‘Put your money where your mouth is’…
When looking through CBInsights’ Book of Strategy Maps, they started off with some much needed truth:
“Tell me what you value and I might believe you. But show me your calendar and your bank statement, and I’ll show you what you really value.”
Peter Drucker
As I have discussed, AI is and will continue to become an important tool for improving how businesses operate and the products they provide, when built in a responsible way. In the Fintech industry, AI is coupled with robust security frameworks to streamline areas such as fraud detection, loan processes and customer targeting. But is AI’s importance reflected in the industry’s spending?
CBInsights examined the spending of some of the biggest global companies, focusing on where the money was spent to demonstrate the priorities of businesses. Companies were divided into categories.
The fintech companies were:
Out of a range of categories CBInsights created to streamline the businesses’ spending, AI did not feature.
2023 was a big year for investment in AI, with Generative AI and AI-related startups raising nearly $50 billion, bringing about an inflation of AI valuations. This year, it is thought that investment will be concentrated on fewer, Big Tech AI companies that already have the resources, data and computer power to create and implement AI technology.
With so much investment happening in AI, why are fintech companies not prioritising partnerships or acquisitions of AI companies?
I believe there are three main reasons.
Lack of Aligned Regulations
There is not yet a global framework for AI regulations. A heavily regulated industry such as financial services is likely to be overly cautious when supporting or deploying AI technology that uses vast amounts of data to determine the outcomes.
The financial services industry is aware of the impact AI will have across credit, fraud detection, and analysing investment options, but perhaps the risk and unclear regulatory impact is preventing investment.
Lower Risk Appetite and Lack of Trust
Fintech companies are known for disruption within financial services, but also need to be more cautious than perhaps other industries. Particularly for the established enterprises surveyed by CBInsights, reputation and trust plays a large part in maintaining industry standing.
With greater education around the opportunities of AI and transparency around how risks are mitigated against, financial services can take steps to improve public trust in AI technology and use it for the benefit of those in the ecosystem.
Irrelevant to Business Strategy
The spending surveyed by CBInsights focused on partnerships and acquisitions, as well as other investment opportunities. When the companies were making these investments decisions, I would presume they focused on those that also contributed to the business and growth strategy.
The lack of investment into AI tells me that perhaps AI is not a priority for the fintech businesses. Building an AI strategy will be crucial for growth in the next five years, and starts with educating the board and executive team on the importance to the business.
As much as the industry may discuss AI technologies, without investment and adoption from businesses within fintech, the industry will not reap the benefits.
If you’re looking to improve your AI strategy for business growth in a responsbile way but aren’t sure how to get started, get in touch.
Email hello@smitagupta.com for enquiries.
