Financial firms struggle to onboard AI; here’s how to get it right
August 19, 2022
Now that financial services firms have made it through the early phases of digital transformation – moving services online, modernizing front-office applications, and embracing mobile finance – the next wave of modernization is already picking up a head of steam.
According to a study by research firm IDC, global spending on AI systems will jump from $85.3 billion in 2021 to more than $204 billion in 2025. Financial services (along with retail) leads the way in aggressive AI adoption. In fact, a study by the Economist found that 86% of financial services executives intend to increase their AI-related investments through 2025.
However, while AI creates efficiencies and opens up new revenue opportunities, AI also challenges organizations in ways that previous technologies did not.
A recent survey by Accenture of 500 licensed financial advisors in the U.S. and Canada found that 50% are struggling to execute their AI vision, and 55% find AI technologies too complicated to be practical. However, the same survey found that even with speed bumps, 92% of financial advisors say their firms have already started to adopt AI.
With AI coming whether your organization is ready or not, here are four ways financial services firms can smooth the transition:
1. Develop a big-picture strategy for AI adoption throughout your organization
One AI adoption trap that many organizations fall into is piecemeal AI adoption, with each department doing its own thing without coordinating with the rest of the organization. Deloitte recently studied what separates AI frontrunners in financial services from the rest of the pack and found that the number-one trait frontrunners shared was embedding AI into enterprise-wide strategic planning.
2. Involve customers early in the process
As you pilot AI-powered applications, be sure to involve customers early. Deloitte found that using AI to enhance customer experiences is the second-most common trait shared by AI frontrunners, and according to the Economist’s research, customer satisfaction is the number-one way to measure the success of AI initiatives.
It’s important to involve customers and all stakeholders in the adoption process, so that their feedback, rather than best guesses, guides the process.
3. Center experts
When unsupervised, AI algorithms are not terribly accurate. The typical failure rate for unsupervised AI is around twenty percent. Supervised AI, in which humans help algorithms learn, is better, but to get the most out of their AI investments, organizations should find ways to layer AI around experts.
Rather than attempting to replicate experts on the cheap, AI that centers experts, or Expert-in-the-Loop (EITL) AI not only has the advantage of greater accuracy, but EITL AI is able to work with experts to tackle much bigger problems, such as discovering new polymers or improving aircraft safety.
4. Mitigate risks
An overlooked way AI can deliver high ROI is through risk mitigation. Cybersecurity and fraud detection are two obvious ways AI can reduce risks, but there’s another area that can deliver outsized ROI through risk mitigation: regulatory compliance.
AI-powered regulatory tools, or RegTech, rely on the same core technologies as modern FinTech tools (AI, Machine Learning, Big Data analytics) to deliver quick insights to experts who can now focus on higher-value strategic activities that benefit the bottom line.
Asif Alam is the Chief Executive Officer at Compliance.ai. A leader in shaping disruptive technology, his experience includes building products using AI and natural language processing for GRC, payments, lending, risk, trading, and new solutions, from Fortune 500 companies to startups.
In his most recent role, he served as the Chief Strategy Officer of ThoughtTrace, unlocking new revenue streams and markets, and reignite portfolio growth. ThoughTrace was then acquired by Thomson Reuters earlier this year. There, Alam designed and launched a new Technology Practice for Thomson Reuters that generated over 150% in Y2 and 180% in Y3 and secured partnerships with enterprises like Amazon, Google, Salesforce, Adobe, and Samsung.
He brings more than 20 years of management and business experience; increasing profitability, unlocking new revenue streams and markets, and reignite portfolio growth for companies like Thomson Reuters, Crux Informatics, and Finastra. Asif is a forward-thinking expert driving engagement via client forums, public presentations, and white papers.
Co-founder, Chief Product/Strategy Officer & Board Member
With more than 25 years of experience in hi-tech, Kayvan leads operations, strategy, sales, and marketing for Compliance.ai. Most recently, Kayvan led the identity strategy at RSA, and represented EMC on various industry alliances such as the FIDO board. He is Co-Founder and CEO of PassBan (acquired by RSA), a company focused on mobile identity assurance. Kayvan also led strategy at LiteScape (as CTO and later as CEO), creating security and mobile identity solutions for VOIP based networks. He was Co-Founder and CTO at BeNotified, a cloud mobile communication service provider. Prior to that, Kayvan co-founded AVIRNEX, a cloud-based enhanced fixed and mobile communication service provider.
