If your house is anything like mine, there has been no escape from the soundtrack from “Wicked” this year. It seems like the voices of Ariana Grande and Cynthia Erivo haven’t stopped playing in the background for months. It occurred to me that those songs from Oz were especially appropriate for the current moment in business.
Companies around the world are putting their trust in artificial intelligence in much the same way that Dorothy looked to the Wizard. Over the past two years, predictions about the transformational impact of AI on business models and corporate earnings have helped stock prices defy gravity. But investors who have helped fund AI development to the tune of hundreds of billions of dollars are starting to wonder what they will find when they pull back the curtain. Will they encounter a force capable of accomplishing great feats through abilities that seem almost magical, or will they find a pretender, a charlatan who has duped us all into thinking he is great and powerful?
That unveiling will happen soon. Companies like Meta, Apple and Google can probably continue to pump billions of dollars into AI research almost indefinitely. However, for the rest of the business world, shareholders are already becoming impatient. Even before the dramatic arrival of DeepSeek upended expectations across the industry, investors were starting to demand a return on their hefty investments. Pressure is becoming especially intense in the fintech sector where, perhaps even more than in other industries, companies have been touting the benefits of AI for their clients and their bottom lines. Projections about AI have helped attract billions of dollars in startup funding and push up the valuations of publicly traded fintechs. If the promised AI performance boost doesn’t materialize quickly, these companies won’t be telling investors to “pay no attention to the man behind the curtain.”
We’re Not In Kansas Anymore, Shareholders
At the same time, I am optimistic about what we’ll find at the end of the yellow brick road. AI really does have the potential to transform business. Every day in my work with some of the world’s largest financial service firms I see companies employing fintech AI solutions to solve real problems facing their businesses. These effects might not be visible to customers or even shareholders, and they might not have had a material impact on performance—yet. But beneath the surface, fintech AI products are transforming business functions, decision-making and workflows in ways that I believe will start enhancing revenue growth and profitability to a noticeable degree in very short order.
Follow The AI Brick Road
There is no shortage of examples of these applications—many developed by fintech providers—that are already in wide use by companies around the world. Fintech AI products are helping companies assess and manage risk, extract insights from consumer behaviors, detect and prevent fraud, evaluate creditworthiness and enhance a slew of other tasks.
In financial services, firms today have access to fintech products powered by AI that dramatically reduce operational costs in post-trade processing. Costs associated with failed trades, inefficient settlement systems, ineffective risk-management procedures and the need to comply with constantly shifting regulations erode profit margins for companies involved in trading. The integration of generative AI and large language models into financial operations through platforms like Broadridge’s OpsGPT is minimizing or even eliminating these pain points, pushing down costs, improving margins and reducing risks.
On the investment side, analysts, portfolio managers and investors have access to a new generation of production-ready, large language models-based applications powered by OpenAI GPT-4 and other AI models. Using these applications, research that once took hours or many minutes can now be completed in seconds. These capabilities are helping to slash research costs, improve investment decision-making and uncover trading and investing opportunities that would have been impossible only a few years ago. Real-time insights from platforms are helping improve trade outcomes in fixed-income, algorithmic equity trading and a host of other products and markets.
AI applications are accelerating and improving product development and distribution/sales in asset management and other financial service businesses, speeding time to market and increasing the odds that new products succeed in hitting projected targets.
More generally, financial service firms are using AI-powered analytics to accurately predict the needs of their clients. These products allow firms to personalize product recommendations and services in businesses like wealth management. They also enable firms to target customers and prospects most likely to purchase their products, and to identify existing clients that might at risk of leaving.
Revenue, Profits And Earnings, Oh My!
All these capabilities will help drive revenue growth, lower costs and increase earnings for financial service firms. Those tangible results, which I believe will begin to materialize in the next 12 months, will increase demand for AI products from fintechs and other companies, alleviating pressure from impatient shareholders, attracting more investment and driving the continued growth of AI into innovative areas like new “reasoning models” that have the potential to vastly increase AI capabilities.
That’s why I believe the current crisis in confidence about artificial intelligence will be short-lived. But to see how all this turnout exactly, I guess we’ll have to wait for Part II.
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