unless they gain wallet share from competitors.

Suppliers that solely provide services to Discover are at risk of having their portfolio consolidated and moved to Capital One. However, providers who bring intellectual property or a niche capability may maintain the business through the consolidation.

Discussions about increased regulatory scrutiny are emerging, as even the regional banking market is at the cusp of such transactions. Moreover, this transaction can potentially increase competition for giants Mastercard and Visa.

Banks will require substantial consulting and system integration support

M&As spur increased short-term spending on post-merger integration and consulting services. By rationalizing vendor portfolios and IT infrastructures, merged entities can substantially cut costs by eliminating redundant applications and platforms. BFS firms will need partners to devise modernization roadmaps to create long-term value.

Merged entities must swiftly adapt their operational models, delivery strategies, and sourcing decisions to excel in the evolving landscape. Investing in specific technologies and tools is essential to foster growth and ensure operational continuity. Emphasizing core operations becomes a prerequisite as firms assess the appropriate valuation before crafting their integration strategy.

The road ahead for the Capital One merger

Richard Fairbank, founder, chairman, and CEO of Capital One, has emphasized that the merger with Discover presents a unique opportunity to unite two highly successful companies with complementary strengths and franchises.

The Capital One merger aims to establish a payments network capable of rivaling the industry’s most extensive networks and companies. However, the potential impact of increased market concentration from this combination will face regulatory scrutiny.

Providers should closely monitor system integration opportunities, as Capital One plans to expand its 11-year technology transformation initiative to encompass all of Discover’s operations and network.

The new entity will invest in growth initiatives, including faster time-to-market, innovative products and experiences, and personalized real-time marketing efforts. Operationally, underwriting, efficiency, risk management, and compliance enhancements will drive data and technology investments.

We are closely watching the market and regulatory actions. To discuss the Capital One merger and its impact on the US banking landscape, reach out to Ronak Doshi, [email protected], Kriti Gupta, [email protected], or Pranati Dave, [email protected].

Join this webinar to hear our analysts discuss Global Services Lessons Learned in 2023 and Top Trends to Know for 2024.

Generation 2.0 of Digital Assets – Modernization Themes Driving the Revolution | Blog

January 12, 2024

While the future of digital assets was once uncertain, the recent surge in investments, partnerships, and pilot use cases spearheaded by banks and technology giants has laid the doubts to rest. This holds particularly true for cryptocurrencies, stablecoins, and Central Bank Digital Currencies (CBDCs). Our latest research provides valuable insights into the latest trends and the key players shaping the digital asset industry landscape. Read on to learn more.

Reach out to us to discuss this topic further.

Over the past decade, the digital asset industry has undergone a dramatic transformation, evolving beyond its initial cryptocurrency buzz to becoming a diverse ecosystem teeming with innovation and new players. This evolution can be understood by looking at the following two distinct generations:

Generation 1: Laying the foundation (2010s)

Cryptocurrencies and blockchain technology were born in this era, establishing the core infrastructure and sparking public awareness of this nascent space.

Generation 2: Entering the mainstream (2020s)

The current phase is characterized by the growing legitimacy of digital assets fostered by regulatory frameworks and compliance measures aimed at protecting investors. This has attracted financial institutions and corporations and propelled the rise of tokenization as a powerful tool for asset representation.

CBDCs have emerged as a significant focus, driven by their potential to enhance financial inclusion, improve transaction traceability, and streamline cross-border payments. Central banks worldwide are actively exploring CBDCs through pilots, partnerships, and infrastructure development. Similarly, tech giants are focusing on stablecoins, with prominent projects like Diem (formerly Libra) backed by Meta and Coinbase.

Exhibit 1 provides a visual overview of this dynamic ecosystem.

CBDCs and stablecoins

Both CBDCs and stablecoins are vying for prominence in the digital asset industry, but their paths diverge on key points. Central banks wield the reins with CBDCs, ensuring strict regulations and government backing. This, however, makes banks wary of stablecoins outshining their controlled offspring. Conversely, stablecoin adoption could weaken central banks’ monetary policy influence by redirecting deposits from banks to digital wallets, hindering loan disbursement.

Despite this tug-of-war, CBDCs are gaining momentum. Many countries are setting regulatory frameworks, with active projects like Project Dunbar and Project mBridge testing retail and wholesale applications. While retail CBDCs face hurdles in building confidence, wholesale versions are generating more traction due to their potential to streamline interbank settlements through fewer intermediaries.

Collaboration is key in this evolving arena. Central banks are actively partnering with regional banks for pilot programs. ANZ and Commonwealth Bank have joined Australia Central Bank to explore offline “digital cash” models. Technology providers like Soramitsu are also lending their expertise, facilitating initiatives like a Pan-Asian payment system built on Cambodia’s CBDC.

Crypto ETFs

Crypto ETFs are making digital assets as accessible as buying stocks. This digital asset trend isn’t lost on global giants like HSBC, who are actively expanding into “crypto-friendly” regions. Take Hong Kong, where they’ve launched Bitcoin and Ether ETFs, allowing everyday customers to buy and sell these digital goldmines through familiar channels. Similar initiatives are brewing in South Korea, with KB Kookmin Bank joining the fray and hinting at potential crypto ETFs alongside their CBDC efforts.

The validation doesn’t stop there. BlackRock, the world’s investment behemoth, recently tweaked its proposed spot Bitcoin ETF, potentially cracking open the door for broader Wall Street participation. This move sent ripples of optimism through the cryptoverse, especially after a rough patch triggered by industry meltdowns.

