The role of artificial intelligence in the Australian financial sector

New research suggests that the adoption rate of generative artificial intelligence in the Australian financial industry will double within the next three years, and mortgage applications will be one of the areas that is about to change. A new report commissioned by the Australian Financial Industry Association and conducted by King&Wood Mallesons and Sapere Law Firm states that artificial intelligence is expected to bring significant productivity improvements to the financial industry and the wider economy, particularly in areas such as employee productivity and process automation.

Firstly, research has found that companies that heavily invest in generative artificial intelligence hope to use it to improve the speed of customer service acceptance and simplify the customer experience, thereby enhancing the customer experience. For example, if a bank requires customers to use digital banking tools to perform a task (such as initiating a mortgage application), but requires customers to follow a different process for another task (such as changing an address), generative artificial intelligence can be used to proactively identify various processes and guide customers through these processes

Secondly, other potential areas of benefit include fraud prevention. The Commonwealth Bank of Australia stated that its use of artificial intelligence has brought multiple improvements to customers, including a 50% reduction in customer fraud losses with the help of AI security features. The bank also pointed out that due to measures such as generating AI suspicious transaction alerts, customer reported fraudulent behavior has decreased by 30%, and with the help of AI application messaging, call center waiting times have decreased by 40% compared to the previous fiscal year.

Furthermore, research has found that in addition to improving customer service, artificial intelligence can significantly reduce costs by reducing wages and employment, which is beneficial for economic development. The economic model of the report indicates that, based on net present value calculations, under the "moderate adoption rate" scenario, it is expected that the financial industry's investment in generative artificial intelligence will cumulatively increase revenue by $15.9 billion between 2025 and 2035.

In addition, under a moderate adoption scenario, it is expected that by 2035, the adoption of generative artificial intelligence in the financial industry will contribute a cumulative GDP of $48.9 billion (calculated in net present value). This means that by 2035, per capita GDP will increase by $690 per year. When commenting on the benefits of artificial intelligence for businesses, Diane Tate, CEO of the Australian Financial Industry Association, said, "Artificial intelligence can significantly enhance the Australian financial industry, improve efficiency, enhance customer experience, and bring competitive advantages to local financial companies globally

However, the Australian Financial Industry Association stated that despite the potential benefits of artificial intelligence for businesses, its adoption in the Australian financial industry has been slow over the past two years, with only one-third of respondents integrating generative artificial intelligence into their existing business functions. Research has found that companies using artificial intelligence typically adopt a cautious attitude, as the technology often enhances rather than replaces human decision-making, and the direct interaction between artificial intelligence and consumers is limited. The reason for slow acceptance by businesses and brokers is the "unique risks" associated with the generation of artificial intelligence described by AFIA, including accuracy, transparency, privacy, and the risk of purchasing technology from a limited number of third parties. Lack of regulation is also a concern for many people, and AFIA calls for a balanced regulatory approach that provides protection but does not undermine innovation.

And Bluestone Home Loans, a non bank lending institution, is also using artificial intelligence to detect fraudulent behavior and speed up application processes, but it still recognizes the limitations of the technology and believes that it enhances the capabilities of brokers rather than replacing them. In an exclusive interview with The Adviser in March, Chief Business Officer Tony MacRae said, "We see it growing, but for me, the key is that it complements the rich experience of brokers and lenders like us, rather than replacing it

Overall, artificial intelligence has brought efficiency revolution and innovation opportunities to the Australian financial industry, but unemployment, technological deficiencies, and regulatory gaps remain major challenges. In the future, balanced development needs to be achieved through technological iteration, policy improvement, and human resource transformation.