The Rise of AI Strategies: Challenges and Opportunities in the Financial Sector
A recent survey conducted by EY (Ernst & Young) of 1,200 global CEOs sheds light on the growing trend of investing in AI strategies among executives. The survey revealed that more than two-thirds of CEOs recognize the urgent need to act on generative AI, but many face significant challenges in both formulating and operationalizing these plans. This is partly due to the rise in firms claiming AI expertise, which has led to uncertainties in the field, complicating the ability of CEOs to make bold moves towards deploying the technology.
The current economic landscape, marked by higher interest rates, increased inflation, and complex geopolitical challenges, has further stymied strategic decisions concerning capital allocation, investment, and transformation. As a result, the survey reflects the lowest acquisition appetite since 2014, with only 35% of CEOs planning mergers and acquisitions in the next 12 months, a trend also influenced by geopolitical tensions.
One of the key challenges facing the financial sector is the rise of AI-enhanced synthetic identity fraud. A survey of 500 American fraud and risk professionals found that half of companies believe their synthetic fraud prevention measures are only somewhat effective. The financial impact of this deficiency is considerable, with nearly nine in 10 companies extending credit to synthetic identities and one in five experiencing average losses per incident between $50,000 and $100,000. Fraudsters are utilizing AI to develop increasingly sophisticated strategies, posing a significant threat to financial institutions.
Another area of concern highlighted in the survey is cybersecurity. KPMG International’s recent CEO Outlook reveals that only 56% of Canadian executives feel prepared for a cyberattack, with 93% expressing concern about generative AI’s ability to amplify breach vulnerabilities. This sentiment is echoed by KPMG Canada’s Private Enterprise Business Survey, where 81% of small to mid-sized business (SMB) leaders recognize generative AI as both a tool for enhanced cyber threat detection and a potential catalyst for increased attacks due to novel criminal methodologies.
Perceptions of AI in financial planning vary among investors by generation. While a recent survey found that 62% of investors ages 45 and over were very satisfied with financial planning advice from a generative AI tool, only 38% of investors under 45 felt the same. Comfort levels nearly doubled to 21% when AI recommendations were verified by financial planners, highlighting the importance of human oversight in AI-based financial advice.
Overall, the survey underscores the need for a multilayered approach to combat AI-generated challenges in the financial sector. As technology continues to evolve, CEOs and executives must stay ahead of the curve to harness the potential benefits of AI strategies while mitigating the associated risks. By addressing these challenges head-on and investing in innovative solutions, financial institutions can navigate the complex landscape of AI in the digital age.
