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Artificial intelligence and its adoption in financial services

Article in International Journal of Services Operations and Informatics · January 2022

DOI: 10.1504/IJSOI.2022.123569

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70 Int. J. Services Operations and Informatics, Vol. 12, No. 1, 2022

Artificial intelligence and its adoption in financial

services

Renato Lopes da Costa

Business Research Unit – BRU-IUL,
ISCTE – Instituto Universitário de Lisboa,
1649-026 Lisboa, Lisbon, Portugal
Email: [email protected]

Miguel Cruz
ISCTE – Instituto Universitário de Lisboa,
1649-026 Lisboa, Lisbon, Portugal
Email: [email protected]

Rui Gonçalves
PIAGET Almada,
2805-059 Almada, Almada, Portugal
Email: [email protected]

Álvaro Dias
Universidade Lusófona de Humanidades e Tecnologias,
ISCTE – Instituto Universitário de Lisboa,
1749-024 Lisboa, Lisbon, Portugal
Email: [email protected]

Rui Vinhas da Silva and Leandro Pereira*

BRU-Business Research Unit,
ISCTE – Instituto Universitário de Lisboa,
1649-026 Lisboa, Lisbon, Portugal
Email: [email protected]
Email: [email protected]
*Corresponding author

Abstract: In the current business landscape, a key issue of concern is that of

society’s transition to the information age. It follows therefore that it is
increasingly important to adapt business models and adopt systems that are
effectively capable of handling data, using artificial intelligence (AI). The
financial industry is one of the sectors of the economy that will face the
challenges of this transition. This study aims to understand what the
perceptions of AI are and its impact in the financial sector. Thus, descriptive
statistics were used to understand financial professionals´ and AI experts’
views on AI. It was possible to conclude that perceptions regarding the impact

Copyright © 2022 Inderscience Enterprises Ltd.

Artificial intelligence and its adoption in financial services 71

that AI may have on this industry are different when seen from an operational
perspective as opposed to a strategic perspective. Additionally, the adoption of
AI accrues benefits not only to the systems themselves, but also to to the
companies that are proprietors of innovative technologies.

Keywords: artificial intelligence; smart systems; financial services; strategic

perspective; operational perspective; innovation.

Reference to this paper should be made as follows: da Costa, R.L., Cruz, M.,
Gonçalves, R., Dias, Á., da Silva, R.V. and Pereira, L. (2022) ‘Artificial
intelligence and its adoption in financial services’, Int. J. Services Operations
and Informatics, Vol. 12, No. 1, pp.70–86.

Biographical notes: Renato Lopes da Costa is PhD in General Management,

Strategy and Business Development by ISCTE (Portugal) has papers published
in several specialised journals in the East, US, Canada, Africa, South America
and Portugal. He is currently a researcher and member of BRU-UNIDE and a
professor at INDEG where he holds the post of director of the MScBA (Master
in Business Administration) and guides students in the development of
Master’s and PhD theses. Teaches business strategy modules in executive and
post-graduate master’s degrees. Since 2013 he has also accumulated teaching
duties as an invited professor at the Military Academy where he teaches the
Knowledge Management.

Miguel Cruz is a Transfer Pricing Consultant at EY since September 2020,

where he has been contributing to several tax consulting, compliance, and
documentation projects in several sectors, such as retail, finance, oil and gas,
among others. He graduated from ISCTE Business School with a Master’s
degree in Management in 2021, where he was included in the Top Master
award for academic excellence. His background also includes various
volunteering activities as well as a certificate in Advanced English Level C2
awarded by Cambridge Assessment English.

Rui Gonçalves holds a PhD in Management from Instituto Superior de

Economia e Gestão, with research in information systems for operational risk
management, a Master in Statistics and Information Management from NOVA
Information Management School (NOVA IMS), with research in the area of
Intelligent Agents, and a degree in Business Management from the
International University. He is currently a Guest Assistant Professor at NOVA
IMS and works as Manager in the Business Expertise division at SAS Portugal.
In recent years, he has coordinated the areas of Operational Risk, Compliance,
Fraud, Audit and Money Laundering.

