Ankush Srivastava
Generative AI is gaining traction in disrupting every industry, and Capital Markets are no exception. In a sector burdened with1 regulatory norms, arduous compliance mandates, market manipulation, and insider trading, GenAI has a wide array of solutions that promise to revitalize industry dynamics.
While most of the implementations are nascent, millions of dollars are being invested to explore Generative AI’s capabilities to streamline processes, enhance consumer service, automate financial advice, and facilitate compliance management. There is a special interest and belief in the CXO level with regards to the power and impact of GenAI, which further solidified its positioning as technology of choice in coming times.
Market predictions suggest an incremental value of $200 billion to $340 billion2 for the entire retail and wholesale banking gamut through enhanced productivity after leveraging the potential of GenAI.
How Are Capital Markets Riding the Generative AI Wave?
In Capital Markets, GenAI is bringing about a paradigm shift in the way these financial institutions are categorizing regulators’ reports, addressing investment related queries, giving in-depth insights on real-time decisions, and augmenting the overall customer experience through targeted offerings.
AI’s impact across the Capital Markets value chain
GenAI can not only assist but radically transform businesses by improving three main capabilities:
Customer-focused growth strategies
through data-driven insights
Most capital market organizations have a vast repository of data that needs to be decoded into machine-interpretable datasets that can produce conversation touchpoints. Markets are continuing to evolve to offer a more comprehensive, albeit complex choices to the investors. Further, investors are becoming multi-dimensional with a global understanding of risk and supply chains. This means the advisory must have a ready reference of transcripts, company filings, market sentiments, competition analysis and reports.
Natural language research assistants with the power of Generative AI can search and synergize millions of transcripts, consensus estimates, macroeconomic reports, regulatory filings, 10Ks, 10Qs, social media chatter and industry trends to churn out real-time responses and tackle follow-up questions.
The above diagram showcases the importance of data at every functional point within a Capital Market services organization.
GenAI can transform the ease and speed with which pitchbooks are created, customized trade notifications are circulated, internal and third-party reports are generated, and strategic forecasting is done to facilitate enterprise-level decisions.
Traditional trading systems operate on strategic trading based on algorithms. Now, trading firms can gain an advantage with Generative AI by predicting short-and-near-term price fluctuations by synthesizing scores of news and economic data. It can influence buy or sell decisions by assessing fundamental indicators.
Elevate consumer experience across multiple touchpoints
by leveraging the power of data.
Relationship managers (RMs) of a leading corporate bank in Asia were spending significant time summarizing sustainability reports and addressing critical queries from B2B customers. To facilitate communication between Relationship Managers (RMs) and B2B clients, banks are empowering their RMs with GenAI-initiated insights into ESG (environment, social, and governance) and audit reports. GenAI tools can go further to integrate multiple data points, such as interest rates, inflation, fuel prices, and other economic parameters, to create customized quotes for every client.
Another client-centric challenge in the capital markets is to build sustainable investor-advisor relationships where analysts can address consumer concerns faster.
Large Language Model (LLM)-enabled digital assistants, aided by extended reality (XR), can analyze human emotions, and modify client interactions accordingly. Humanizing customer communications makes the conversation more contextual and, hence, more engaging. Eventually, this fosters a stronger consumer connection.
A Greenwich Wealth Management study3 reveals that more than 50% of US-based financial consultants are adopting GenAI-powered customer relationship management (CRM) software to strengthen investor bonding.
To provide a top-tier customer experience, it’s imperative to ramp up employee productivity.
Dutch investment bank ABN AMRO4 is deploying GenAI to revamp its operations and consumer experience. Real-time transcription of customer calls enables call center agents to quickly access relevant information sources, leading to reduced turnaround time. The lending giant is further leveraging its Generative AI solution to train their center staff. With a decentralized “hub and spoke” model, they aim to enable 75% of their agents with the new technology in the first quarter and reach full implementation by the second quarter.
Several organizations, such as Morgan Stanley, BNY Mellon, Deutsche Bank, MSCI, and Dun & Bradstreet, are collaborating with conversational Generative AI platforms to streamline their operations, execution timelines, provide customer service and investment management industry solutions.
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Safeguard stakeholders’ interests
with more robust fraud and compliance management.
In an industry laden with fraudulent activities, GenAI is starting to play a pivotal role in detecting and preventing such attempts. Large Language Models (LLMs) are adept at identifying suspicious transactions in trading. Another tool that’s rapidly gaining popularity in financial risk management is synthetic or artificially curated data. GenAI can deploy synthetic data tools to assess a vast array of stress scenarios and significantly enhance the scope of anti-money laundering and the prevention of insider trading.
Pathbreaking innovations based on GenAI can save significant time in Suspicious Activity Report (SAR) filing and reduce investigation time. Generative AI can also combat financial crime by skillfully combining suspicious transaction data and summarizing alert cases with pertinent information. Fraud Analyst Assistant chatbots significantly improve operational efficiency by handling time-consuming and repetitive alert triage and case narrations.
So, what does the future hold for GenAI in the capital markets?
Governed by evolving regulatory norms and the consolidation of risk-mitigating technological advancements, GenAI is set to redefine the capital markets. Tools such as the Responsible AI Suite5, part of Infosys Topaz, can provide a vast array of protective shields, scans, and steer frameworks to prevent data theft and misuse of information.
The cutting-edge technology of Generative AI will be widely used once smart investments are made in the right technical assets, an operating framework is built that works well for everyone, relevant market intelligence data is found and decoded for easy access, and the technology infrastructure goes beyond working with pre-trained models like ChatGPT to include enterprise-specific workflow tools that keep private data safe.
Disclaimer Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the respective institutions or funding agencies
- https://www.financestrategists.com/wealth-management/alternative-investment/capital-market/#:~:text=However%2C%20
- https://www.mckinsey.com/industries/financial-services/our-insights/been-there-doing-that-how-corporate-and-investment-banks-are-tackling-gen-ai
- https://www.greenwich.com/market-structure-technology/wealth-management-firms-set-technology-priorities-2023
- https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/generative-ai-a-growing-priority-for-banks-with-1-in-5-launching-apps-80435129
- https://www.capitalmarket.com/markets/news/corporate-news/Infosys-launches-Infosys-Topaz-Responsible-AI-Suite/1495519
