Profitable investments at budget-friendly prices - This sector promises significant growth opportunities for investors soon
In the rapidly evolving world of finance, Artificial Intelligence (AI) is set to play a transformative role, reshaping jobs and presenting lucrative investment opportunities.
According to a report by ThoughtLinks, AI is expected to redefine approximately 44% of the work done in banks by 2030. This transformation varies across banking sectors, with tech, engineering, and infrastructure roles potentially seeing up to 55% of their tasks redefined, commercial banking experiencing 49%, wealth management 42%, and investment banking 33%.
This shift is not merely about job losses but a significant shift in the nature of work. AI will automate many routine and operational tasks, freeing employees to focus on higher-value client interactions and decision-making. For instance, AI is already serving as a digital assistant to bankers, handling routine tasks to enable bankers to spend more time on personalized client services, improving efficiency and client responsiveness.
However, this shift may result in some job reductions where tasks can be fully automated, particularly in roles focused on data processing or routine operations. On the other hand, there will be demand for new skills in AI management, data analysis, and governance to maintain and improve AI systems.
Banks are investing heavily in AI to enhance competitiveness and improve service delivery. Major institutions like JPMorgan, Goldman Sachs, and Citigroup have deployed AI tools such as large language models and AI assistants to support their employees and clients. AI is driving increased efficiency by automating routine processes, enhancing credit assessment capabilities, improving loan pricing and product customization, and better financial forecasting and fraud prevention.
Banks are also allocating more funds toward AI-driven cybersecurity efforts due to the risks and opportunities AI technologies present.
Despite AI’s promise, banks face challenges including data quality, governance, and scaling AI projects beyond pilots. Poor data quality can cause up to 30% of generative AI projects to fail, according to Gartner. To unlock AI’s full potential, banks must align AI initiatives with business goals, embed governance early, and invest in cross-functional talents.
In essence, AI is reshaping the banking sector by both transforming jobs and unlocking substantial investment and growth opportunities. Investors can benefit from this trend by betting on traditional banks with the Xtrackers MSCI World Financials ETF (WKN: A113FE) or even fintech disruptors with the Xtrackers MSCI Fintech Innovation ETF (WKN: DBX0R1).
The financial sector, where personnel costs play a crucial role, could be particularly affected by AI. This development could result in a significantly lower personnel requirement in the financial sector, as seen in the Italian bank group BPER Banca's plan to cut 10% of its workforce by 2027 through technology-driven productivity improvements.
The launch of ChatGPT marked the beginning of AI as a market topic. This article was first published in Euro am Sonntag a few weeks ago, providing weekly analyses of current topics. For the latest issue, visit [insert link here]. The average cost of an employee in a European financial institution is approximately 84,000 euros (2022 data). There is a massively increased demand for experts in the field of artificial intelligence. The financial sector has the highest automation needs among industries, and the sector could undergo a major overhaul due to AI.
- The financial sector, with its high demand for automation, could undergo a significant overhaul, as seen in the Italian bank group BPER Banca's plan to cut 10% of its workforce by 2027 through technology-driven productivity improvements, specifically focusing on AI.
- Banks are investing in AI to enhance competitiveness and improve service delivery, with major institutions like JPMorgan, Goldman Sachs, and Citigroup deploying AI tools to support their employees and clients, boosting efficiency and financial forecasting.
- Investors can capitalize on the AI transformation in the banking sector by investing in traditional banks like those tracked by the Xtrackers MSCI World Financials ETF (WKN: A113FE) or fintech disruptors through the Xtrackers MSCI Fintech Innovation ETF (WKN: DBX0R1).
- AI is poised to restructure the nature of work in the banking sector, as seen in the shift from routine tasks to higher-value client interactions, while also presenting challenges such as data quality, governance, and scaling AI projects beyond pilots, which banks must address to unlock AI's full potential.