Álvaro Dias is Professor of Strategy at Instituto Superior de Gestão and ISCTE-

IUL, both in Lisbon, Portugal. He got his PhD in Management from
Universidad de Extremadura, Spain, after an MBA in International Business.
Professor Dias has over 24 years of teaching experience. He has had several
visiting positions in different countries and institutions including Brazil,
Angola, Spain, Poland and Finland. He regularly teaches in English,
Portuguese, and Spanish at undergraduate, master and doctorate levels, as well
as in executive programs. Professor Dias has produced extensive research in the
field of Tourism and Management, including books, book chapters, papers in
scientific journals and conference proceedings, case studies, and working
papers.
72 R.L. da Costa et al.

Rui Vinhas da Silva was Chairman of the Board at COMPETE 2020

(December 2014-May 2016). He has degrees in Business Management (BAS)
and (BAS Honours-Marketing) and Economics (BA) from York University,
Atkinson College, Toronto, Canada, an MBA from Aston Business School, UK
and a PhD and Post-Doctorate from Manchester Business School, UK. Before
joining ISCTE in April 2010, he was an Associate Professor (Senior Lecturer)
(2008) at Manchester Business School (Assistant Professor since 1998). He
taught on MBA and PhD programs at MBS for over 12 years. Since 1998 he
taught on several senior executive training programs and held consultancy
appointments through MBS. These included: PWC in Baskin Ridge, New
Jersey (April 2008) AMAC (British senior military officers) (2000–2004),
TACIS (Senior Executives- Russia) (2000–2002), or government officials in
Port Dickson, Malaysia (May, 2009).

Leandro Pereira is Assistant Professor with Habilitation in Management at

ISCTE Business School. He holds a PhD in Project Management. He is also
CEO and Founder of WINNING Scientific Management. He is also former
President of Business Case Institute, PMI Portugal Chapter and Training
Specialist of the Court of Auditors. As CEO, he receives from Best Teams
Leaders the award of Best Team Leader and CEO of Portugal in 2017 in
Portugal. He is also PMP from PMI and ROI certified. As researcher,
he published more than 100 scientific publications and 10 books. As student, he
received the best student award from University of Minho. He is an
international expert in strategic management, project management, benefits
realisation management, and problem solving.

1 Introduction

In today´s business landscape, there is an increasing pressure to reinvent business models

and to incorporate data/information to decision-making with regards to company strategy
(Pereira et al., 2021). With the growing volume of available information, the adoption of
systems that are indeed capable of handling large sets of data has become paramount. We
are currently witnessing the transition of companies and society in general to the
information age, with an increasing adoption of AI-based systems by organisations
(Gonçalves et al., 2022a).
The financial sector will undergo structural changes due to its transition to the
information age, with the integration of AI, which will naturally bring new competencies
to companies in the sector, which may be related to the technology itself, with all the
benefits accruing from what AIbrings to the sector (Canina and Orero-Blat, 2021), but
also to the way that this technology enters the financial sector, with new companies
entering the market with innovative technology, that is more advanced than the
incumbent technology, which he current financial institutions and banks own.
This research will address the topic of the impact of AI adoption in the financial
sector, an issue with an increasing weight in this industry. In this sense, the theoretical
objective is to understand the impact that the adoption of AI is bound to have in the
financial industry. Empirically speaking, this papers aims to understand the role that AI
may play in the future of the financial sector, considering the insights of financial
professionals and AI experts, and also what the perceived impact of its adoption is.
 Artificial intelligence and its adoption in financial services 73

Additionally, this papers also aims to contribute to the state of the art by shedding light
on the topics of finance, smart systems, and AI.
This papers is organised as follows: Section 2 – Literature review on the topics of AI
and innovation on the financial industry; Section 3 – Methodology used; Section 4 –
Results; Section 5 – Discussion of results in the light of the literature; Section 6 – Main
conclusions and contributions of the study, limitations, and suggestions for further
research.

