Insights

The financial and professional services industry has been using various forms of AI and automation for decades, but just like the rest of us they’ve also been swept up in the huge advances in machine learning and generative AI that have exploded in recent years, even recent months. Goldman Sachs forecast that $200bn will be commercially invested in AI by 2025, up from around $130bn last year. Gartner, meanwhile, claims it will be $300bn by 2027. Bloomberg Intelligence forecast this week that the figure will be $1.3trillion by 2032 and Skyquest analytics say the figure will reach $170bn of AI investment in financial and professional services alone by 2031. Whether these forecasts will prove accurate or not the level of expectation today tells us how seriously the sector is being taken. But to what end? Why? And what does this investment actually look like?

On Wednesday morning Hawthorn Advisors gathered an expert panel to discuss this and to explore how AI is changing the financial services industry – and how it might continue to change as the various forms of AI get smarter, more accessible and more bespoke. 

City Minister Bim Afolami joined Lisa Quest of consultancy Oliver Wyman, Megan Bulford of the CBI’s financial services policy team and Dr Lewis Liu, CEO and co-founder of Eigen Technologies which uses advanced AI to turn mountains of documents into dynamic, meaningful data for banks, insurance companies and the healthcare industry. Between them the discussion took in a huge range of topics from AI’s limitations to the global regulatory landscape, legal risks, transformative potential and impact on jobs and the wider economy. 

One of the main themes sparking discussion between the panellists and among the invited audience was whether businesses (and the UK more broadly) have access to the sufficient level of skills to exploit the advantages AI can bring to a business. “AI knowhow cannot be confined to the tech team,” was how one panellist put it, while others noted that upskilling and training has to be part of all our lives in the years ahead. The emerging regulatory environment also proved to be a hot topic, with a consensus emerging that the UK stands to benefit from its light-touch approach, perhaps in contrast to the stringent regime imposed across the EU. 

When it comes to the application of AI in the financial services industry, panellists explored the many business functions already being replaced or enhanced by AI technology, not least in risk management and in mobilising a company’s institutional memory through the AI-powered analysis of existing data, documents and precedent. This speaks to the immense productivity gains that AI enables, and panellists felt that the economic benefits of this transformation will be felt nationally – not least given the prevalence (or dominance) of the financial and professional services sector within the UK economy. There was a general sense of optimism and excitement as the use cases and practical benefits of AI continue to reveal themselves, but several cautious notes were sounded by our expert speakers. These tended to relate to questions of risk and barriers to adoption – be they cultural, technological or financial. Some panellists expressed serious concern that regulators, be they global or local, will continue to be outmanoeuvred by large AI firms – not least in areas such as copyright protection, which remains a live issue before the courts in many jurisdictions.

In a sector where the technology is moving so fast, but with no genuinely settled regulatory framework in place, many firms will find themselves trapped between a fear of missing out and a cautious wait-and-see approach. What’s abundantly clear is that any discussion on AI, particularly one involving such informed experts, inevitably touches on grand philosophical questions as much as it does on the mechanics of large language models. Lewis Liu, who holds a rare joint honours from Harvard in fine art and physics, was particularly strong on the social, cultural and political debates sparked by AI’s rapid development. 

Hawthorn’s guests in the audience, drawn from across the banking, fintech, legal and investor community, benefited from an extremely wide-ranging, stimulating and lively debate, as evidenced by the range of questions posed from the floor. There is a huge appetite for informed, open discussion on this topic, whether from those who are far advanced in their AI deployment or those still searching for the right path to take.