How AI in Finance May Improve Healthy Competition


CFTE continues its series of deep dives into AI in Finance, looking at how financial services must consider new age solutions, ethical dilemmas, market structure and talent as a result of these changes.
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The rise of artificial intelligence in finance has resulted in a diminished need for search and comparison costs for customers. This pushes financial services providers to extreme ends of the market, with larger returns for large-scale companies and new opportunities created for innovators in specific niches. Overall, this is set to increase healthy competition as institutions begin forming alliances and partnerships to secure a more diverse pool of data, but it also poses potential strategic and operational risks.

Although such partnerships may be enticing, this could also mark the end of small- and mid-sized firms as the market will be skewed to favour large-scale players. For example, it is impossible to imagine a small firm in China taking on the likes of Ping An or Alibaba simply due to the sheer scale of their resources – monetary, data and user base.

The rise of AI platforms has led many consumers to lower-cost providers, while those with specific niche needs will find products that cater to their situation. Similarly, AI also makes it cheaper for firms to create products to respond to demand, accordingly, making it close to impossible for smaller companies to keep up when larger incumbents begin offering AI-driven services themselves.

However, this also creates a new headache for regulators who must decide how to respond to this consolidation in a bid to prevent near monopolies. Depending on the markets they govern, there may also be pressure to create regulations in order to allow new players to rise up, which can be a tricky scenario, especially when there is plenty of cross-border merging.

The alliances and partnerships formed by financial institutions with startups mirrors the words of Martin Markiewicz (Silent Eight) in the CFTE AI in Finance course – “AI is something that is already here. If you understand what it is, perfect timing. If you don’t, you’re kind of behind.”

It is through consolidation that the shortcomings in different areas can be fixed quickly, allowing mid-tier firms to survive and scale their niche offerings, while large-scale players can continue to reap the benefits of collecting diverse data sets. However, whether these alliances will result in healthy competition among alliances or absorption into a few large-scale players remains to be seen.

About the AI in Finance programme

The CFTE AI in Finance course has been developed in partnership with Ngee Ann Polytechnic, a leading institute of higher learning in Singapore and features high-quality content taught by five senior lecturers and 18 industry experts.

With an easy to follow format, the course is perfect for busy professionals to understand the technologies behind AI and machine learning that are disrupting finance.

Click here to learn more about the CFTE AI in Finance course.

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These series of articles is based on the Deloitte report titled “The new physics of financial services | How artificial intelligence is transforming the financial ecosystem” released in 2018. Click here to download the full report.

About CFTE

We are a platform supported by senior leaders from the largest institutions, startups and universities. We address the needs of professionals in finance to upskill in a rapidly changing industry being transformed by emerging technologies. More than 50,000 participants learn from our online courses, such as AI in Finance, Fintech Foundation or Extrapreneurship, a mini-MBA with fast growing startups such as Revolut or Shift Technology.

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Cover image from workamaniac.com

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