2 Literature review

2.1 Artificial intelligence

The concept of Artificial Intelligence (‘AI’) is broad and includes several areas. A key
feature is its relationship with the idea of Big Data, insofar as AI algorithms deal with
large amounts of data. Big Data is an ambiguous concept whose definition has been
evolving (Vanam and Raj, 2020), but omnipresent in several industries, so the
information revolution and the explosion of the latter concept are topics that should be
introduced to contextualise the evolution of Artificial Intelligence. One of the most cited
definitions of Big Data was proposed by META Group (Laney, 2001), currently Gartner,
in which the term ‘Big’ was derived from three dimensions – Volume (of data), Velocity
(at which it is transmitted) and Variety (of data – structured and unstructured), as
described in the study conducted by Ward and Barker (2013), where the authors gathered
several definitions proposed by different authors regarding the concept of Big Data.
The concept of volume refers to the large amount of data and information generated
per second -sets too large to be stored and analysed using conventional technologies-,
speed refers to the speed with which information is generated and transmitted and can be
analysed in real time through Big Data technologies. Finally, variety includes the
different types of data that can be used and analysed by Big Data, whether structured or
unstructured sets (Ward and Barker, 2013). Broadly speaking, AI relates to the use of
computational tools in performing tasks that traditionally required sophisticated human
reasoning (Gokul, 2018; Gonçalves et al., 2022a). Allas et al. (2018) also contribute to
the definition of AI, describing it as the ability of machines to exhibit human intelligence,
solving problems without the need for a code that describes all the steps of the resolution.
According to Bughin et al. (2017), there are four areas where AI can generate value to
companies in a decisive way. The first relates to the support in planning and forecasting,
to anticipate demand or optimise R&D. Furthermore, AI enables the production of better-
quality products and services at a lower price, as well as supporting the promotion of
those same products and services at the right price, with the right message and reaching
the desired audience. Finally, AI makes it possible to offer a good user experience. All of
these allow a reduction in costs, increased revenues, and an optimisation of the use of
company assets and resources in pursuing that revenue.
Recently, deep learning, a sub-area of machine learning, has demonstrated advances
in solving problems that not even the best attempts of the AI community had been able to
solve, having several applications in science, business and government, according to
Lecun et al. (2015). According to the same authors, while conventional machine learning
systems are somewhat limited in the analysis of raw data, some deep learning models are
74 R.L. da Costa et al.

already able to recognise and analyse natural language or recognise emotions (Gonçalves
et al., 2022b).
Thus, machine learning, and especially deep learning, are the main and most effective
attempts of AI usage ever conceived (Kolanovic and Krishnamachari, 2017), with tools
transitioning at an increasing rate from research labs to industry. The new services and
solutions offered by IT and cloud services companies are the future of AI (Gupta, 2018).
Leading services and companies include Amazon Web Services, Microsoft’s AI
Platform, Google’s Cloud AI, and IBM’s Watson Studio, in addition to several growing
start-ups.

2.2 AI challenges
Even though AI presents a set of capabilities that can revolutionise the economic and
social landscape, it also presents challenges and obstacles that must still be overcome.
According to Allas et al. (2018), many leaders are not yet aware of the benefits that AI
can bring to the business, where to acquire the technologies, how to integrate them into
the company or how to assess the return on investment. Innovation initiatives, and
particularly AI, encounter not only cultural but also organisational barriers.
In the digital transformation process, the implementation of AI requires structural
changes in the company. Fountaine et al. (2019) highlight the importance of teams with
different skills, decision-making based on concrete information and data and, finally, risk
acceptance. In addition, to capture the value of AI, companies need to build specific
organisational capabilities embedded in a strategic framework that guides the
organisation during the transition and ensures strategic alignment, partnership with and
acquisition of know-how from companies working in the field. An open organisational
culture that allows for collaboration between humans and machines is also a success
factor that allows for the reaping of benefits from AI in the long-term, as already
mentioned by Bughin et al. (2017) and further reinforced by Brock and von Wangenheim
(2019).
Regarding the issue of replacing roles performed by humans, Huang et al. (2019) say
that AI will simultaneously replace some current roles and create new jobs, insofar as it
cannot reproduce the emotional part of human behaviour, namely communication and
establishing interpersonal relationships. Jobs requiring these types of skills will become
more important in the future as we enter what the authors define as the “Feeling
Economy”. In turn, Pettersen (2019) presents a contrasting idea to Huang et al. (2019)
stating that AI systems will have difficulties even in solving cognitive problems that do
not have a universal solution, depending, for example, on the context. Pettersen (2019)
reinforces the importance of context by drawing on a hypothetical situation of a private
organisation in China, whose strategy will have to be thought out and implemented
differently compared to a public organisation in Norway. This type of problem cannot yet
be solved by AI algorithms, as the correct solution may change over time and will depend
on the context. The functions dealing with this kind of problems cannot yet be replaced
by AI and still require humans to perform them.
Finally, Güngör (2020) studied the impact and value that the application of AI in
companies has on the different stakeholders. According to the author, companies can
analyse the value created by AI through two axes: the first concerns opportunities in the
 Artificial intelligence and its adoption in financial services 75