Kevin Jacques
Board Member
Kevin Jacques joined Cota in 2021 as a Partner. Prior to Cota, Kevin was Vice President and Head of Corporate Ventures at Visa. During his tenure at Visa, Kevin led the company’s venture investment efforts serving as lead partner on over 25 FinTech transactions. Prior to Visa, Kevin spent seven years at Intuit directing Corporate Development and Investments. At Intuit, Kevin and his team completed over 30 acquisitions, seven divestitures, four direct corporate venture investments, as well as 11 FinTech venture fund investments with total deal value approaching $2B. Prior to Intuit, Kevin spent nearly 12 years as a venture capital partner with Sevin Rosen Funds and Palomar Ventures. Kevin was also the CEO of Globeranger, an RFID middleware provider, and a consultant at The Boston Consulting Group. Kevin received a B.S. in Industrial Engineering from Stanford University and an M.B.A. from the Wharton School at the University of Pennsylvania.
Ben Malka
Board Member
Ben Malka joined Cota in 2019 as a Partner on the investment team, where he is focused on sourcing, evaluating, executing and governance of venture investments. Prior to Cota, Ben was a General Partner at F-Prime Capital, a San Francisco-based financial technology and enterprise IT-focused venture capital fund. At F-Prime, he served as lead partner for a number of investments, including Snapsheet, Vestwell, Toast Inc, and Blispay. Since 1999, Ben has also served as a General Partner at North Hill Ventures, a financial technology focused venture capital fund. At North Hill, he was the lead partner for investments in Compete Inc, Placemark Investments, Paychoice, Simple Tuition/Valore Books, CashStar, and FSV Payment Systems. Previously, Ben was with The Boston Consulting Group, where he was the Project Lead for a number of clients across strategy development, acquisition strategy, new product evaluation and operations improvement. He began his career at Bank of America as a Statistical Analyst. Ben graduated with a Bachelor of Arts in Economics and Political Science from Stanford University and a MBA from the University of Chicago.
Bobby Yazdani
Co-Founder & Board Member
Bobby Yazdani is Founder and Managing Partner of Cota Capital, a firm investing in private and public technology companies. Bobby has successfully mentored entrepreneurs and invested in over 100 early-stage startups. In 2014, Bobby was ranked #1 out of 2000 angel investors for successful follow-on funding by CB Insights. In 2015, Bobby endowed the Signatures Innovation Fellowship at University of California, Berkeley to support data science projects with commercial promise.
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Richard Dupree has held multiple Risk, Compliance and Operations positions at regional, national, and global financial services firms including Wells Fargo, Silicon Valley Bank, Bank of the West and BNP Paribas. Rick currently advises FinTechs and RegTechs and sits on industry panels, contributes to industry whitepapers, thought leadership efforts, and speaks at industry seminars on Risk and Compliance challenges faced by banks and FinTechs.
Mariam is an Operating Principal at Cota Capital. Mariam has experience providing guidance on strategic and operational planning to Venture and Growth stage companies. Prior to Cota Capital, Mariam spent her career in management consulting as a Director at KPMG. She has experience leading global transformation programs and developing innovative service offerings for Fortune 500 companies in the Technology sector. Mariam has an MBA from UCLA’s Anderson school of management with an emphasis in Finance and Entrepreneurship. She has a Bachelors in Science in Finance and a Bachelors in Science in Economics from Santa Clara University.
Drake Ross is a former bank regulator who specialized in compliance with consumer protection regulations while at the OCC, FDIC, and OTS. While at these agencies, he provided extensive training and guidance and developed materials to ensure full comprehension and proper application of rules, laws, policies, and guidance, and served as a Subject Matter Expert in numerous areas. Because of his expertise, he often presented at agency and industry events. He also played a significant role in successful windup of the 2008 IndyMac Bank failure, where because of his extensive knowledge of the FDIC deposit insurance regulations, he was called upon to administer highly-complex insurance determinations.
Chris Callison-Burch is an Associate Professor in Computer and Information Science Department at the University of Pennsylvania. His research interests include natural language understanding and crowdsourcing. He has served the Association for Computational Linguistics as the General Chair for the ACL 2017 conference, as an action editor for the Transactions of the ACL, as an editorial board member for the Computational Linguistics journal, and an officer for NAACL (the North American chapter of the ACL) and for SIGDAT (the special interest group for linguistic data and corpus-based approaches to natural language processing)
Tom Ladt is an experienced executive and investor. Tom has lead and served on the boards of several public and private companies serving highly regulated industries such as technology, healthcare, real estate, and food processing. Tom has also served in key governmental roles and on numerous community boards.
Jeroen Plink is a global executive with a proven track record of developing and growing businesses, teams, and technologies with innovation and passion. Jeroen was CEO of Practical Law US during its acquisition by Thomson Reuters. He now serves on numerous boards and acts as a strategic consultants for start-ups.