However, the road to crypto nirvana isn’t paved with pure optimism. The Securities and Exchange Commission (SEC) has historically been skeptical, rejecting numerous spot Bitcoin ETF applications, including one from Fidelity. Their concerns? Potential market manipulation and the threat that cheaper ETF access could undermine major exchanges.

Payment capabilities

The digital asset industry landscape is buzzing with innovations aimed at propelling crypto beyond speculation and into everyday use. Revolutionizing payment capabilities and transaction mechanisms is a key focus area. From fintechs to card giants, everyone’s in the game, forging partnerships and rolling out solutions to boost crypto acceptance, scale cross-border transactions, and enhance liquidity management. Let’s look at some examples:

FinTechs – Alchemy Pay, a crypto payments provider, is bridging the gap between crypto and fiat by partnering with domestic payment systems in Australia and New Zealand (ANZ), making crypto purchases a breeze. Imagine buying groceries with Bitcoin – Alchemy Pay makes it possible. And their reach extends far beyond this, with millions of transactions processed for users in over 170 countries. They’ve even teamed up with Legend Trading to further extend their global reach and enhance user experience with seamless crypto purchases and fiat support in major currencies.

Big banks – Financial giants like JP Morgan are embracing the blockchain revolution. The JPM Coin, initially used in US dollars, is now available in euros, streamlining fund transfers between their branches and corporate clients, enabling 24/7 payments and smoother liquidity management. MUFG’s Progmat Coin joins the scene as a blockchain-based stablecoin platform, aiming to become a universal digital payment method that is compatible with other digital assets.

Payments platforms – Wirex, a crypto payments platform, has made a strategic move by partnering with Visa. This alliance grants them Visa membership in the Asia Pacific region and the UK, paving the way for them to directly issue crypto-enabled debit and prepaid cards in over 40 countries. Imagine swiping your Bitcoin-loaded card at your local cafe – that’s the future Wirex is building.

Cards – Mastercard enters the mix with its APAC-first digital wallet integration with Stables. This partnership allows users to convert stablecoins to fiat, enabling global spending at Mastercard-accepting merchants. Additionally, Mastercard is actively fostering innovation through its fintech accelerator program, supporting startups in the crypto and blockchain space.

Beyond the usual players – Deep tech ventures are also pushing boundaries. Crunchfish, a company developing a Digital Cash platform for banks and CBDC implementations, has partnered with LISNR, a proximity verification specialist. Together, they’re offering a groundbreaking proximity-based payment solution for merchants and banks. Envision paying for your coffee just by being near the counter – that’s the futuristic vision Crunchfish and LISNR are bringing to life.

Digital and green bonds

Tokenization, the process of converting traditional assets into digital tokens, is rapidly changing the financial landscape, with digital bonds and green bonds taking the lead. This has spurred enterprises to explore and invest in these innovative assets, attracted by their potential to streamline processes, enhance transparency, and unlock new opportunities.

Financial giants like Goldman Sachs and UBS are already revving their engines. Goldman Sachs’ Digital Asset Platform (GS DAP™) powered the European Investment Bank (EIB) in issuing the world’s first fully digital bond on a private blockchain. Similarly, UBS launched a three-year senior bond on Distributed Ledger Technology (DLT) through SIX Digital Exchange, showcasing the potential for efficient and secure bond issuance.

Green bonds, with their focus on financing environmentally beneficial projects, also are finding their tokenized groove. Project Genesis, a collaboration between the Bank for International Settlements (BIS) and the Hong Kong Monetary Authority (HKMA), developed a prototype platform to tokenize retail green bonds and track their environmental impact. This initiative, along with others from ABN Amro, the Japanese Exchange Group (JPX), and the BIS Innovation Hub, demonstrates the growing interest in tokenizing sustainable investments.

Digital assets custody

The digital asset landscape thrives on partnerships and innovation, and nowhere is this more evident than in custody solutions. While other areas remain entrenched, custody is forging a path forward, laying the groundwork for a robust future built on trust and security. These developments, fueled by partnerships and even the entry of insurers, are poised to propel digital asset adoption.

Let’s look at some key partnerships shaping the landscape:

BNP Paribas – The banking giant plans to offer custody services for Bitcoin and other digital assets, teaming up with fintech heavyweights Metaco and Fireblocks to build a secure and reliable offering.

Zodia – Recognized for its institutional focus, Zodia Custody has set foot in Singapore, aiming to meet the rising demand for bank-grade custody services across Asia-Pacific. Backed by industry stalwarts like Standard Chartered, SBI Holdings, and Northern Trust, Zodia leverages cutting-edge technology and stringent compliance to fuel digital asset adoption in the region.

Canopius – This leading (re)insurer has made its mark by underwriting a groundbreaking digital asset custody product in Singapore. This first-of-its-kind offering establishes Canopius as the pioneer on Lloyd’s Asia platform to provide local coverage for digital asset custody.

These partnerships and developments signify a critical shift. Custody solutions are no longer an afterthought but a cornerstone for building a secure and trusted digital asset ecosystem. With renowned institutions and insurers stepping in, the foundation for mass adoption is getting stronger, brick by brick.

Fueled by technology providers, the current digital asset generation is expected to dominate the market for the next two to three years. However, the true revolution lies on the horizon with the imminent arrival of Generation 3.0. This era will witness a surge in meaningful collaborations across communities, bringing forth a wave of tangible use cases for the public. Tokenization will shift from being a niche concept to a readily accessible tool for everyone.

In this dynamic landscape, competition will be fierce. To thrive, service providers must embrace partnerships and actively build their capabilities. The stark reality they face is either to join the ecosystem or get left behind.