value chain (in core functions and support activities) and the second relates to the benefit
derived by stakeholders. While shareholders can benefit from tools that allow reducing
costs and consequently increasing revenues, customers have more secure transactions, for
example. As far as employees are concerned, while there may be technologies to increase
productivity, it should be borne in mind that AI may eliminate some jobs in the future.
In the same study, the author assessed the value and risk perceived by the various
stakeholders regarding AI and concluded that the value of AI is more strongly associated
with financial and business interests, where the perceived benefit is higher for
shareholders and customers. In contrast, employees see the least value in the technology,
assuming a higher risk factor.

2.3 AI in finance
Innovation is a constant and growing issue in several sectors of the global business
landscape. Some industries, such as photography and media, were impacted by the digital
transition in the late 20th and early 21st century, other industries are now undergoing a
new transition, the transition to the information age. One such industry is finance, a
relatively laggard sector that is currently undergoing structural change as it enters the AI
and information age (Shaikh, 2017).
According to the report “Smart Money: AI transitions from fad to future of
institutional investing”, by PwC Financial Services (2018), the financial sector has been
facing challenges in terms of business models due, namely, to increasing levels of
regulation, pressures to reduce costs and changes in consumer behaviours (Quirino and
Dias, 2021). Technology, by enabling rapid business transformations, has been playing
an important role in a sector marked by low organic growth, volatile returns, and reduced
margins (Halpin and Dannemiller, 2019).
The financial industry is based almost exclusively on information exchange and many
of the processes require less and less physical interaction between the parties involved
(Puschmann, 2017). Digitalisation in segments such as payments, lending or investment
services can, and certainly will, revolutionise the industry (Phan et al., 2020). Similarly,
with recent IT innovations, the financial sector is not only experiencing process
automation, but also undergoing a reorganisation of its value chain, with new business
models. new players and new revenue streams (Puschmann, 2017; Singh et al., 2021).
According to Puschmann (2017), there are some drivers to the digital transformation
in the financial sector, namely the growing role of IT, with emerging technologies such as
Big Data, IoT or cloud computing, and changes in consumer behaviour, which has been
using electronic channels at an increasing rate. Likewise, the regulations that some
countries have implemented have made it easier to overcome barriers to entry.
These drivers, combined with the digitalisation of front-end services and the loss of
confidence in banks following the global financial crisis (Imerman and Fabozzi, 2020;
McQuinn et al., 2016; Puschmann, 2017; Schindler, 2017), culminate in several
opportunities that are increasingly being explored by new companies, called
Fintechs.Technology companies in the software development, e-commerce, mobile
technology and data analytics fields, which had no connection with financial services, are
looking for opportunities and gaining market share from banks, brokers and asset
managers (Imerman and Fabozzi, 2020).
76 R.L. da Costa et al.

With the evolution of Fintech, the future of the financial industry may involve the
establishment of strategic partnerships. A large proportion of start-ups in this industry do
not have a banking licence, which is required for various operations such as providing
loans or credit. At the same time, banks do not possess the technology developed by these
companies or own outdated IT infrastructures. Thus, it is possible that the role of banks in
this digitalisation process is to make the technology available to their customers through
the mentioned partnerships. Despite resulting in a small increase in revenues, these
prevent their customer base from switching to the services offered by the new companies
(Brandl and Hornuf, 2017).
Regarding the use of AI in the financial sector, this technology promises to change
operating models in this industry. Some companies use these algorithms to enhance their
asset analysis and to make investment decisions, while others apply this technology to
improve operational processes. Financial institutions are able to derive four major
benefits from AI, which can be adopted from a front, middle and back-office perspective:
predictive capability, accuracy, efficiency and scalability (Halpin and Dannemiller, 2019;
PwC Financial Services, 2018).
The important role AI plays in addressing industry challenges is reinforced by Cao
(2020). The synergies between AI and data science and the financial sector complement
and transform the roles that both have in creating more advanced, efficient, transparent,
and global systems and services, assuming a strategic importance in the sector. A survey
conducted by Ryll et al. (2020) on 151 companies found that 77% of respondents
recognise the future strategic importance of AI in the financial sector and about half
admit that the entry of Big Tech companies (large technology companies such as Google
or Apple) in the sector could be a threat. Furthermore, commercialisation of AI solutions
is starting to be a distinct business model.

