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Artificial Intelligence in Capital Markets: a tale of opportunities and Fintech collaborations

According to a recently released IDC spending guide, worldwide Cognitive Systems and Artificial Intelligence revenues are forecast to surge past USD 47Billion in 2020. According to another research firm, Opimas Research, in 2017, financial firms alone will spend more than USD 1.5 billion on artificial intelligence (AI) related technologies and by 2021, USD 2.8 billion, representing an increase of a whopping 75%.

Capital Markets, like every other space, is seeing a surge in technological solutions that are coming of age and delivering increased performance- especially in areas of advanced analytics, real time trade-processing platforms and improved regulatory compliance. These technological solutions in a way, have come as a panacea for Capital Market firms, which are grappling with increasing compliance costs and shrinking bottom lines.

Thanks to these macroeconomic factors, Capital Market firms are increasingly looking towards advanced technology solutions like AI to increase employee efficiency and aid faster decision making.

As a technology, AI already has established use cases in areas of client relationship management, trade execution, reconciliations, transaction reporting, tax operations, and several other areas.

We see initial implementations like robotic process automation for reduced manual errors and improving process speeds by automation of repeatable IT tasks. Even as the Capital Market firms explore more advanced use cases for AI, a few areas that we are seeing pilot adoptions include speech recognition, machine learning platforms and virtual agents.

However, the siloed legacy infrastructure that most of the capital market institutions have, coupled with lack of a cohesive, top-driven automation strategy are acting as impediments in the way of effective AI implementation. In such a scenario, many Capital Market firms are taking the route of small, targeted phases of adoption, which can scale in sync with their IT infrastructure.

Another aspect that we find interesting, is the alternate route that these organizations are looking to leverage for bringing in AI and other automation technologies into their ecosystem -- partnerships with Fintech players. Capital Market firms, much like banks, are partnering with Fintech players for things like AI driven post-trade processing platforms and advanced analytics. The most prominent model of these engagements as of now is via accelerators and labs, and the next phase can bring in investments and acquisitions.

As Capital Markets gradually move up the AI value chain, we can expect more Fintech collaborations, advanced use cases for areas like fraud detection and prevention and anti-money laundering activities.

Keep watching this space for the latest in banking technology and trends!

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