SINGAPORE – While ethical artificial intelligence (AI) and analytics adoption can add about US$2 trillion ($2.7 trillion) of value each year to the global banking and insurance industry, a Temasek survey showed that only 13 per cent of the sector uses AI solutions across the bulk of its processes. Financial firms in select markets including Singapore were polled in the survey.
About 31 per cent of the companies are still only dipping their toes in AI-driven solutions, while more than half of the respondents fell somewhere in the middle – using AI in some areas, but not harnessing its full potential.
The findings mean that, while almost all financial services companies use AI in their processes in some way, they differ in the extent of AI deployment, with an overwhelming 93 per cent of the companies demanding that AI solutions should be trustworthy, said Temasek.
The study was conducted by Temasek in March this year, on an anonymous basis, with 39 decision-makers from banks and insurance companies in the United States, Europe, Singapore and Hong Kong.
The survey comprised 25 questions, with a strong focus on AI adoption and governance within financial services, Temasek said, in its recently published report on how AI ethics and governance could accelerate the deployment of transformative AI solutions in financial services.
A lack of awareness also emerged as a key finding. While numerous AI ethics and governance guidelines exist, only 50 per cent of organisations say they are familiar with them.
However, Temasek said companies worldwide do want to cash in on the fast maturing and increasingly prevalent technology that is driving change in almost every major industry, generating revenue both directly or indirectly.
The International Data Corporation forecasts that global spending on AI will double over the next four years, growing from US$50.1 billion last year to more than US$110 billion in 2024.
According to McKinsey & Company, an additional annual value of US$2 trillion can be unlocked if global financial services companies roll out AI solutions ethically and responsibly.
Temasek’s report highlighted DBS Bank as one of the leaders here in deploying AI at scale with a strong enablement of governance and ethical considerations.
“Today, the bank uses AI extensively across front and back-end operations, from improving customer engagement through personalised insights to fighting financial crime and reducing the risk of fraud,” it said.
Financial services is a key sector for Temasek, making up 24 per cent of its $381 billion net investment portfolio. It said building AI capabilities not only drives better business outcomes in its own ecosystem, but also shapes a better world.
“To do so, AI solutions have to be responsibly designed, developed and deployed. That’s why this report casts a spotlight on financial services, a sector that can expand economic opportunity while meeting societal needs,” it said.
“Moreover, virtually all of us rely on banks and insurance companies as the providers of integral services in our daily lives. Add to that the sheer number of people employed within the sector, and it’s clear that AI will have a far-reaching impact, touching households, businesses and employees,” Temasek added.
“If the financial services sector demonstrates successful adoption and scaling of AI responsibly, it could also contribute best practice standards for other industries.”
To encourage industry-led adoption of AI governance, many countries have published non-mandatory guidelines on the responsible use of AI. Singapore has published the Model AI Governance Framework to promote fairness, ethics, accountability and transparency.
Many banks and insurance companies use various AI technologies and methods across their entire value chain of key processes, ranging from loan and insurance underwriting, financial advice for investment products, fraud detection, claims management, marketing, and sales and distribution.
Temasek’s survey found that almost two-thirds of companies are focusing on more established machine learning and advanced statistical algorithms. However, only one-third are AI leaders who use advanced AI systems like deep learning and artificial neural networks.
According to Temasek’s report, a lack of AI-literacy among decision-makers is considered the biggest challenge for the adoption and scaling of AI, ahead of inadequate tech and data infrastructure and lack of AI talent.
One agency, the Singapore Computer Society (SCS), seeks to enhance AI ethics and governance capabilities within companies through training and certification programmes.
Dr Chong Yoke Sin, president of the SCS, explains that the goal of the programmes is to ensure that professionals have deep expertise in ethics and governance, and are accordingly certified.
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