AI Empowering Finance: Opportunities and Challenges Coexist, Building a New Digital Financial Ecosystem

AI Empowering Finance: Opportunities and Challenges Coexist, Building a New Digital Financial EcosystemOn October 19, 2024, at the "AI+Finance Enabling a New Chapter in Digital Finance" parallel forum of the 2024 Financial Street Forum Annual Meeting, several experts and scholars from the financial industry engaged in an in-depth discussion on the development of artificial intelligence empowering the financial industry. They analyzed the opportunities and challenges of AI applications and offered valuable insights on how the financial industry can leverage its strengths and mitigate weaknesses during its integration with AI

AI Empowering Finance: Opportunities and Challenges Coexist, Building a New Digital Financial Ecosystem

On October 19, 2024, at the "AI+Finance Enabling a New Chapter in Digital Finance" parallel forum of the 2024 Financial Street Forum Annual Meeting, several experts and scholars from the financial industry engaged in an in-depth discussion on the development of artificial intelligence empowering the financial industry. They analyzed the opportunities and challenges of AI applications and offered valuable insights on how the financial industry can leverage its strengths and mitigate weaknesses during its integration with AI.

AI Empowers Finance, Ushering in a New Chapter of Digital Finance

With the rapid development of generative AI (AIGC) technology, the processing and analysis capabilities of large models for complex text and images have continuously improved. AI applications have penetrated various fields, including the internet, financial services, manufacturing, transportation, education, and healthcare, profoundly changing all aspects of economic and social life. According to IDC, global sales of AI system software, hardware, and services will reach $400 billion by 2027, with spending in the financial industry reaching $97 billion, representing a compound annual growth rate of 29%.

The introduction of AI technology will propel the digital transformation of finance towards a new stage of intelligence. Shang Fulin, Director of the Economic Committee of the 13th National Committee of the Chinese People's Political Consultative Conference and former Chairman of the China Banking Regulatory Commission, pointed out: "The field of fintech is bound to witness a new wave of technological revolution." AI possesses significant advantages in content comprehension, semantic analysis, and prediction, offering vast application scenarios in financial consulting, financial analysis, and other sub-sectors.

In risk management, credit approval, and anti-fraud, AI technology can analyze massive transaction data in real-time, utilize big data and machine learning algorithms to identify and predict risks, and enhance the accuracy and efficiency of risk control. Zhang Dong, Deputy General Manager of China Mobile, introduced that China Mobile has developed financial customer service large models, financial investment and financing large models, and financial security large models for the financial industry, contributing digital intelligence to improve the quality and efficiency of financial services and fortify financial security. Furthermore, China Mobile has implemented over 100 AI+finance demonstration cases covering intelligent investment research, asset supervision, risk assessment, financial anti-fraud, and other areas, providing intelligent empowerment for the high-quality development of digital finance. It is understood that China Mobile plans to launch over 60 AI product applications across multiple industries by the end of 2024.

Challenges and Risks Coexist, Building a Secure and Controllable AI Financial Ecosystem

While AI empowers financial development, it also brings new challenges and risks. Shang Fulin pointed out that the complex algorithms and output results of AI models are difficult to interpret and trace, increasing regulatory difficulty and potentially posing a threat to financial stability. Additionally, biased AI-powered credit approval assistants may lead to homogenization in risk assessment and credit decision-making in the financial sector, intensifying financial vulnerability. Regarding unpredictable risks, AI tools are trained based on past data, which may not accurately reflect reality or predict the future. In the event of market abnormalities, models may not issue timely warning signals.

Gao Feng, Chief Information Officer of the China Banking Association, also expressed that the most significant issue with large models is cognitive bias, which presents potential risks. Currently, humans have yet to explore the theoretical foundation and accurate laws governing the transition from judgmental to generative AI.

Leveraging Strengths and Mitigating Weaknesses, Building a Sustainable AI Financial Ecosystem

Faced with the opportunities and challenges presented by AI empowering finance, building a secure and controllable AI financial ecosystem has become a focal point of industry attention. Shang Fulin suggested that financial institutions actively explore AI application scenarios, including key areas like risk management, credit approval, and anti-fraud. Through practice, they can continuously enhance the capabilities of large models, construct a digital and intelligent financial ecosystem, and provide customers with a more convenient and intelligent financial service experience.

Moreover, Shang Fulin emphasized the importance of strengthening cooperation and building an ecosystem. Financial institutions and technology vendors should collaborate closely, share resources, complement each other's strengths, develop targeted financial industry large models, and drive technological innovation and industry upgrading in the financial sector. By lowering application thresholds and costs, they can leverage the strong to support the weak, constantly reducing the cost of software and hardware use, allowing small and medium-sized financial institutions to benefit from advanced technology, enhancing their market competitiveness, and promoting balanced development of the entire financial industry.

Simultaneously, Shang Fulin stressed the need to uphold bottom lines and ensure security. It is necessary to continuously improve the safety standard system for financial data and strengthen the construction of legal and regulatory frameworks to provide legal protection for financial data security and privacy protection. Through AI technology, it is crucial to enhance the identification and early warning of financial risks, establish risk monitoring and early warning mechanisms, and promptly detect and manage potential risks.

He Zhujun, Member of the Party Committee and Vice President of the China Insurance Asset Management Association, also proposed that to address the issue of decision transparency caused by the black box nature of AI, it is advisable to build white box models and establish AI information disclosure standards to enhance decision transparency and traceability. Looking ahead, He Zhujun believes that "AI+Finance" will deeply integrate with cutting-edge technologies like blockchain and cloud computing, forming a new financial infrastructure and reshaping the financial ecosystem. AI-driven personalized financial services will become more prevalent, meeting the diverse and customized needs of consumers. AI-powered inclusive finance will break down barriers related to geography and credit, enabling more people to access convenient and low-cost financial services, a crucial step towards inclusive development in the financial industry.

Gao Feng indicated that attention should be focused on directions such as intelligent benevolence, concentrated computing power, and the use of synthetic data.

In Summary:

AI empowering finance presents unprecedented development opportunities for the financial industry, but also brings new challenges and risks. In the future, financial institutions should actively explore AI application scenarios, strengthen cooperation and build ecosystems, uphold bottom lines and ensure security, construct a secure, controllable, and sustainable AI financial ecosystem, drive the digital transformation of the financial industry towards a new stage of intelligence, and contribute to building a new digital financial ecosystem.