If you would like to share your observations or have questions about the evolving digital asset industry and digital asset trends, please reach out to [email protected] or [email protected].

Discover what changes are likely to occur in sourcing spend, sourcing strategy, and locations, and which digital services and next-generation capabilities are expected to be in demand in our webinar, Key Issues 2024: Creating Accelerated Value in a Dynamic World.

Reinventing the P&C Insurance Claims Value-Chain: Moving to the Claims of the Future Vision | Blog

April 4, 2023

Heightened momentum for technology-first and automated operations is elevating customers’ need for greater convenience, instant gratification, faster turnaround time, and more self-service options. Today’s digitally-immersed consumers have grown accustomed to doing business anywhere, at any time, and with any device, and this is shaping up the new normal of the insurance industry; transforming the insurance claims journey becomes a pivotal priority for Property and Casualty (P&C) carriers to meet demands for a customer-centric hyper-personalized experience driven by digital technologies. Read on to learn more about the zero-touch claims of the future vision and how to achieve it.

Leading InsurTechs with pure-play digital models are heating up the competitive landscape, making it imperative for traditional insurers to optimize their claims functions. An insurer can achieve future goals by accelerating the adoption of next-generation capabilities.

Amid the digital shake-up and rising demand for delivering an “Amazon-like” experience, insurance operations are plagued with workflow complexities caused by multiple intermediaries and legacy systems. Digital and emerging technology solutions can help insurers reshape the customer claims journey and improve turnaround time while reducing information leakages and fraud and delivering a superior customer experience.

Foundational pillars of a digital-claims future

To embark on a transformational claims journey, insurers need to go beyond traditional after-the-fact claims management, tap into the plethora of available data to unlock immense value, and focus on offering omnichannel experiences powered by intuitive digital technologies. P&C carriers will need to excel at the 3Es: experience, efficiency, and effectiveness.

Winning P&C digital claims offer a compelling digital experience and strengthen customer loyalty. Insurers can differentiate themselves by supporting each touchpoint in the claims journey – starting even before an incident occurs – with data, artificial intelligence (AI), analytics, and other emerging technologies—all while retaining the human touch.

By offering seamless omnichannel customer experiences across claims registration, disputes, timely process updates, final settlements, insurers can improve customer satisfaction and retention rates. This is crucial given that Everest Group’s research shows ~35% of P&C insurers’ priorities across claims management are focused on enhancing customer experience (based on an analysis of 60+ case studies involving claims modernization/transformation).

Insurers also need to drive superior efficiency by enabling data-driven and analytics-driven claims processing. This ensures focus on effective service delivery to reduce claims expenses, while improving claims handling accuracy and ensuring greater customer satisfaction.

Bridging the gap between current and future digital claims-processing

With innovation growing throughout the P&C insurance industry value chain, AI/Machine Learning (ML)-enabled tools eventually will help insurers redefine their roles from claim handlers to claims preventers. P&C carriers flourish when they embrace this mindset shift from a risk transfer to a risk mitigation model.

Insurers can unlock value in the claims industry by employing the internet of things (IoT) and telematics capabilities combined with the connected devices ecosystem and third-party data to identify red flags and alert customers of risks before any loss occurs.

Insurers need to look beyond mere cost-savings, accurately utilize the wealth of data they possess, and transform claims from a necessary back-office function into a source of competitive advantage and market differentiation. Below is a look at the key steps to reach a seamless claims settlement:

Exhibit 1:

Future Enables Carriers — Source: Everest Group

Rigid legacy systems for claims processing can present challenges for insurers and prohibit them from adapting to the evolving customer requirements and optimizing their operations. Legacy IT processes slow progress and innovation, eventually affecting the end-user experience that holds the potential to make or break insurers’ reputations. Taking a one-size-fits-all solution approach for different business lines, failing to adopt modular design principles, and having limited advanced systems skills add to the overall complexity and further weaken the ability of insurers to thrive in today’s competitive environment.

To attain a competitive edge, insurers require instant resolutions and digital experiences on the go. Leading insurers are harnessing the power of unified and custom low-code/no-code platforms with advanced AI and analytics tools to streamline claims processes, modernize systems, and build modern layers on top of existing legacy systems or other core platforms without involving time-intensive and expensive upgrades. This allows insurers to build reusable codes and design “plug and play” environments to deliver enterprise-grade solutions at speed and scale. Low code makes it easy for carriers to simultaneously focus on profitability, enhance customer experience, and fulfill the vision of balancing quick wins with strategic initiatives.

The need for digitalization of workflows and customer interfaces, convenient user journeys, reusability of components and faster configurations, cost optimization, and skill management are the top drivers fueling the demand for low-code/no-code technology for insurers in modernizing the claims process.

For instance, a leading global insurer used a low-code platform to create an intuitive and dynamic first notice of loss (FNOL) prototype application in just 90 minutes and transformed it into a fully functional mobile application for 2,000-plus users in four weeks, delighting customers.

Where do the opportunities lie?

A combination of agile insurance claims process/operating model transformation, adoption of advanced technologies and telematics, a skilled workforce with technical and domain expertise, and a connected partner ecosystem are the fundamental facilitators for the probable future of zero-touch claims.

In the future of claims processing, P&C insurers will be able to facilitate touchless claims decisions, accelerate payment settlements, assess indemnity obligations accurately, prevent fraud, and mitigate claims litigation losses.

