A Real Economy publication

Financial services industry outlook

Feb 27, 2024

Financial services industry outlook key takeaways

AI can provide value in customer service management, pricing and promotion and churn reduction.

PE fund managers are looking beyond traditional financial engineering to keep investors satiated.

The insurance industry has shown improvement in workforce diversity, but gaps remain.

Financial services trend #1: AI in banking

AI’s true value in banking
For banks, artificial intelligence holds significant opportunity in two areas: sales and marketing, and risk management.

ChatGPT's emergence has accelerated the adoption of AI in various industries, particularly banking, which is set to invest over $500 billion in AI tools. The technology's impact is most pronounced in sales, marketing, and risk management.

In risk management, AI is a game-changer, helping detect fraud and improving debt analytics for more accurate default predictions. However, successful AI deployment requires careful consideration of use cases, data availability, technology selection, and talent acquisition.

Financial services trend #2: Talent strategies for asset managers

In the current asset management landscape, several factors have led to a significant slowdown in investment sales, resulting in longer holding periods for existing portfolio companies. This shift has prompted private equity fund managers to seek alternative strategies beyond traditional financial engineering to maximize value and satisfy investors.

As holding periods continue to lengthen, operational excellence has become a key differentiator for private equity firms. The ability to drive long-term growth and manage extended holding periods has become paramount, with operating teams playing a critical role.

People power: How private equity talent strategies drive sustainable value
Private equity talent strategies can drive sustainable value.

Financial services trend #3: Diversity in the insurance industry

The evolving landscape of talent diversity in the insurance industry
Talent diversity in the insurance industry is an evolving landscape.

The insurance industry has made progress in gender diversity, with notable improvements in 2021. However, women still hold only 12% of C-suite positions, highlighting the need for increased efforts to promote gender equity in leadership. To maintain effective diversity, equity, and inclusion initiatives, companies must focus on robust implementation rather than just planning, ensuring these efforts are woven into the fabric of the business.

Subscribe to Financial Services Insights

Sign up now for a monthly update on the marketplace trends important to financial institutions, capital markets, asset management and other financial services.