Artificial intelligence (AI) has already begun disrupting the financial services industry in Singapore. AI systems are reducing inefficiencies and automating processes, and the government has rolled out a National Artificial Intelligence Strategy to cement Singapore’s leading position in the AI race and create a Smart City.
A survey by Refinitiv found that 78% of data scientists in the Asia-Pacifc say that their company makes significant investment in AI and machine learning (ML), and 69% said that AI/ML is a core component of business strategy. By analysing massive amounts of data and removing human objectivity from decision making, AI is poised to transform investing, banking, insurance, and other industries in several dramatic ways.
Fewer Physical Locations and Industry Consolidation
The widespread adoption of AI will undoubtedly alter the physical geography of the financial services sector. Analysts at Deloitte expect the massive cost of investment in machine learning to drive the consolidation of scale players into a few large industries, potentially leading to the disappearance of mid-sized firms. On the other hand, agile niche firms with breakthrough innovations will emerge to fulfill specific consumer needs, resulting in a bifurcated future market structure.
Source: “How artificial intelligence is transforming the financial ecosystem”, Deloitte
Financial institutions will rely less on expensive, brick-and-mortar buildings to bring in customers and conduct operations. In December of 2020, the Monetary Authority of Singapore (MAS) said it would award full bank licences to Grab-Singtel consortium and tech giant Sea, bringing the number of digital banks in Singapore to 4. These banks will provide traditional services, but all interactions will be handled online, resulting in significantly lower operating costs and increased market competition.
Customer Service and Personalisation
Consumers are hungry for frictionless, 24/7 customer service, and AI will play a key role in enhancing user experience. Financial services companies increasingly rely on self-learning chatbots to provide rapid support and reduce call center workloads. Advances in natural language processing and an expanding data pool will make consumer services more seamless in the future.
AI will also allow banks and financial institutions to deliver personalised advice and automated features. Rather than providing generic tips or recommendations that are tainted by human bias, AI powered apps can tailor investing or savings strategies to consumers based on their data and behaviors.
Future customer experiences will be centered around AI, with financial transactions like investments and bill payments automated and managed by Robo Advisors. Consumers will also be regularly updated regarding changes and have tailored advice to inform their decisions. A robo-advisor is an artificial intelligence (AI) driven virtual financial advisor. Here is our list of Best Robo Advisors in Singapore 2021.
Security and Risk Reduction
AI is already driving a sea change against fraud, money laundering and other criminal behaviours. AI has the ability to rapidly isolate irregularities in spending behaviours that would otherwise go unnoticed by humans. AI has proven especially effective at preventing credit card fraud, empowering fraud detection systems to analyze consumer geographic and spending data and trigger security mechanisms when suspicious payments are made.
In corporate finance, AI will be particularly helpful in assessing loan risks and determining credit scores. AI’s enormous processing power allows vast amounts of data to be processed at speeds humans cannot compete with. By analysing troves of structured and unstructured data, financial institutions will be able to assess risks and predict outcomes at unprecedented speeds.
The democratisation of personal finance and an increasingly competitive market landscape have driven down costs of investing and other services. Retail traders have more options than ever to affordably invest, and AI will continue to cut costs for consumers and institutions alike.
The back office of financial institutions often have thousands of employees processing requests or tracking reporting needs. One European bank that implemented digitisation and automation allowed staff to spend 70% less time processing forms. At Amazon’s processing centres, services like Amazon Connect offer AI-driven, cloud-based solutions to cut down on staff and enhance facility operations.
Savings resulting from automation and streamlined processes will drive down costs of business and allow consumers to enjoy lower fees on transactions with financial institutions.
AI is rapidly transforming the financial services industry in Singapore by automating processes, reducing risks, and transforming business models. The automation of tasks and rapid data processing power of machine learning will empower consumers with tailored information and provide an unprecedented view of their financial decisions. However, industry consolidation and the elimination of jobs will bring a number of economic and societal challenges as well.