Surge in Financial Sector’s AI and BaaS Investments

A recent survey conducted by Finastra has unveiled compelling insights into the ever-evolving landscape of the financial services industry, demonstrating a remarkable surge in investments despite prevailing economic constraints, as reported by Fintech Global News. The survey, which garnered responses from 956 professionals across various global financial institutions, sheds light on the prevailing trends and attitudes within the sector.

The study, carried out between August and September 2023, encompassed financial experts from a range of countries, including France, Germany, Hong Kong, Singapore, Saudi Arabia, the UAE, UK, US, and Vietnam. The findings underscore a palpable enthusiasm among decision-makers within these institutions regarding the rapid technological and cultural transformations currently underway. An impressive 87% of respondents expressed excitement about the current pace of change, with 83% harboring optimism about the opportunities it brings for their organizations and 81% for the broader financial services sector.

One of the survey’s standout revelations is the escalating focus on artificial intelligence (AI), particularly generative AI. Compared to the previous year, there has been a noteworthy uptick in the deployment and enhancement of AI capabilities, with 37% of respondents reporting improvements or new deployments of AI technology.

Generative AI, in particular, has captured the attention of 83% of decision-makers, with 26% having already incorporated it in some capacity. This technology is predominantly seen as a means to meet the growing demand for personalized customer services and for specialized tasks such as ESG criteria classification and data analysis for KYC and AML compliance.

The survey also highlights a significant uptick in the adoption of Banking as a Service (BaaS). Nearly half of the surveyed institutions (48%) have either implemented BaaS solutions or strengthened their capabilities in this domain over the past year, marking a substantial increase from the 35% reported in 2022. The most common applications of BaaS include buy now pay later schemes, embedded lending, and cross-border payments.

Despite the current economic climate casting a shadow over tech investments, with 78% acknowledging its impact, there remains a positive outlook. A majority (69%) of respondents anticipate a full resumption of their investments by the first half of 2024. Furthermore, the survey underscores the strong belief held by financial institutions in the positive influence of Open Finance, with 85% recognizing its collaborative potential in the industry.

Additionally, the survey reveals a steadfast commitment among financial institutions to their communities, even amidst economic challenges. An overwhelming 86% of decision-makers affirm that the financial services and banking sector’s role extends beyond mere finance, emphasizing their duty to support the communities they serve.

Commenting on the survey findings, Finastra CEO Simon Paris remarked, «Despite the challenging economic climate, it’s clear from our research that investment in AI, BaaS, and embedded finance remain key priorities for financial services organizations over the next 12 months, particularly as they seek to further enhance and personalize the customer experience. We share the industry’s ongoing commitment to ESG initiatives, to collaboration around Open Finance, and excitement in using advanced technologies like AI to help deliver on the opportunities ahead.»

The survey conducted by Finastra underscores the financial sector’s resilience and adaptability in the face of economic challenges, showcasing a strong commitment to embracing technology and innovation for the betterment of both institutions and the communities they serve.