{"id":76527,"date":"2024-07-10T00:48:24","date_gmt":"2024-07-09T22:48:24","guid":{"rendered":"https:\/\/intellias.com\/?post_type=blog&p=76527"},"modified":"2024-07-29T12:58:25","modified_gmt":"2024-07-29T10:58:25","slug":"the-increasing-use-of-ai-in-capital-markets-is-it-worth-the-hype","status":"publish","type":"blog","link":"https:\/\/intellias.com\/increasing-use-ai-in-capital-markets\/","title":{"rendered":"The Increasing Use of AI in Capital Markets \u2013 Is it Worth the Hype?"},"content":{"rendered":"

The global capital markets are set to face several challenges in 2024 that will persist into next year caused by a slowing international economy and multiple disruptive forces. One of these issues is the exponential growth in technological development, which will benefit market participants significantly while posing challenges as they work to optimize and implement new tech. Artificial intelligence in capital markets, or AI in capital markets, is one of the most prominent of these technologies.<\/p>\n

The best way to protect your company from disruptive forces in any industry, particularly in international capital markets, is to ride the incoming wave ahead of your competitors. You stand to benefit far more from AI in capital markets if you embrace it earlier and use its associated tools to improve your financial performance and forecasting. To stay afloat, survive in turbulent seas, and reach your final destination as a company you need support; let\u2019s start by covering the essentials of AI for capital markets<\/p>\n

AI in Capital Markets<\/h2>\n

As in other sectors of the wider financial services industry, AI technologies have been present in the capital markets field for quite some time. What\u2019s changed is the increased proliferation of these tools and their acceptance by leading companies. Increased globalization has led to increased sharing of new technology, making it easier for service providers to enter new territories and regions.<\/p>\n

That\u2019s because it has become significantly simpler for companies to adopt tools designed specifically for AI in capital markets and learn from the data they consequently gather. This allows companies to create products and services that more closely match the expectations of their clients. This allows said companies to improve both their offerings and their internal processes for increased efficiency, but AI doesn\u2019t just travel in one direction.<\/p>\n

Financial services consumers are now significantly more amenable to using AI tools and products, and expect most capital market services providers to integrate at least some AI technology into their offerings. The sudden appearance and widespread popularity of Chat GPT has made the general public all the more comfortable with using AI, and its generative AI capabilities are also being put to good use by capital markets firms.<\/p>\n

In a recent study, Ernest & Young describes the emergence of generative AI<\/a> as \u201cmore than just a rends, it is a comprehensive reimagining of operations, product development and risk management.\u201d Succinctly put, it highlights how generative AI, combined with increased investment in high-quality NVIDIA computer chips, will spearhead innovation across all aspects of AI in capital markets. In essence, the ball is rolling and accumulating both speed and power as it does so.<\/p>\n

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Regtech is also playing an increasing role in determining how banks and insurers operate <\/p>\n

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The Role of AI in Capital Markets<\/h2>\n

AI technologies are playing an increasingly important role in the capital markets industry, improving the performance of companies internally and by providing new offerings to customers as outlined above. The potential applications of AI technology in this sector is nearly limitless as more data is gathered and processed to prove insights that can be used to develop new technology. The process is cyclical; for the immediate and short-term future, however, these are the primary roles of AI in capital markets.<\/p>\n

Robotic Process Automation (RPA)<\/h3>\n

Labor-intensive and costly processes like trade settlement, customer onboarding and servicing, reconciliation, and regulatory compliance are typically outsourced to low-cost locations; However, offshoring is frequently not sustainable. RPA<\/a> automates middle and back operations in capital market firms and can reduce labor costs and labor manuals, improve financial accuracy, break down departmental silos, and generate audit trails.<\/p>\n

Real-Time Credit and Risk Sensitivity<\/h3>\n

AI systems can identify patterns in big datasets, and quickly and accurately identify changes in the market (including credit abnormalities) by incorporating machine learning. Not only does this ensure quicker reactions to possible threats, it also makes more advanced risk management techniques possible.<\/p>\n

Algorithmic Trading<\/h3>\n

AI in capital markets can be used to produce rapid and precise market evaluations that offer vital insights into current market circumstances, consumer behavior, and emerging trends. Based on trade algorithms, this enables them to make judgments more quickly and effectively, but also more accurately, generating increased returns.<\/p>\n

Customer Experience Chatbots<\/h3>\n

Chatbots<\/a> are widely utilized in many different online contexts, such as sales and customer support, and are particularly effective in the capital markets sector. They can provide rapid responses to customers concerned about fluctuating market conditions, provide individualized service offerings, and handle routine issues relating to accounts.<\/p>\n

Regulatory Compliance<\/h3>\n

The financial markets industry is heavily regulated, and laws are frequently changed. By automating procedures for regulatory compliance, AI for financial markets technology can ensure that your business remains compliant automatically. Using AI reduces or eliminates the risk of human errors and generates automated reports on your entity\u2019s ability to remain compliant, ensuring that any audits you undergo go smoothly.<\/p>\n

The Impact of AI on Capital Markets<\/h2>\n

AI for financial markets is a growing trend that as we can see plays a number of rules in the capital markets sector, but that doesn\u2019t mean that its adoption has been broadly welcomed by all market participants. Even in an industry characterized by rapidly shifting circumstances, there are plenty of operators that remain hesitant to adopt new technology.<\/p>\n

Wells Fargo, Deutsche Bank, and JPMorgan Chase are just some of the leading banks in the United States to ban their employees from using Chat GPT. While this does not preclude them from using generative AI more generally, it does highlight how concerns exist amongst major capital markets participants that they should be concerned about generative AI and other associated tools.<\/p>\n

The statistics speak for themselves: AI in the capital markets provides a significant number of benefits to those companies that will embrace new technology and achieve a significant competitive advantage. If your company is considering embracing an AI-driven transformation in the capital markets sector, then you should consider highlighting the following statistics: They should prove to even the most recalcitrant of colleagues that AI represents a good investment.<\/p>\n