The Changing Role of Artificial Intelligence in Financial Markets
Based on the latest observations, we can conclude that the selling segment will increase its investment in these technologies faster than its buying counterparts.
Artificial Intelligence and Machine Learning are technologies that can transform companies and their markets. Defining what form these transformations will take and how companies in the financial market should position themselves to take advantage of them is not an easy task.
However, in its latest report, Refinitiv managed to shed light on this topic. “The Rise of the Data World,” as this report is called, is the second annual report from the financial data and industry analyst group.
As part of the report, more than 420 respondents across commercial and investment banks, brokerages, exchanges, hedge funds, asset management and project firms were surveyed. Respondents’ specializations range from data science, quantitative analysis and development to senior management.
Respondents were divided geographically into the Asia-Pacific region, Europe and America. For each region, about a third of the participants’ accounts. Although a small quantitative bias towards the Asia-Pacific region was still present, with an additional 7 participants from Europe and an additional 9 from North and South America.
Key findings from the report are that companies are now looking to increase the means of artificial intelligence and machine learning in many areas of their business.
As these operational units develop, the pool of data science experts grows and the role of artificial intelligence and machine learning shifts from being auxiliary (e.g. to evaluate the effectiveness of marketing campaigns) to tasks proactive measures that help control the strategy.
Methods such as natural language processing can reveal a lot of hidden value in the unstructured datasets that many companies have.
However, the quality and availability of data is now considered the biggest barrier to the wider implementation of AI and machine learning. As mentioned in the report, the problems of lack of talent, technology and funding are gradually disappearing.
However, AI and machine learning are not a panacea, and companies’ AI models will only be as effective as their data processing strategy will allow.
The fallout from COVID-19 will likely increase AI investments by companies that already have existing software. However, for these techniques to be effective against other “black swans” (or at least be ready for them), more surrogate data will be needed.
As for the survey results, 72% of respondents said that artificial intelligence and/or machine learning is the main component of their business strategy. And 80% said they invest significant money in these technologies. 70% of respondents agreed that decisions about implementing and developing artificial intelligence and machine learning strategy relate to many areas of their business.
The number of options for using artificial intelligence is also increasing. Risk management and trading are the two most popular application areas, with over 60% of organizations offering AI-powered decisions.
However, the level of implementation in the reporting and compliance area was 33%. Additionally, 31% of surveyed organizations use AI in research and idea generation. Other popular usage options include customer service, segmentation, forecasting, analytics, and new customer support.
Selling is expected to grow its investment in these technologies faster than its buying counterparts, and is more likely to expand them into multiple areas of its business simultaneously. Until now, procurement has primarily used these technologies locally rather than enterprise-wide.
About 44% of sell-side organizations show a wide range of deployment compared to 28% on the buy-side.
65% of surveyed companies use one type of artificial intelligence and machine learning, 28% – two. However, only 7% of companies use three different types of these technologies in their activities.
Finally, from the point of view of applications and areas of interest, companies in the financial market are increasingly paying attention to in-depth training. About 75% of respondents said they have used these apps, although the buy side was the leader here.