Exhibit 2:

Industry Frontrunners — Source: Everest Group

Below are the key elements needed to move from the current state to claims of the future:

Acting quickly and flexibly: The rapidly changing environment is compelling insurers to keep up with the pace. Incumbents need to act fast, develop and launch new products, accelerate FNOL processing, and streamline claims management quickly to stay relevant. The need for agility is greater than ever. Adopting the latest technologies and processes will propel P&C carriers to move faster and separate leaders from laggards
Adopting advanced analytics and AI: Real-time sensor and IoT data coupled with AI and ML-backed algorithms will enable insurers to process claims efficiently and manage fraud without any human intervention. For instance, leading insurers are using an AI model embedded within the claims workflow to assign a complexity score to each claim based on multiple parameters and process all low-risk claims under a certain threshold. Low-complexity claims are routed for straight-through processing while high-complexity claims are sent to the right team depending on the claims adjuster’s specialization and availability, thus ensuring speed and accuracy
Transforming talent management strategy: Modernizing the claims journey requires relying on advanced technologies and a skilled workforce to manage emerging risks. Insurers need to enhance their long-term value proposition to attract skilled workers with technical and domain expertise
Partnering with digital claims solution providers: Building partnerships with solution providers can support carriers in extracting maximum value by utilizing the provider’s end-to-end digital claims solutions portfolio. Advanced capabilities across core functions include claims notification, adjudication, and settlement to fulfill P&C carriers’ needs across the claims value chain

To achieve the zero-touch claims of the future vision and keep up with leading competitors, insurers will need to invest in advanced technologies and drive value creation by taking a more proactive and customer-centric approach.

Successful insurers who can deliver a hyper-personalized experience will generate superior efficiency and leverage data and ecosystem insights to proactively detect fraud. Above all, this transformation improves the claims ratio by building predictive and preventive capabilities. Insurers who take these steps will emerge as industry frontrunners.

To discuss transforming digital claims, please reach out to [email protected], [email protected], and [email protected].

To learn more about technology-first, automated customer experiences, watch our webinar, Strategies for Customer Experience (CX) Success in an Uncertain World, for trends and recommendations on what to prioritize to deliver exceptional customer experience.

How Technology Can Help the Wealth Management Industry Navigate Coming Changes in 2023 | Blog

March 24, 2023

With the economy headed for slower growth, technology is more important than ever to enable companies to better serve customers by providing hyper-personalized experiences. Read on to learn how the disruptions will impact the wealth management industry and the role technology and service providers can play to help wealth managers navigate the choppy waters ahead.

In light of changing investor preferences, mounting regulatory pressures, and a looming economic slowdown, the wealth management industry is at the cusp of change. While the industry has demonstrated good resiliency and recovery post-pandemic, signs point to subdued growth in the next few years.

The wealth management industry has been experiencing one of the longest periods of market growth and economic stability in recent history. Financial support by governments, lower interest rates, and limited consumption opportunities have contributed to rising household wealth, generating increased revenues for wealth management companies from more fees and advisory support.

But the rapid rise in interest rates and fear of an economic slowdown will put pressure on this industry in 2023. Let’s look at the factors disrupting the wealth management industry in the first of our two-part series.

Fundamental change in ecosystem participants – passing trend or here to stay?

The industry is seeing structural changes in ecosystem participants. Traditional wealth managers are no longer the only players offering wealth management services and products. Challenger banks, pension providers, insurance firms, super-apps, nonbank financial companies (NBFCs), and nonbank financial institutions (NBFIs) are entering the market and creating competition.

These emerging segments already have access to a large customer base supplemented by data insights on demographics and buying patterns. This enables them to remove silos for customers and simultaneously improve income streams by reducing churn risk.

Customers now can access investment services within an umbrella of existing offerings. While this is a win-win for both parties, it is making wealth managers apprehensive as they realize the critical importance of retaining and more effectively serving their current customers.

Rethinking growth versus profitability conundrum – impact of a potential slowdown?

While the pre-pandemic era was all about expanding and tapping into new customer segments, the strategy for serving various customer bases has significantly shifted. With the changing market dynamics, the focus has morphed from expanding and tapping into newer segments to building trust with existing customer segments and enabling hyper-personalized experiences.

A potential economic slowdown would have ripple effects on the wealth management industry. The focus on rapid growth would take a backseat as enterprises pivot their attention to reducing costs and improving profitability. This would directly impact tracking advisor productivity, improving advisor-to-client ratios, and enabling hyper-personalized experiences.

At the same time, providing access to emerging themes like Environmental, Social, and Governance (ESG) and digital assets will prove to be differentiators in the long run. Regulatory activity is heating up in the ESG space and will lead to corresponding technology implications for wealth managers’ IT estate, as previously discussed in our blog, New Sustainability and ESG Investment Regulations will Spur a Second Digitalization Wave in Wealth Management.

Technology implications – will the IT estate need to be re-examined?

The wealth management technology estate traditionally has been characterized by multiple disparate systems siloed by products or functions, fracturing the customer experience. At its core, wealth management grapples with a massive data problem – how to effectively analyze customer data, understand their journeys, and identify better cross-sell/upsell opportunities.

Wealth managers need an IT estate that is flexible enough to accommodate these hyper-segments and different products, and their underlying data to address these evolving demands at speed and scale.

Identifying the right platform partner, enabling product expansion via ESG and digital asset offerings, and quickly disseminating this information to advisors will be key priorities for wealth managers as they assess their technology estates.

Identifying the ecosystem strategy for system integrators and other technology companies to improve fractured customer experiences will be equally important for technology providers. At the same time, service providers also will need to orchestrate and assemble best-of-breed solutions for wealth management clients by building a robust partnership ecosystem.

As wealth managers grapple with these market changes, technology has never been more important to help them better prepare and tackle the potential challenges coming their way.