Global Legal and Compliance executive with 15+ years of success in the SaaS technology and financial services industries. Partner to the CEO and executive team in corporate transactions, business development, product expansion, and regulatory navigation during periods of intense growth and organizational change. An advocate of effective risk management that starts with sound business practices and putting the customer first.
Brian advises clients on legal and regulatory compliance in the financial, tech, and procurement sectors. His passion is helping businesses succeed in heavily regulated environments. As counsel and trusted advisor to businesses of all sizes, and as a former regulator, policymaker, and federal official, Brian acutely understands the unintended burdens that even well-intentioned government requirements can put on innovation and business growth, as well as how to create policies that strike the right balance.
Brian served as National Ombudsman in the Obama Administration, leading the federal Office of Regulatory Enforcement Fairness in assisting hundreds of startups, entrepreneurs, and small business owners in every industry and every state.
Dr. Marsha Ershaghi Hames is Managing Director of Strategy & Development at LRN, a leader in advising and educating organizations about ethics and regulatory compliance, as well as corporate culture, governance and leadership. With the focus of inspired behavior versus required behavior, LRN is a leading voice in the industry for companies to build ethical cultures instead of “check-the-box” compliance approaches. She’s advised Department of Justice corporate monitors on successful program transformation under CIAs (Corporate Integrity Agreements. With over 20 years of experience in leading multinational ethics and compliance strategies, Marsha has become a highly sought-after thought leader on leading Corporate Compliance and Ethics practices.
Carla Carriveau is currently the Senior Managing Counsel at Wealthfront, an automatic investment service firm in Redwood City, California. Carla was previously Senior Counsel, Division of Trading and Markets, at the United States Securities and Exchange Commission. As a former regulator with over 15 years of experience in helping small businesses navigate legal and regulatory needs in the financial services sector, Carla advises Compliance.ai on financial services regulation, the regulatory landscape and industry practices.
Carliss Chatman is an Assistant Professor of Law teaching Contracts, Agency and Unincorporated Entities, Corporations, and Transactional Skills. Her work is influenced by over two decades of service on non-profit boards and involvement with community organizations. Through leadership positions, she has developed expertise in corporate governance and non-profit regulation. She has also been instrumental in strategic planning and fundraising efforts. Prior to law teaching, Professor Chatman was a commercial litigation attorney in Houston, Texas. In practice, she focused on trial law, appeals and arbitration in pharmaceutical, health care, mass torts, product liability, as well as oil, gas, and mineral law. In addition to negotiating settlements and obtaining successful verdicts, Professor Chatman has also analyzed and drafted position statements regarding the constitutionality of statutes and the impact of statutory revisions for presentation to the Texas Legislature.
Hugh Cadden is a recognized expert in derivative financial and trading markets including futures, options, and swaps. Hugh is currently a senior consultant and expert with OnPoint Analytics, Inc. an economic, finance and statistical consultancy specializing in expert testimony for complex litigation. He has been specializing in the organization, operation, and regulation of financial and trading markets for over 40 years. Hugh’s experience includes both the public and private sectors and he has held senior level positions with the U.S. Commodity Futures Trading Commission including serving as Director of the Division of Trading and Markets and Deputy Director of Enforcement. He has been qualified as an expert on financial and trading market matters before the Commodity Futures Trading Commission, the Securities and Exchange Commission, the U.S. Tax Court, Financial Industry Regulatory Authority, National Futures Association, American Arbitration Association and federal courts.
Maria Devassy is a RegTech, Content, and Technology leader with over 20 years of experience helping companies bridge the gap between technology, product, and business. Maria has held leadership positions with MetricStream, KPMG, Oracle Corporation, and other technology companies. She has launched several successful RegTech products, business partnerships, and advised Fortune 100 clients on risk management, audit, advisory, and compliance business across Industries.
Cesar Lee is a Principal at WRV, a venture capital fund focused on early-stage investments in hardware, semiconductor, and other technology-related companies. Previously, he was an investment professional at Riverwood Capital, a technology-focused, late-stage venture capital, and private equity fund. He began his career at RBC Capital Markets, where he was part of the Mergers & Acquisitions group for two years and the Equity-linked & Derivatives group for one year. While at RBC, Cesar spent a majority of his time working on M&A advisory transactions for technology companies.
Cesar’s investment experience includes buyouts, later stage, early stage and seed rounds. Cesar has completed transaction in the U.S., Latin America, and Asia, and in technology sectors including data centers, software, semiconductors, consumer electronics, robotics, big data, and internet.
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