2.4 Theoretical framework

Table 1 shows the main objective of this research, the two research questions mentioned
and the main literature from where those questions originated from.

Table 1 Relationship between the study objectives, research questions, technique used and
literature review

Objective Research questions Technique used Literature

OBJ – (Q1). What role does AI Descriptive Allas et al. (2018), Brandl and
Understanding play in the future of analysis Hornuf (2017), Bughin et al.
what impact AI financial institutions’ (2017), Cao (2020), Fountaine et
can have on the business? al. (2019), Gupta (2018), Halpin
financial sector. and Dannemiller (2019), Ryll et al.
(2020) and Schindler (2017)
(Q2). What is the Descriptive Bughin et al. (2017), Güngör
perceived impact of analysis (2020), Halpin and Dannemiller
financial professionals (2019), Huang et al. (2019) and
and AI experts regarding Pettersen (2019)
the adoption of AI in the
financial sector?
Source: Author’s elaboration
 Artificial intelligence and its adoption in financial services 77

3 Methodology

3.1 Research model

Research methodology is a discipline originated from logic and its object is the study of
the scientific method (Tarski, 1977). It is thus possible to deduce that the scientific
method consists of a set of practices used and verified by the scientific community as
valid for the exposure and confirmation of a given theory. In this sense and considering
the research classification criteria proposed by Vergara (2006) and Vilelas (2009), there
are two ways in which we may classify the methodology used in the design of research
documents, as to its ends and as to its means. The ends, in this case, refer to the applied
and exploratory research, while the means are linked to the field study and
bibliographical research.
This research was based on a pragmatic or inductive nature, conducted from a non-
probabilistic sample by convenience, constituted according to the availability of the
elements addressed (Carmo and Ferreira, 2008), in this case, professionals from the
financial sector and AI experts, expert being understood as the individual who works in
this area or deals with intelligent systems in the course of their duties.
This papers was motivated by two main research questions, namely
1 What role does AI play in the future of financial institutions’ business?
2 What is the perceived impact of financial professionals and AI experts regarding the
adoption of AI in the financial sector?
These questions were answered using descriptive statistics, presenting the results
obtained through charts and tables with a set of techniques and rules that summarised the
information collected in a data dispersion in the form of percentages, means, modes and
counts (Vilelas, 2009).
The information was collected through a questionnaire survey using the Google
Forms platform. These questionnaires were built based on the literature review, where the
factors that had greater relevance to the present study were analysed, giving rise to blocks
of questions. After the construction of the surveys, 250 questionnaires were sent to
financial professionals and AI experts, via LinkedIn and email, and 105 responses were
returned, constituting a response rate of 42%. It should be noted that the findings of this
research should be read with due care from a sample that is considered small. This is
therefore a limitation of this research, as it is impossible to generalise. The results were
then imported into the IBM SPSS Statistics program.
Regarding the choice of the questionnaire survey, this was the method least likely to
be misleading, given that it is implicit in primary knowledge, and because it allows for
the possibility of aggregating data in the form of statistical tables, which also makes the
analysis of the variables under study more accessible. Another of the factors that led to
this option was based on the fact that it is a relatively inexpensive method, always
considering the risk of being involved in some degree of subjectivity with regard to the
responses obtained, resulting from the different individual points of view.

3.2 Sample description

The present sample includes 105 respondents. An analysis was carried out on all the
variables that could characterise the sample, specifically regarding to its demography,
78 R.L. da Costa et al.

area of activity and academic qualifications, to comprehend the sample obtained in terms
of its nature. Table 2 provides further detail.

Table 2 Sample characterisation

Category class Class description Total number Percentage

Gender Feminine 48 46%
Masculine 57 54%
Academic Bachelor’s degree 57 54%
qualifications Master’s degree 47 45%
PhD 1 1%
Age group 18–25 35 33%
26–30 40 38%
31–40 20 19%
41–50 9 9%
51–60 1 1%
Field of activity AI experts 54 51%
Financial professionals 51 49%
Source: Author’s elaboration

4 Results

4.1 Perceptions on the future of the financial sector

Of the total of 105 respondents, 72 (68.6%) have a degree of agreement equal to or higher
than 4 for the statement “The new financial technology companies (Fintech) that have
entered the sector are strong candidates to replace traditional banks/financial
institutions”. The degree of agreement is higher in the statement “The future of the
financial sector involves strategic partnerships between financial technology companies
(Fintechs) and traditional banks/financial institutions”, with 104 respondents (99%)
answering with level 4 or higher, as shown in Tables 3 and 4.