The key questions that need to be answered include:

How can the service cost be reduced?
How can the right tools be used to improve advisor productivity?
How can a microservices-based Application Programming Interface (API)-enabled composable core be built?
How can data be leveraged to enable personalized client experiences?
How can a scalable and purpose-built cloud infrastructure be used to run mid- and back-office operations on the cloud?

We are interested in hearing how wealth managers are preparing and tackling these market dynamics, and how this is manifesting in the conversations technology and service providers are having with clients. Please reach out to [email protected] or [email protected] to share your thoughts. In our next blog, we will look at the future state of the wealth management industry and provide a technology architecture blueprint for this space.

Learn more about how to deliver better customer experiences in our LinkedIn Live session, Frictionless Customer Experiences: The Key to Unlocking Satisfaction.

SVB Aftermath: How Will the Bank Failures Impact the Technology Services Industry? | Blog

March 16, 2023

With the recent banking implosion, the global financial services industry, technology companies, and service providers will be hit in different ways. Let’s explore the reverberations of these concerning banking trends.

The failure of Silicon Valley Bank (SVB) along with Silvergate and Signature Bank raises the question: Are these isolated incidents or signs of greater trouble in the financial services industry signaling a recession in the US? We believe this will start a domino effect impacting banking regulations, profitability, and technology spend.

The recent collapse of the banks will have repercussions across the financial services system and may trigger the following aftermaths:

Opportunities for large banks to capture business from banks with similar concentration sector risks of sectors that are seeing slowdowns (e.g., the start-up and tech concentration for SVB)
Rising mergers and acquisitions (M&As) to counter concentration risks and take advantage of current banking valuations, especially in the mid-market and regional banking segments
Reversing rate hikes by the Federal Reserve could bring about a multi-fold impact, as most organizations have planned their business strategy with the assumption of additional hikes for rates in 2023
Tightening of spend across organizations to manage near-term profitability. This could also cause spending slowdowns this quarter for IT outsourcing suppliers. Discretionary spending also will dry up, and decisions on new large modernization deals will be delayed
Declining revenues and loss of business in the current and following quarters for IT outsourcing suppliers catering to these banks

After the dust settles, these bank collapses can bring about the following two key learnings in the long term:

Data and analytics and Artificial Intelligence (AI) technologies could play a key role in better risk management (e.g., for the SVB asset-liability mismatch issue) to predict similar risk scenarios and prevent future failures
Additional stress test scenarios can help avoid future bank runs on non-SIFI institutions

Banking trends and impact

As the events played out, Moody’s downgraded its view on the US banking system from stable to negative, citing a rapidly deteriorating operating environment. Banks with sector-specific concentration risks, specializing in two or three sectors, have grown deposits in the last couple of years and also have a higher percentage of customers with average deposits exceeding the FDIC-insured limit, putting them at higher risk.

These banks will need to assess their portfolios and provide assurance to their customers. Even with these guarantees, customers still may decide to change their banking partners and seek traditional large banks that have more liquidity, impacting regional and smaller banks’ growth.

Declining customers and subsequent deposits will also affect other banking portfolios, and digital and technology transformation spend may take a hit. Banks’ risk management functions also will be scrutinized again. For example, only one of the seven members of SVB’s Risk Committee had risk management experience.

Implications for the financial services industry

The global financial services industry also could be impacted. Other geographies like Japan and the UK are showing signs of distress with banks of similar portfolios and exposures.

The bank failures could have a lasting impact on the sector as the financial services industry restructures and implements new processes to avoid similar scenarios, including:

Stricter stress testing rules to prevent further risk to the nation’s financial stability
Increased frequency and number of stress testing within banks as they reassess their portfolios and plan for any asset-liability mismatches
Greater focus on banking governance in the US triggered by the questions raised over systemic risk exemptions for SVB and Signature
Layoffs and hiring freezes as the industry becomes more prudent and conservative
Larger banks taking business from banks that have similar risk issues and might struggle
Rising M&As, especially in the mid-market and regional banking segments

Opportunities for providers

Here are our recommendations on how technology and service providers can capitalize on these new banking trends:

Adopt a multi-stakeholder approach with large banks: More than half of the business and financial services (BFS) technology spend comes from Tier 1 banks, and we expect investments by these market giants to remain strong and even expand to address the ripple effects. Providers should adopt a multi-stakeholder approach to target risk and compliance, marketing, operations, technology, and business unit leaders who all might course correct their strategies (in response to potential Federal Reserve reverse rate hikes, products being stress tested, new ones being launched, increased regulatory reporting activity, etc.)
Prioritize accounts for small and mid-size banks and credit unions: Service providers need to re-prioritize their account strategy for these banks as they renew priorities and focus areas. We expect overall spending by small- and mid-size banks to decline, making it critical for providers to identify and pursue the right accounts with the most relevant messages (based on the level of financial health)
Reenergize pre-COVID cost-takeout playbooks with next-gen elements: As banks come under immense margin pressure, some asset takeovers and carve-out opportunities may arise. A solutions mindset will resonate more soundly with clients than a pure talent-led play. Providers should plug gaps by working with technology partners and/or bring in-house technology assets.

