Half of European Financial Firms Have Adopted AI-Powered Fraud Analytics
Venture capital fund MMC, which invests in early-stage tech companies, published the third edition of its annual State of AI report in partnership with Barclays Ventures. In it, it defines AI as technology which “enables software to perform difficult tasks more effectively by learning through training instead of following sets of rules.”
The financial sector has a relatively high rate of AI adoption, with 37% of respondents deploying or planning to deploy AI within the next 12 months. Having recognised the benefits of artificial intelligence as early as 2017, the sector is now at the active deployment stage, according to the report.
"Financial services firms have also been proactive adopters of the technology,” said David Kelnar, Head of Research at London-based MMC. “In 2017, financial services and technology firms indicated they intended to invest more in AI in the next three years than companies in other industries. They did so, and as a result, have among the highest adoption rate of AI today. Half of financial services firms, for example, have adopted an AI-powered fraud analytics solution.”
And there is a growing market for serving the particular needs of the financial sector.
“Half of financial service firms, for example, have adopted an AI-powered fraud analytics solution,” Kelnar explained. “Financial service firms are also well served by early stage, ‘best of breed’ AI technology suppliers. Among the 1,600 early stage AI software companies in Europe, approximately one in five serve the financial sector.”
The incentive behind the sector’s accelerated AI adoption is twofold, according to Kelnar. On the one hand, firms in the sector handle a larger volume of routine, data-related tasks than anywhere else, meaning that there’s more potential for AI technologies to add value.
“50% of finance and insurance companies’ employees’ time is spent processing and collecting data – more than any other sector,” he explained. “Accordingly, AI can assist with numerous use cases – including investment strategy, portfolio construction, risk management, client service, claims processing, fraud detection and customer service.”
Additionally, financial firms have been early investors in cognitive tech, helping to explain why they are now further along the adoption curve than other sectors.
Despite continuing excitement around artificial intelligence and machine learning, the distinction between these technologies and traditional software isn’t always clear. And, as cognitive technologies become more pervasive, the boundaries are set to blur even further.
“Over time, the distinction between ‘AI companies’ and other software providers will blur and then disappear, as AI becomes pervasive,” the report states.
The fuzziness of the definition, coupled with the continuing hype around AI, might explain why only 60% of the 2,830 purported AI start-ups reviewed in the report had AI “at the heart of their value proposition.”