Artificial intelligence (AI) will disrupt all areas of institutional finance, from trading, compliance, and sales to research and idea generation.
Rapid advancements in AI have produced machines that can now solve the types of problems previously better suited to the human mind. In a new Greenwich Report, Meet Your Robot Broker: AI in Institutional Finance, Greenwich Associates projects rapid proliferation of AI throughout institutional finance in the next five years.
“AI technology is developing at a rapid pace and we will soon see significant disruption across investment banking business lines,” says Richard Johnson, Vice President of Market Structure and Technology at Greenwich Associates.
The AI solution
Artificial intelligence is now utilized in finance, with applications related to fraud detection, credit scoring and robo-advising. To date, most of these use cases are focused on retail rather than institutional applications, but this will change rapidly as banks seek to deploy the technology across research, sales, trading, and compliance.
The research finds that while computer algorithms already handle the majority of institutional trade flows, the next generation of algorithms will incorporate machine learning to figure out the optimal strategy to execute an order for example.
Furthermore, while AI is already being used by the research department to generate investment ideas, natural language processing could transform the sales and support model at banks even further.
“In today’s environment of continued cost pressure and low margins in many businesses, investment banks are even more incentivized to reduce costs through automation,” says Johnson. “AI and robotic process automation promise to provide just the solution they are looking for.”