There’s a lot of AI ‘success theater’ in finance, HSBC exec warns

AI in finance: Hype vs. reality: The financial services industry is witnessing a surge in artificial intelligence adoption, but the true impact of AI implementation varies significantly among companies.

• HSBC’s head of generative AI, Edward J Achtner, warns of “success theater” in the industry, suggesting that many firms are overstating their AI achievements.
• Achtner emphasizes the need for a clinical approach in choosing where and how to implement AI technologies within financial institutions.
• HSBC has identified over 550 AI use cases across its business lines, ranging from fraud detection to supporting knowledge workers with generative AI systems.

Contrasting approaches to AI implementation: Financial institutions are taking diverse routes in their AI adoption strategies, with some being more cautious than others.

• HSBC has partnered with Google to leverage AI for anti-money laundering and fraud mitigation efforts, a collaboration that has been ongoing for several years.
• The bank distinguishes between traditional AI applications and newer generative AI technologies, recognizing the different risk profiles associated with each.
• Lloyds Banking Group is proceeding cautiously with AI implementation, focusing on automating back-office functions, providing prompts for sales staff, and generating responses to client queries.
• Lloyds is particularly careful about exposing customers to generative AI tools, prioritizing the establishment of proper safeguards before scaling up these applications.

AI’s impact on workforce dynamics: The integration of AI technologies is prompting discussions about potential job displacements and the need for workforce adaptation.

• Buy now, pay later firm Klarna has made headlines by attributing significant workforce reductions to AI implementation, aiming to cut its staff from 5,000 to 2,000 employees.
• Klarna’s CEO, Sebastian Siemiatkowski, suggests that AI’s impact on jobs and society could be dramatic, calling for politicians to consider alternative ways to support potentially displaced workers.
• Critics argue that such drastic workforce reductions attributed to AI may be oversimplified and potentially harmful to public perception of AI’s role in the workplace.

Balancing AI potential with practical realities: Industry experts emphasize the importance of a measured approach to AI adoption in financial services.

• Nathalie Oestmann of NV Ltd advocates for continuous learning and curiosity in exploring AI tools, suggesting that proper training and adaptability will help financial firms evolve in the AI era.
• ING’s chief analytics officer, Bahadir Yilmaz, downplays the disruptive potential of AI, focusing instead on its practical applications in global contact centers and software engineering.
• Johan Tjarnberg, CEO of Trustly, sees AI as a significant technology lever in payments but focuses on basic AI applications rather than transformative changes.

Realistic expectations and measured progress: Financial institutions are beginning to report more modest but tangible improvements from AI implementation.

• Trustly reports 5-10% improved efficiency from AI integration within its organization, a more conservative figure compared to some of the bolder claims in the industry.
• The company is developing an “intelligent charging mechanism” for subscriptions, demonstrating practical applications of AI in enhancing customer experience.
• ING emphasizes that AI is not necessarily needed for all processes and should not be portrayed as a universal solution for all banking challenges.

Looking ahead: Balancing innovation and caution: As the financial services sector continues to explore AI’s potential, a nuanced approach is emerging.

• While AI presents significant opportunities for efficiency gains and improved services, industry leaders are advocating for a balanced perspective that acknowledges both the technology’s potential and its limitations.
• The focus is shifting towards practical, measurable improvements rather than sweeping transformations, with an emphasis on responsible implementation and clear communication about AI’s role in financial services.
• As AI technologies continue to evolve, financial institutions will likely refine their strategies, seeking to maximize benefits while carefully managing associated risks and societal impacts.