UK Finance has released a new report detailing how financial services firms are embracing generative Artificial Intelligence (AI) to drive innovation, optimise operations, and enhance customer engagement, all while managing the associated risks.
The financial services sector, with its long history of responsible technological innovation, is increasingly investing in AI, recognising the vast potential it offers across multiple areas. The report identifies seven key domains where generative AI is currently delivering the most value:
While firms are eager to capitalise on these opportunities, the report underscores their careful approach in mitigating potential risks, ensuring adherence to regulatory standards, and maintaining a commitment to responsible AI use.
A major point of focus in the report is the importance of human oversight in generative AI applications, particularly in areas such as model training, interpretation, and sensitive decision-making. It stresses that financial services firms must ensure that AI models are properly understood, that they are trained on high-quality data, and that their operations are transparent.
The report identifies three primary risks linked to generative AI and outlines strategies to address them:
- Reliability of Outputs: Generative AI models, especially Large Language Models (LLMs), are susceptible to producing biased, erroneous, or inappropriate outputs. To mitigate this, firms are focusing on selecting the right models, fine-tuning them with specific datasets, and conducting continuous testing to ensure accuracy and appropriateness.
- Data Privacy and Security: Alongside general data security concerns, LLMs have the potential to inadvertently generate or expose personal data. Financial services firms are adopting stringent data protection practices and implementing new measures, such as personal information filters, to safeguard customer privacy.
- Third-Party Risk Management: Relying on external AI providers can reduce a firm’s control over its operations. To address this, financial services firms are enhancing their third-party risk management processes to ensure accountability and transparency when working with external vendors.
Despite these risks, the overall sentiment is optimistic. Financial services firms are benefiting from their previous experiences with technology adoption and are using those insights to safely integrate generative AI into their operations.
However, the report stresses that continued collaboration with regulators, government bodies, and customers is essential for further innovation. Building trust through transparency, education, and ethical practices will be key in unlocking the full potential of generative AI.
Jana Mackintosh, Managing Director of Payments and Innovation at UK Finance, commented: “Generative AI has captured the public and policymakers’ attention. It’s an exciting technology with significant potential, but it also brings risks that must be managed carefully. The financial services sector is currently focusing on areas where human oversight is paramount and adopting a cautious, responsible approach. Fortunately, the sector has a strong track record of innovating responsibly, which puts it in a prime position to harness the full benefits of generative AI.”
As financial services firms continue to explore the possibilities of generative AI, their efforts to balance innovation with caution are paving the way for a new era of technological advancement within the sector.