We expect an increase in offshoring intensity and a push for captive setup conversations through a build-operate-transfer (BOT) model approach. Service providers should watch the direction of US dollar prices as commercials will need to be revised for the foreign exchange (FX) impact (the double impact of potential rate reversal and wage inflation)

Support clients on product/portfolio diversification strategies (long-term): BFS firms entering and/or expanding their asset and wealth management business as part of their revenue diversification plan will spike. We hold onto our growth forecast in this segment with renewed affirmation from the market
Pivot to growth pockets that will be less impacted: Not all lines of businesses will be equally affected. There’s a glimmer of hope for a revival in investment banking, private equity, treasury, and brokerage spending on technology outsourcing. However, cards and payments will stay flat, and lending might struggle

Looking ahead, BFS firms will cautiously approach technology and outsourcing spending, resulting in another quarter of soft demand. We also expect increased medium-term regulatory actions leading to spending increases across risk and compliance functions for non-SIFIs.

Rippling effects across geographies

The recent bank failures have an underlying mix of bank-specific (micro) and macro-economic factors in play. The macro factors have the potential to increase fear in the markets (and depositors) as government bond yields have shown signs of reversing their course, and the added factors of slower economic recovery, inflation, high-interest rates, and the resulting layoffs in specific sectors add further pressure.

Credit Suisse saw a 20% fall in share price on fears of a liquidity crunch on March 15. This also impacted shares of other European banks, such as BNP Paribas, Societe Generale, Commerzbank, and Deutsche Bank falling between 8% and 10%.

We are closely observing the market and regulatory actions and are available for any questions you or your teams might have about the impact of these latest banking trends. Please reach out to Ronak Doshi, [email protected], Kriti Gupta, [email protected], or Pranati Dave, [email protected].

Learn about key trends and the outlook for the global services market in 2023 in our webinar, Global Services: Lessons from 2022 and Key Trends Shaping 2023.

Financial Services Trends Fueling Outsourcing Opportunities in Emerging Markets | Blog

March 3, 2023

With customer demand for financial services rising across geographies, looming recessionary fears and competition is leading enterprises to expand beyond North America and enter developing markets such as the UK, Europe, Latin America, Asia Pacific, the Nordics, and the Middle East. Read on to understand the geographical differences, financial services trends driving growth, and the outsourcing opportunities in these regions.

Fueled by high volumes, new technological products, and enhanced customer experience, demand for financial services is rising across developing geographies. Banks, lenders, FinTechs, and other banking and financial services (BFS) enterprises are expanding into new markets following the rising customer demand.

The saturated and competitive North American market and high-cost pressures, against the backdrop of the looming recession, are forcing enterprises to move beyond traditional markets and enter new geographies to increase their customer base. Let’s take a look at where they are headed.

The UK and Europe, along with nascent geographies such as Latin America, Asia, Australia, and New Zealand (ANZ), the Nordics, and the Middle East, are some of the geographies identified for rapid development by enterprises that have unique factors driving end customer demand.

But like the rest of the world, these markets have been impacted by the pandemic and domestic challenges that have reshaped business models and environments. Outsourcing service providers can identify these pain points and leverage capabilities to provide support.

Financial services trends driving outsourcing demand by enterprises in upcoming geographies

A few major trends impacting the enterprises in these geographies, where third-party providers can offer support:

Environmental, social, and governance (ESG) – While a board room discussion for BFS enterprises across geographies, enterprises in Western Europe and the UK are leading other geographies in the charge for ESG adoption because of high regulatory pressure
Super-apps and buy now pay later (BNPL) – As a result of increased technological advancement in these geographies and enhanced experience demanded by end customers, these financial services trends are making waves in Asia Pacific and Latin America
Embedded finance and neo-banks: Traditional banks are setting up their own digital banking arms to cater to the pandemic-induced demand spike. From nearly US$47 billion in 2021, the global neo-banks market is poised to be valued at US$2.05 trillion in 2030, growing at a CAGR of 53.4%

Enterprises increasingly are leveraging third-party provider support to build scale and ramp up services in these growth areas, but various internal and external factors impact the ease of outsourcing in the respective geographies.

How can service providers help enterprises in making outsourcing decisions? What factors are pushing financial services firms to outsource?

Factors like high volumes, technology, and cost margins act as demand drivers for outsourcing from these geographies, as illustrated below.

Let’s take a closer look at some of the geographies that are uniquely placed based on their outsourcing maturity:

Nordics, Western Europe, and the UK – High costs and wages act as major demand drivers for these areas, but tight talent markets create high-cost pressures to scale. The UK and Western Europe also face vendor consolidation issues
Asia Pacific and Latin America – Enterprises based in these regions have to grapple with regulatory challenges and the political environment to varying degrees. Latin America is faced with political and economic uncertainty.

Geographic segments

Based on Everest Group’s assessment, the emerging geographies for BFS have been segmented into the following three categories:

Leaders: UK and Western Europe: have high or full provider coverage in outsourcing and operate in highly competitive markets
Major Contenders: Asia, ANZ, and Nordics: offer high outsourcing potential and scope and less competition
Aspirants: Middle East and Latin America: have high potential but low outsourcing penetration because they are riddled with challenges such as complex regulations, rigid culture, low volumes, etc.

Service provider strategies to seize opportunities in emerging geographies

Each region has unique outsourcing-related differences that should be met with targeted approaches. Service providers willing to make inroads into these geographies must carefully assess the demands and challenges enterprise face. Talent and skill availability, geopolitical risks, and regulations can be obstacles to outsourcing for enterprises and impact costs.

In our report, Emerging Geographies’ Specialized Banking, Mortgage, and Risk and Compliance Needs, we detail these specific nuances and provide recommendations for service providers to approach and expand coverage in each geography.

