What’s next for finance? GenAI, DORA and the future of financial services
1. GenAI: Use cases and Implications
The landscape for GenAI in 2023
Whether you're thinking about digital transformation or sustainability, the topic of Generative AI (GenAI), tends to crop up. A common question posed is: is AI just a passing fad?
In a 2023 cloud trends article on the Nordcloud blog earlier this year, we listed AI as a top trend to watch out for in financial services. Whether at the planning or practical stage, banking professionals are already using GenAI for everyday purposes.
Artificial intelligence (AI) is being used to automate routine tasks, allowing employees to focus on more exceptional activities. This arises out of the crucial need for banks to reduce manual work in order to allocate more time for customer interaction. Let’s consider some real-life examples.
Use cases of GenAI
- Annual reviews: Banks have such large numbers of business accounts and account managers. There’s the current or emerging potential for AI to handle a significant portion of these accounts
- Investments: Some professionals are exploring the use of AI to reduce advisory costs
- Client calls: The use of ChatGPT to summarise client calls has improved client-agent communication
- Product pages: The use of ChatGPT to summarise product pages for call agents
- Automated coding: Banks are actively exploring AI solutions
The bite-sized takeaway
GenAI can automate ordinary, routine tasks, enabling humans to focus on extraordinary activities.
Implications of GenAI in FSI
It’s important that AI usage is aligned with a company’s overall strategy, and that these businesses recognise the risks associated with implementing AI.
They need, for example, to be able to explain AI-driven decisions and answer questions related to accountability, like, how do you hold machines accountable for explainability, compared to humans? Why do we hold machines and humans to different levels of accountability?
The disparity in expectations between machines and humans, particularly when it comes to accountability, is going to be increasingly apparent in the industry’s immediate future.
OpenAI & Cloud: 2 Use Cases We Built & What We Learned
Check out the two use cases we’ve been working on for AI in the cloud and what we’ve learned.
2. DORA
DORA is a milestone regulation applicable to all actors in the financial services value chain, not just banks. The oversight framework encompasses on-site inspections and reporting obligations to authorities and will have large-scale impacts on everyone in the industry.
Many industry experts discuss DORA favourably, regarding it as proportionate and fit for purpose. Still, there are benefits and risks associated with centralisation, particularly considering real-life examples such as the entire tax database in Brazil being hacked in 2021. Let’s consider some of those benefits and challenges now.
Benefits of DORA
- Aims to harmonise regulations and legal bodies and bring various stakeholders together, including ICT providers under its scope
- Lowers concentration risks, builds trust and increases transparency, as it allows for visibility of industry-wide issues and the services banks rely on
How to tackle financial services regulations
Our expert Sander explains how to translate regulatory requirements into cloud compliance frameworks.
Challenges of DORA
- Impacts day-to-day business operations, requiring resources to fulfill reporting requirements, especially for global organisations
- The possibility of fines and personal criminal fines, with second-line functions already focusing on DORA due to the limited time available (18 months) for compliance
- Potential impact of an outage in a region of a cloud service provider due to the digital concentration of financial systems
Insights: How to plan for DORA
- Start evaluating your readiness for DORA and understanding the necessary actions
- Conduct self-assessments against regulations, review frameworks and processes, and perform testing.
- Compile a list of all ICT providers with specific contract clauses, considering contract renewals
- Set up a team to translate legal requirements into technical requirements, as on-site inspections may be conducted
Final thoughts on DORA
Ultimately, most financial services businesses know that they need to be working towards Level 2 compliance and security. There is an urgent need to accelerate cloud adoption, take action and prepare for DORA's impact on business operations.
Are you set up for digital resilience in the cloud?
For financial services, basic continuity planning has always been part of keeping up with regulations.
But two factors are driving business continuity up the agenda for FSI right now:
- The current geopolitical instability in Europe
- New regulations like DORA and NIS that require businesses to leverage digital technologies like the cloud to keep running in the event of a disruption or emergency
We have a cloud-based strategy to achieve business continuity - helping you use cloud to safeguard critical data and keep essential services running during disturbances.
It's called the Digital Vault. And our handy guide explains things a little more, and breaks down whether or not you're really resilient to potential risks. Read it here.
A guide to digital resilience in financial services
See our best practice guide to leveraging the cloud to achieve business continuity.
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