Sunday, June 24

Research shows AI to save $1 trillion for financial services, half in front office

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The financial services industry can expect savings from artificial intelligence to reach $1 trillion, a 22% cost reduction, by 2030, according to research firm Autonomous NEXT.

Autonomous’ estimates are built from financial company public filings, global revenue pools, and granular analysis to assess the likelihood of automation.

AI impact 

Broken down between front, middle and back offices, the front office takes almost half of that, at $490 billion in savings. The middle and back offices are expected to save $350 billion and $200 billion respectively.

Source: Autonomous NEXT

Whereas in the categories of banking, investment management and insurance, banking comes out with the biggest estimated savings at $450 billion, or 25%.

Insurance closely follows at $400 billion (14%) and investment management, with the highest percentage in savings at 38%, will see $200 billion in AI impact.

Human impact

As the services economy is incrementally automated with judging machines, financial professionals are highly exposed.

Just in the US, 2.5 million financial services employees are exposed to AI technologies in front, middle and back office; 1.2 million working in banking and lending, 460,000 in investment management, and 865,000 in insurance.

“These functions will see between 20% and 40% productivity gains, or unemployment, depending on your vantage point,” according to the report.

AI startups have room to run

Autonomous also noted a $500 billion long-run market opportunity to build financial AI companies by 2030, although that did come with caveats: like being stymied by software failure or regulations.

In addition, “to catalyze change from industry incumbents, new solutions must be meaningfully more economic than the traditional cost base which AI displaces,” according to the report.

Meanwhile, that traditional cost base will continue to shrink. Autonomous expects 10% of it to be captured by 2025, and 50% by 2030.

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