Some takeaways from our research include:

Enterprises in Asia need a customized, comprehensive services suite to address regional requirements
Providers should increase their focus in ANZ on the underserved mid-tier and smaller banks buying segment
Uruguay and Peru are the outsourcing locations to watch in LATAM
Know Your Customer (KYC) and related procedures are in demand in the Middle Eastern market
Outsourcing demand by enterprises will increase in the financial crime and compliance area in the Nordics
In the UK, traditionally less outsourced segments such as commercial lending and payments are witnessing an uptick
The Western European market is observing the need for ESG operations support from mid and smaller banks in countries such as France and Germany

Please reach out to Sameer Das, Shrey Jain, and Sahil Chaudhary to gain additional insights into the research and to discuss financial services trends.

ChatGPT Trends – A Bot’s Perspective on How the Promising Technology will Impact BPS | Blog

February 9, 2023

What better way to find out how ChatGPT will impact the Business Process Services (BPS) market than to ask the trained chatbot itself this question? According to its answers, the future looks promising. But obstacles still need to be overcome. Learn about the latest ChatGPT trends in this second part of our series.

Since OpenAI released ChatGPT for public testing in November 2022, ChatGPT has generated a lot of buzz. Based on initial impressions, the technology holds great promise to enhance and revolutionize many industries, including customer experience, healthcare, logistics, banking, and education, among others.

With all the attention, it’s natural to wonder how ChatGPT will impact the BPS market. And how better than to hear it straight from the bot? So, our analyst logged in on a session with ChatGPT and had a very direct and long conversation. Here’s what we learned:

Figure 1A Snippet from a conversation with ChatGPT

ChatGPT’s potential to enhance customer experience is fairly well known. It has shown the promise to improve current conversational Artificial Intelligence (AI) solutions and make them sound more human-like, which can significantly change how these services are delivered.

It is already capable of understanding natural language with high accuracy, and with enough training, it can start with taking on simple tasks at contact centers. ChatGPT also can track customer preferences and provide real-time insights that can unlock new opportunities for enterprises.

Exploring ChatGPT trends beyond experience

We were interested in understanding its impact beyond customer experience in other major areas such as back-office, content moderation, and finance and accounting, so we asked ChatGPT.

Below is a summarized finding of how ChatGPT can revolutionize six key areas, according to the conversation. (And we have no reason to believe it might have been exaggerating, unlike, say, an analyst writing something similar).

Back-office: Can automate back-end processes such as data entry, record keeping, and reporting, freeing up employees for more value-adding work
Content moderation: Can assist with content moderation by automatically detecting and flagging potentially harmful or inappropriate content, improving efficiency and accuracy compared to manual moderation
Human resources: Can automate repetitive tasks such as candidate screening, resume filtering, and scheduling interviews, freeing up HR staff for more value-adding work. It can provide quick and accurate responses to candidate inquiries, improving the overall candidate experience and making the hiring process more efficient. Another use is virtual interviewing, making it easier for HR to conduct interviews with candidates located in different locations
Financial and accounting: Can automate tasks such as invoice processing, expense reporting, and budget tracking, freeing up finance staff for more value-adding work
Supply chain: Can assist with supply chain management by providing real-time visibility into inventory levels, shipment status, and other supply chain data, enabling companies to make data-driven decisions and optimize their supply chain
Procurement: Can automate procurement tasks such as vendor management, purchase order creation, and invoice processing, helping procurement teams work more efficiently and effectively

The answers show the technology can potentially have positive repercussions across major areas within BPS. With such huge potential, ChatGPT is expected to impact talent as well. While demand may decline for low-skill jobs such as data entry and transactional customer service, ChatGPT will require new skills such as AI and data analysis, creating new job opportunities in areas such as conversational AI design and deployment. As enterprises adopt ChatGPT and other AI technologies, developing new skills and staying up-to-date with industry trends and advancements will become increasingly important for employees.

While the technology is certainly promising, several factors must be considered for successful implementation, including ethical and legal considerations (such as data privacy and algorithmic bias), integration with existing systems, quality of training data, human oversight, and ongoing development and improvement.

ChatGPT has the potential to significantly impact various areas within BPS. While challenges exist, careful planning and considering factors such as data privacy and ethical implications can lead to successful implementation and ongoing improvement. With careful investments, planning, and further technological advancement, ChatGPT can reach its full potential before too long.

For the first part in our series, see ChatGPT – Can BFSI Benefit from an Intelligent Conversation Friend in the Long Term? To discuss ChatGPT trends, please reach out to Sharang Sharma.

ChatGPT – Can BFSI Benefit from an Intelligent Conversation Friend in the Long Term?

February 2, 2023

With the advent of chatbots reaching human-like sentience and mannerisms, and banks being at the forefront of adopting conversational Artificial Intelligence (AI), the question arises whether ChatGPT threatens the likes of Google, other AI platforms, and the non-critical workforce in the technology and services industries. While its promise remains high, will the banking, financial services, and insurance (BFSI) sector unearth ChatGPT’s full potential? Read on to find out.

ChatGPT has taken the internet by storm and has become a trending sensation overnight. This AI-powered innovative chatbot has taken the world for a spin and is generating a big buzz among millions of professional users experimenting with it. Microsoft has also invested billions in the tool.

But what is ChatGPT? Developed by OpenAI, it is a generative language model that has been trained over large volumes of text to generate human-like responses. Like a search engine, it curates answers for queries but is designed to answer in a more conversational flow that goes beyond chat and delivers a richer experience with an intelligent chatbot. The AI engine generates solutions for all sorts of queries, including R, Python, and VBA codes.

Let’s explore ChatGPT’s potential to impact the future of AI and its usage in the technology and services industry, particularly by financial institutions, banks, and insurers.

What makes ChatGPT approachable and different to use?

