FinTech Pulse #4

Nota Bene: Over the past months, we've covered a lot of topics in both the manufacturing and financial services sectors. For your convenience, I've decided to divide the Profitable Production newsletter into two separate editions: one focusing exclusively on manufacturing and the other dedicated to financial services.

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Welcome to my monthly newsletter covering the latest tech news in Financial Services. This edition covers the EU's AI Act and its implications for the financial sector. We also explore why European banks are trailing in AI adoption compared to North American peers and highlight the transformative potential of AI-driven technologies like chatbots.

Subscribe and stay informed about the evolving regulatory landscape and opportunities for strategic AI adoption in finance.

The impact of AI on financial services is also intertwined with regulatory changes. The EU reached a landmark agreement on December 8, 2023, introducing the world's first comprehensive AI regulation, the new AI Act. After intense negotiations, the EU Commission, Council, and Parliament resolved key issues, including regulation of foundational models and innovation concerns. The law is expected to be formally adopted in 2024.

Here are the key points:?

1. Definition of AI systems: Adopted OECD's standard for classification.
2. Risk-based approach: Stricter rules for higher-risk AI systems.
3. Governance of high-risk AI: Includes Fundamental Rights Impact Assessments and registration.
4. GPAI and foundation models: Special provisions ensure transparency and mitigate risks.
5. Prohibited AI systems: Certain high-risk AI applications are banned.
6. Innovation promotion: Encouragement for regulatory sandboxes.
7. Establishment of administrative bodies: AI Office and scientific panel to oversee implementation.
8. Penalties for non-compliance: Fines range from €7.5 million to €35 million.
9. Implementation timeline: Expected to become law in early 2024, with a two-year implementation period.
10. Business preparation: Companies should assess compliance, implement governance strategies, and monitor global regulatory trends.

The agreed text will now have to be formally adopted by both Parliament and Council to become EU law. Parliament’s Internal Market and Civil Liberties committees will vote on the agreement in a forthcoming meeting.

In a financial field where profitability should inspire confidence, European banks are in a strange situation. Even though they're making money again, investors are still staying away. Meanwhile, American banks are doing great, with their stock prices going up a lot because they're making big profits.

What sets these regions apart? ?Well, European banks have a lot of rules and limits from the government and politics that hold them back. But American banks are pushing forward because they're really into using the newest tech, especially AI.

AI isn't just a fancy word; it's a big deal. It can make things work better, cost less, and make customers happier. While American banks are really getting into AI, European ones are struggling to keep up.

But all is not lost. European banks can still reclaim their competitive edge with a strategic embrace of AI, robust leadership, and a clear vision for the future. Collaboration with tech partners like SoftServe presents a pathway to expedited AI adoption and renewed growth. In a world that's changing fast, European banks have to decide: adapt or risk irrelevance. They need to listen up and use the chance to do well in a future where AI is a big deal, or they'll fade away in the money world.

A recent study by The Economist Impact, involving 300 banking executives across five continents, reveals that 75% of banking leaders foresee substantial changes in their industry due to Generative AI. The report also notes a notable surge in AI-related job listings in the European banking sector, with 30% of positions now mentioning AI. Banks are increasingly leveraging AI and machine learning to enhance consumer understanding and streamline banking services, with chatbots emerging as the predominant customer-facing AI tool. Notably, Bank of America's virtual financial assistant, Erica, has engaged over 37 million customers in more than 1.5 billion interactions from 2018 to 2023. Additionally, research suggests that banking chatbots, offering personalized experiences, could save banks $7.3 billion in operational costs by 2023.

Check out the content, to learn more about SoftServe's recent studies and offerings:

• 45% INCREASE IN SOFTWARE DEVELOPMENT OUTPUT WITH GEN AI
• BANKS SET TO TAKE GEN AI PLUNGE
• WILL EUROPEAN BANKS EMBRACE AI TO REVIVE FORTUNES?

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Thank you for reading and subscribing. I hope you found the content valuable and interesting. If you have any questions, comments, or feedback, please feel free to share below.

Until next time!

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