Table 3 The new financial technology companies (Fintech) that have entered the sector are
strong candidates to replace traditional banks/financial institutions

N Percentage (%)
Level of agreement 3 33 31.4
4 65 61.9
5 7 6.7
Total 105 100.0
Source: Author’s elaboration
 Artificial intelligence and its adoption in financial services 79

Table 4 The future of the financial sector involves strategic partnerships between financial
technology companies (Fintechs) and traditional banks/financial institutions

N Percentage (%)
Level of agreement 3 1 1.0
4 75 71.4
5 29 27.6
Total 105 100.0
Source: Author’s elaboration

As shown in the ‘mean’ row, in Table 5, the average degree of agreement is higher for
the statement on establishing partnerships than for the statement about the substitution of
traditional banks/institutions with new financial technology companies.

Table 5 Comparison between the average level of agreement with the statements on the
substitution of companies and establishment of strategic partnerships

The future of the financial sector

New companies as substitutes for involves the establishment of
traditional institutions strategic partnerships
N Valid 105 105
Missing 0 0
Mean 3.75 4.27
Median 4.00 4.00
Mode 4 4
Std. deviation 0.568 0.465
Minimum 3 3
Maximum 5 5
Source: Author’s elaboration

Regarding the respondents’ opinions on the entry of new companies into the sector, they
showed, on average, a high degree of agreement (level 4 or above) with the statement
“The entry of new companies that previously had no connection with the financial sector
is beneficial for it”, as can be seen in Table 6. Additionally, when asked whether the
current culture and structure of financial sector firms are prepared for the transition to the
AI era, respondents showed, on average, a relatively low degree of agreement – between
levels 2 and 3 (Table 7).
Finally, in what concerns the rate at which the financial sector is transitioning to the
AI era and the information age, respondents showed a high degree of agreement with the
statement “The financial sector’s transition to the AI era is taking place slowly”
(Table 8). Further analysis was conducted to compare the responses of financial
professionals and AI experts. This led to the conclusion that, on average, financial
professionals showed a higher degree of agreement compared to the latter (Table 9).
80 R.L. da Costa et al.

Table 6 The entry of new companies that previously had no connection with the financial
sector is beneficial for it

N Valid 105
Missing 0
Mean 4.13
Median 4.00
Mode 4
Std. deviation 0.621
Minimum 3
Maximum 5
Source: Author’s elaboration

Table 7 The current culture and structure of companies in the financial sector are prepared for
the transition to the AI era

N Valid 105
Missing 0
Mean 2.22
Median 2.00
Mode 2
Std. deviation 0.480
Minimum 1
Maximum 3
Source: Author’s elaboration

Table 8 The financial sector’s transition to the AI era is taking place slowly

N Valid 105
Missing 0
Mean 3.60
Median 4.00
Mode 4
Std. deviation 0.565
Variance 0.319
Minimum 3
Maximum 5
Source: Author’s elaboration

Table 9 Comparison between the responses of the two professional areas to the statement
“The financial sector’s transition to the AI era is taking place slowly”

Professional area Mean

Financial professionals 3.76
AI experts 3.44
Source: Author’s elaboration
 Artificial intelligence and its adoption in financial services 81

4.2 Perceived impact of AI adoption by financial professionals and AI experts~

When asked about the main advantages of adopting AI in the financial sector – lower
costs for consumers, safer transactions, and higher productivity levels – the sample
showed, on average, a higher degree of agreement when it comes to the higher
productivity levels that AI brings or can potentially bring to the sector (Table 10).

