Is Your Firm Being Left Behind in the Race to Adopt AI?

The rapid development of artificial intelligence presents both challenges and opportunities for broking firms. A recent report jointly authored by the Bank of England and the Financial Conduct Authority (FCA) titled: Artificial intelligence in UK financial services – 2024 underscores the importance of AI in transforming the broader finance sector.
In this article, we will look at some of the key learnings from the report, analyse its findings, and emphasise why it is imperative for firms to plan for AI integration.
Key Findings from the Report
The report outlines several key findings that are essential for firms to consider:
- AI Integration: Firms that have integrated AI into their operations report increased efficiency, enhanced decision-making capabilities, and improved customer experiences.
- Risk Mitigation: AI tools can help in identifying and mitigating risks more effectively, thereby safeguarding firm assets and ensuring regulatory compliance.
- Competitive Advantage: Early adopters of AI technologies gain a competitive edge, positioning themselves as leaders in the market.
AI integration can offer brokers the ability to automate routine processes, such as customer onboarding, compliance checks, and transaction monitoring, which could free-up valuable time for more strategic activities. Furthermore, AI-driven analytics can enable brokers to analyse market trends and customer behavior in real-time, allowing for more informed and timely decision-making.
Risk mitigation is a critical aspect of brokerage operations. Advanced AI systems can help to detect unusual trading patterns or potentially manipulative activities with higher accuracy and speed than traditional methods. The use of such systems can help to ensure better adherence to regulatory requirements, reducing the risk of penalties and reputational damage. By identifying risks early, brokers can implement corrective measures promptly, safeguarding both their clients and their business.
Key Takeaway:
Integrating AI into broker operations could enhance efficiency, mitigate risks, and provide a substantial competitive advantage.
The benefits and risks of AI as highlighted by the report
The highest perceived benefits from the report are related to data and analytical insights, anti-money laundering (AML), combating fraud, and cybersecurity. The areas expected to see the greatest increase in benefits over the next three years include operational efficiency, productivity, and cost base. These findings align with those from the prior 2022 FCA survey.
Among the top five perceived current risks, four pertain to data: data privacy and protection, data quality, data security, and data bias.
The risks anticipated to escalate the most over the next three years involve third-party dependencies, model complexity, and embedded or 'hidden' models.
The projected increase in the average perceived benefit over the next three years (21%) is significantly higher than the projected increase in the average perceived risk (9%).
Cybersecurity is regarded as the highest perceived systemic risk both currently and in the foreseeable future. However, the most substantial increase in systemic risk over this period is anticipated to stem from critical third-party dependencies.

Key Takeaway:
The areas where survey respondents believe AI has the potential to be most beneficial are related to data and analytical insights, AML/fraud prevention and cybersecurity. Interestingly, the largest perceived systemic risk is also cybersecurity.
Executive Accountability in AI Deployment
According to the report, 72% of firms stated that their executive leadership is accountable for AI use cases. However, accountability is often shared among multiple parties, with most firms reporting three or more accountable persons or bodies.
Key Takeaway:
The areas where survey respondents believe AI has the potential to be most beneficial are related to data and analytical insights, AML/fraud prevention and cybersecurity. Interestingly, the largest perceived systemic risk is also cybersecurity.
Conclusion
The most compelling message from the report is the potentially significant financial losses associated with failing to plan for AI integration. It is apparent that Firms that delay or overlook the adoption of AI are, in essence, "leaving money on the table." The potential for AI to drive growth, efficiency, and innovation is immense, and firms that do not capitalise on these opportunities risk falling behind their more proactive competitors.
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References:
- Bank of England and Financial Conduct Authority Report
https://www.bankofengland.co.uk/report/2024/artificial-intelligence-in-uk-financial-services-2024
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