Know it first: The race for AI advantage from within the data tornado of financial services

CEO, Capitalogix

Many ask why financial services is one of the most advanced sectors for data and artificial intelligence (AI)—but they’d probably expect the Willie Sutton answer, “Because that’s where the money is.” To some degree, it would be true, too, as financial services and banks are expected to spend $5.6 billion on AI solutions in 2019, second only to retail, according to analysts quoted by CIO Magazine.

However, it’s just as likely the advances in AI are because financial institutions are in the center of a data tornado. Banking alone spent over $20 billion on big data initiatives, and industry experts believe that the amount of data generated each second in banking will grow 700 percent by 2020, according to Analytics Insights.

My belief is that a powerful benefit from AI is the advantage of knowing first—taking confident action when others are tentative. In the past, the average holding time of a stock was years, but it’s now down to 20 seconds. Since confusion is the catalyst to many financial trades, supremacy in speed-to-knowledge creates a competitive advantage. In short, if you know it first, you trade it best. This is why Capitalogix is so focused on having the smartest in-house tools, taking advantage of hybrid cloud and IBM’s Integrated Analytics Systems.

The focus of AI in financial services is on knowledge advantage and data speed

The focus on real-time data in financial services is shifting from solely risk analysis to building an asymmetric information advantage through speed and comprehensiveness. By harnessing the true potential universe of data – structured and unstructured – and applying the tools – on premises and on the cloud to reduce latency – to extract insights faster, fintech or finserv firms like Capitalogix, can capitalize on opportunities others don’t see. Currently, 6.5 percent of U.S. GDP is accounted for by digital goods. This fundamentally means 6.5 percent of the economy is pure data. This has tripled since 2016, and is expected to continue to grow.

The AI race is on, but not everyone is running at the same speed

The world’s biggest finserv firms already know this is a race. Regional banks may need to accelerate their push up the ladder of AI, as there are already signs that they may fall behind fast, as benefits may accrue suddenly, and even compound very quickly to those larger banks that invested early in AI. Financial services firms need to acknowledge now that they are as much in the technology business as in the financial services business. As such, they need to recognize the need to actively – and aggressively –pursue an articulated position in the AI future of our industries.

If you’d like to hear more about this topic and what we are doing with real-time data at Capitalogix as well as other technological advantage for financial services, I’ll be speaking at Build Smarter Financial Services, in New York City on June 13. Register now to join us:

Capitalogix Howard Geston