AI is making a big splash in CFO offices. Where will its promise of efficiency have the greatest impact?
Artificial Intelligence (AI), a term once used only in science fiction or discussions of the future, is very much a part of the corporate-banking and financial-services sector today. According to a report from The Economist, “Artificial Intelligence in the Real World,” 75% of the 203 senior executives surveyed in 2016 said AI will be actively implemented in their companies within the next three years. Another 3% said it has already been done. North America, according to the report, will be the quickest to implement AI.
AI, in and of itself, is not particularly new. Michel Jacobs, head of Global Sales and of Digital & Payments at fintech vendor iGTB, quips that it “will not solve world hunger or bring world peace.” In fact, he notes that as a tool for the banking industry, analytics that provide insight on positive and negative trends have been around for some time. In the past, analytics and AI have been used for applications such as anti-money-laundering. Now, however, banks are using them to help companies optimize their decisions with predictive capabilities.
But the technology is now changing the corporate-banking sector and, in some cases, in a very influential way. In the past, chief financial officers were needed but were not especially involved in the operation of the business, notes Falk Rieker, global head of the International Banking Unit at tech giant SAP, “They just reported what happened yesterday.” But in today’s world, developments like AI and real-time access to profit and loss analysis make CFOs more relevant to the business than they had been in the past.
“What the office of the CFO has to do is fundamentally challenge what was built in the ’80s and ’90s,” Rieker adds. “What they had built was data warehousing, and it was needed because there was no capability to stream data in real time. Today you have real-time, in-memory platforms that enable you to do things like that. [CFOs] have to fundamentally look at how they manage data and reorganize their data management.” He says that areas such as data preparation, which generally operate in the office of the CFO, will benefit because AI will reduce the need for reconciliation and redundant materials.
In terms of the financial-services sector, however, some believe the development and implementation of AI is occurring in a divergent way. “The financial-services industry is watching developments in AI capability closely, but has been generally more conservative than other industries,” says Nicholas Brewer, product-marketing director at banking-software vendor Temenos. “It is possible to divide the financial-services approach according to whether the use is focused around customer interaction or transaction processing. In the former case, the stress is more on online, real-time and interactive tools (often in the sales, advice or fraud-detection areas); and in the latter case, it’s around periodic, offline automation approaches.”
Brewer also says that due to the nature of the transaction dynamics, as a result of AI, corporations will have the ability to choose among providers, rather than being tied to one banking relationship. “Bank relationships can already be fairly automated, depending on the technology and process maturity of both parties. However, the business process and data flows are currently fairly static and predesigned by (human) staff. AI offers the possibility of making these interactions dynamically flexible, but only if the corporations can keep up with the pace of change at banks,” he says. “The likely emergence of online marketplaces for transaction-banking bids means that corporations may be able to choose dynamically between banking providers for each large arrangement, rather than relying on fixed-term account relationships.”