In the past two and a half years since the launch of ChatGPT – and the likes of Copilot – the world has been gripped with generative AI fever. However, after the initial rush of enthusiasm, many businesses today are taking a more cautious approach. Trying to identify tangible benefits and use cases that can prove its worth before making costly investments.
One industry where the use cases are becoming more evident day by day is Financial Services. Repetitive and time-consuming tasks, traditionally completed manually with all the risk of human error that entails, can now be automated. Capabilities such as machine learning, generative AI, and advanced data analytics algorithms are being used to help ensure organisations remain compliant through delivering accurate, timely calculations, tax filings and reports. And creating clearer visibility.
AI Revolution
By automating routine processes, such as data analysis and reconciliation, finance executives can spend more time on higher level strategic tasks. AI can also provide insights beyond the capacity of humans thanks to its ability to crunch vast volumes of data, It can uncover trends that might otherwise go unnoticed. This enables real-time reporting and analysis with AI insight forming the basis of smarter decision-making.
For finance, this is just the beginning of the AI revolution. Look deeper into any finance sector and a huge variety of more specialised applications are revealed. Take the tax industry, for example, where a sizeable cohort of professionals still spend a considerable amount of time checking long lists of numbers on invoices or using spreadsheets to track spending. Not only is this work frustratingly boring, it is also prone to human error. AI has the potential, at a single stroke, to handle such tasks.
Navigating Choppy Regulatory Waters
Staying in the tax-related field, AI can also play a pivotal role in handling incoming regulations, such as Pillar Two. Multinational corporations are grappling with the complexities of this legislation. AI is emerging as a game changing tool in compliance management, transforming tax reporting, risk mitigation, and regulatory adaptation.
AI is being used to automate compliance and reporting processes. It can streamline data aggregation, ensure accurate reporting, and adapt to evolving regulations. AI-powered compliance tools optimise the evaluation, monitoring, and reporting of Pillar Two obligations. This can reduce complexity and improve precision. They can also integrate and standardise financial data across jurisdictions, improving consistency in tax computations.
These solutions seamlessly connect disparate systems, extracting and harmonising data from multiple sources regardless of format. By normalising and processing this information in line with BEPS regulations, AI can swiftly identify potential compliance risks. Advanced algorithms can flag irregular transactions between related entities and pinpoint inconsistencies in transfer pricing. This helps to detect possible profit-shifting activities before they become regulatory concerns. AI thus has the potential to change compliance management from a costly obligation to a strategic advantage.
Be Wary of AI’s Limitations
So, there is clearly a lot of potential for AI to transform financial services in terms of daily operations and compliance. However, it is important to remain wary of its limitations. Chief amongst them, is AI’s propensity to ‘hallucinate’ or make information up if it can’t find the right answer. That casts a shadow over the accuracy of all of its output. And underlines the importance of professional gatekeepers who can verify AI content and ensure it is correct.
AI also currently lacks the ability to interpret subtle context, which humans can more easily respond to. This can feed into spurious responses and misinterpreted data. However, with the right training, monitoring and oversight, AI tools can overcome such weaknesses.
Supporting, Not Replacing, the Human Touch
Understandably, given AI’s potential, many are concerned about the impact on jobs. If AI can digest thousands of lines of data and spit out a report in seconds, what do we need interns for? But it’s important to see AI as an augmentation of existing human talent, not a replacement for it.
As noted above, the possibility of hallucination means that qualified professionals will always have a role to play in quality checking output. So, what we are seeing is the development of a symbiotic relationship wherein professionals are freed from the drudgery of repetitive grunt work. They can focus on more strategic objectives, while AI handles it under their careful eye.
For the tech-savvy Gen-Z entering the workplace today, this is a hugely positive change. The finance and tax industries have become a less attractive career option for this generation, due to the traditional processes and lack of technological innovation. What graduate wants to spend their days entering data after years of studying their chosen subject? With AI ready as a helping hand, they can enter the workplace and use their skills and knowledge to assess the technology’s output, rather than spending hours manually doing it themselves. The finance industry is now in a position to embrace this opportunity that AI has presented. And encourage new talent into the industry.
Given the financial services sector is plagued with skills shortages, and ever-growing workloads, employers can now offer more attractive career opportunities. Furthermore, striking the right balance to drive improved efficiency, productivity and performance and reap the rewards of an AI-enabled future.
- Artificial Intelligence in FinTech