Financial services organizations are constantly looking for solutions that automate transaction processing and eliminate the need for manual intervention. Banks run large teams to manage bespoke products, investigate unresolved breaks in transactions, review data inconsistencies and communicate with counterparties. There are industry utilities that drive efficiency across participants but large segments of operations remain manual and require human input for execution. Banks have been using a wide range of enterprise systems and technologies like RPA over time and are now increasingly looking at AI to accelerate their change programs. AI shows potential with a wide range of use cases across market operations, client services and compliance.

There are three distinct areas where AI has immense potential to make a positive difference for organizations operating in Capital Markets and several early adopted organizations have already made tangible strides in developing and deploying AI driven solutions:

Trade opportunities and Decision Making: 

 Capital markets involve large amount of real-time data processing and decision making. This drives the need for evaluating hundreds of data points spanning both the macroeconomic environment and a micro level analysis of the economic parameters for specific securities. With increasing volatility in the markets, AI powered tools can provide a decisive edge to firms engaged in trading. These technologies are capable of analyzing buy and sell opportunities, perform risk analysis by generating predictive models for price forecasting and recommend the best course of action. Many financial institutions use AI-generated market analysis to power algorithmic trades, offering them the much-needed agility to succeed in every market cycle.

Optimizing Operations and reducing risk of processing errors: 

A tighter regulatory framework coupled with the ever increasing financial and reputuaional risk associated with transactional errors, Reducing operational risk has become a key priority for Capital Market organizations. Firms are looking to leverage AI to improve match rates, flag failed transactions and recommend a course of action for support teams. Better matching improves STP rates while solutions like “next best action” enable faster resolution of breaks. AI tools can be employed to identify high risk transactions and prioritize the actions for those transactions with appropriate levels of supervision. This ensures negligible failure rates among sensitive transactions. AI-based solutions are proving to be indispensable in streamlining trading related activities while also minimizing the overall costs of operation.

AI driven Data Analytics: 

The vast majority of firms in the capital markets generate and handle extensive amount of data on a live basis coupled with a correlated historical data going back several years or decades. Recognizing the importance of data, entities involved in the capital markets are focusing on implementing organization-wide data management solutions that can cover client, product, market and risk-related information. However, this task of gathering, validating, digitizing and distributing client related information can get increasingly complex, often resulting in costly human or computation errors that can jeopardize operations. Implementing AI & ML-powered compliance solutions can help financial firms to process voluminous historical and current data, identify suspicious or fraudulent transactions and even automate regulatory compliance checks, without the need for human intervention. Functions like KYC and customer screening are seeing greater efficiency through AI solutions.

In addition to the bespoke areas above, the customer facing divisions for Capital Market firms are also leveraging AI for traditional applications such as sentiment analysis on Social media. Customer service departments are also increasingly leveraging NLP (Natural Language Processing) to analyse emails and chats and provide a pre-drafted response for users to review and dispatch. This is helping firms deliver better customer service.

LeackStat 2023