The amount of data used to train the GPT model
Human-like interaction
Versatility and variety of responses
Low data input requirements
Highly scalable
Adjustable coherence and adaptability

What does it mean for banking and financial services?

Banks can use ChatGPT in several ways to enhance their operations and customer experience. Here are a few examples:

Assistive chatbots: ChatGPT can be used to build natural language-based chatbots that can assist customers with common inquiries, such as account balances, transaction history, and bill payments. The chatbot also can guide customers through more complex processes like applying for a loan or a credit card. It also could help increase agent efficiency by aggregating requests by type to the appropriate departments
Automation of simple and repetitive tasks: ChatGPT, along with other conversational AI models, can be used to automate simple and repetitive tasks, such as customer service interactions, order processing, and data entry. This can increase efficiency and lower costs for service providers and their clients
Customer service: ChatGPT can assist the human agent in answering customer questions, improving efficiency and response time, and providing more accurate and detailed information. This can improve customer service and satisfaction and employee onboarding
Marketing: Banks can use ChatGPT to analyze customer data and build personalized marketing campaigns that target specific customer segments. It also can generate personalized responses to customer inquiries by fine-tuning the model to a specific client, enabling it to generate tailored responses to their needs
Decision Making: With the right database connections and integrations, ChatGPT can be used to analyze data to generate insights that can be used in decision making
Learning and development: ChatGPT can be used as a learning and development tool. It can be trained with a company’s pre-existing data to create learning tools and modules and as an onboarding tool for new employees

Current mapping of ChatGPT to the BFS BPS value chain

Current use cases of ChatGPT in banking and financial services (BFS) and business process services (BPS) operations are limited. Building capabilities around conversational AI and incorporating ChatGPT into offering portfolios can help BFS and BPS firms unlock innovation. Enterprises such as Microsoft, AWS, and Meta are developing their capabilities internally or through partnerships with conversation AI specialists.

Industries leading in innovation investments are becoming early adopters of ChatGPT. Microsoft is reportedly investing US$10 billion in OpenAI and plans to introduce it along with its Azure OpenAI service bundle in the Bing search engine. This furthers Microsoft’s stake in the market, where it already has a working partnership with OneReach.ai, one of the market’s leading conversation AI providers, since 2019.

Current capabilities still have hurdles to overcome

Although ChatGPT appears to have multiple uses and strengths, some limitations include:

Biased and inconsistent output: Content generated by ChatGPT depends on the trained data, making it prone to biases. It is difficult to achieve the same level of consistency in output generated. Cases requiring more context and complexities may lead to biased and inconsistent output. When training for complex operations such as trade reconciliation, exception management, and know your customer (KYC) remediation, the subject matter experts (SMEs) must be well-versed with minute details, which can’t be guaranteed when using ChatGPT
Standardized data requirement: ChatGPT cannot process different file types or extract information from them. A lot of consumer data is often received in varied file types and formats that require intelligent operations to skim through and sort, which is beyond ChatGPT’s current text-based data capabilities
Largely text driven: Its text-based generated content can fall short of expectations for the coming generation of users that desire more visual stimulation. Dashboards and descriptive analytics have become a basic requirement of all transaction-intensive industries that ChatGPT cannot fulfill
Limited ability to handle sensitive customer information: ChatGPT may not have the necessary security and privacy measures to handle sensitive customer information, such as account numbers or personal identification numbers. With the ever-evolving compliance norms varying across industries, it doesn’t yet have the capability or the secure framework to process, analyze, and interpret KYC or transaction data
Outdated information: ChatGPT’s information database is limited to data up until 2021 and can result in outdated opinions and facts. Deals, news, and updates in recent years aren’t recorded. For a constantly-evolving industry like BFS, where new deals and contracts dictate the capital markets, this makes the source of information unreliable
Ethical concerns: As artificial intelligence improves, the lack of proper credit for AI-generated content is becoming more widespread. The distinction between content created by AI and content created by humans is becoming less clear, causing confusion, mistrust, and ethical dilemmas
System Integration issues: Incorporating new technology with outdated systems can be difficult due to potential incompatibilities and differing protocols or data formats. This can decrease efficiency, add complexity, and impair interoperability

Where will the future take ChatGPT?

While ChatGPT’s future looks promising, it is too early to say the product will revolutionize banking and financial services. Before it gets integrated into banking products, it needs to overcome several hurdles, including:

Responding to competition from rising financial technology (FinTech), regulatory technology (RegTechs), and other AI/Machine Learning (ML) service providers
Meeting regulatory, compliance, and cybersecurity requirements
Catering first to front-office requirements for low-critical queries and then for more complex queries and back-office operations that have not yet been explored
Maintaining high operational efficiency, accuracy, and customer satisfaction
Expanding variation in output categories
Overcoming the lack of recent factual data

Though ChatGPT use cases are promising, it is still a machine learning model that needs modifications to be used in real-world applications. The model would have to consume specific industry data to build domain depth and be programmed to manage contextual nuances for various tasks. Its ultimate success would depend on end customers’ user experiences.

While the road is being paved for innovation, ChatGPT still has a long way to go before making strides into banking and financial services.

To further illustrate the nature of results and drill down on the capacity of ChatGPT, below are some screenshots for financial crime and compliance queries (platforms, codes, advisory):

If you have questions about banking and financial services trends or would like to discuss developments in this space, reach out to [email protected], [email protected], and [email protected].

Also, download our Navigating the Regulatory Tightrope via End-to-End Solutions – Financial Crime and Compliance (FCC) State of the Market 2022 report to explore key trends. Stay updated by following the latest research on Banking and Financial Business Process Services.

Category: Financial Services Industry