Table 10 Key advantages of adopting AI in the financial sector

“AI enables lower costs “AI makes it possible to “AI enables higher
for consumers in the achieve safer levels of productivity in
financial sector” transactions” the industry”
N Valid 105 105 105
Missing 0 0 0
Mean 4.12 4.44 4.66
Median 4.00 4.00 5.00
Mode 4 4 5
Std. deviation .331 0.499 0.477
Minimum 4 4 4
Maximum 5 5 5
Source: Author’s elaboration
In what concerns the issue of the replacement of human functions with intelligent
algorithms, it was possible to verify that respondents showed a relatively low degree of
agreement (between 2 and 3) with the statement “Replacing human functions with
advanced algorithms is a threat derived from the adoption of AI in the industry”
(Table 11).

Table 11 Replacement of human functions with advanced algorithms is a threat derived from
the adoption of AI in the industry

N Valid 105
Missing 0
Mean 2.81
Median 3.00
Mode 3
Std. deviation 0.395
Minimum 2
Maximum 3
Source: Author’s elaboration

Bearing in mind that the survey was answered by financial professionals and AI experts,
it becomes relevant to, again, analyse the responses obtained within these two groups. As
can be seen in Table 12, the degree of agreement with the statement “The replacement of
human functions by advanced algorithms is a threat derived from the adoption of AI in
the industry” is, on average, higher in the group of financial professionals than in the
group of AI experts.
82 R.L. da Costa et al.

Table 12 Comparison between the responses of the two professional areas to the statement
“Replacement of human functions by advanced algorithms is a threat derived from
the adoption of AI in the industry”

Professional area Mean

Financial professionals 2.96
AI experts 2.67
Source: Author’s elaboration

5 Discussion

After presenting the main results from the data gathered through the questionnaire, this
section will discuss these results, comparing the conclusions the current research arrives
at with the literature that has provided the conceptual basis for the research questions.
Regarding the first research question (“What role does AI play in the future of
financial institutions’ business?”), this study leads to the conclusion that, although new
financial technology companies entering the sector may be considered strong competitors
to existing companies and institutions (Gupta, 2018), financial professionals and AI
experts in the sector believe that its future will involve the establishment of strategic
partnerships between new technology companies and traditional institutions (with
answers 4 and 5 making a total of 99%).
This phenomenon had already been studied by Brandl and Hornuf (2017), but this
research shows that the entry of new companies may generate new competitive dynamics
within the financial sector (Costa et al., 2021; Dias et al., 2021). Regardless of how the
entry of new firms into the sector takes place, it is possible to conclude that their entry is,
in general, beneficial for the sector. These benefits are linked not only to the new
technologies that recent Fintech companies bring to the sector (Schindler, 2017), but also
to all the potential that new AI tools (Bughin et al., 2017; Cao, 2020; Ryll et al., 2020).
Nevertheless, this study also allows us to conclude that, despite all the advantages
that the adoption of AI presents, the culture of companies (median equal 2) is not yet
prepared to face all the difficulties and challenges that this transition entails (Fountaine et
al., 2019) and this is one of the preponderant factors in the inertia regarding the transition
of the financial sector to the AI era and information age, which is being done slowly, a
phenomenon that can also be observed in other sectors of the economy (Allas et al.,
2018).
Among the three advantages studied in relation to the adoption of AI in the financial
sector, highlighted in the literature review – lower costs, increased transaction security,
and additional productivity – it can be concluded that the additional productivity resultant
from the use of intelligent algorithms and AI tools (mean equals 5) is the one that is most
prevalent among financial professionals and AI experts. This is in line with the findings
of Güngör (2020), which indicated that professionals in the industry could benefit from
technologies that would allow them to increase productivity in the industry. Additionally,
it is also possible to conclude that, among the three advantages mentioned, the one that
assumes less preponderance is the one related to the lower costs that AI tools bring or can
bring to the financial sector (Bughin et al., 2017; Halpin and Dannemiller, 2019) which,
according to Güngör (2020), would be more valued by shareholders, as it would allow for
the increase of company revenues in the sector.
 Artificial intelligence and its adoption in financial services 83

Regarding the risk of replacing human functions with intelligent algorithms, this
study shows that this risk is present, although not preponderantly (median = 3). This
complements the research of Güngör (2020) in that, despite the presence of the risk, as
the financial sector advances in the digital transition, the idea of replacing human
functions begins to be deconstructed.
Another important factor that this study shows is that, although the difference is
small, AI experts (mean = 2.67) believe less in function replacement than financial
professionals (mean = 2.96). AI experts, as individuals who have been dealing with
intelligent tools and algorithms in their jobs and for a longer period of time than financial
professionals, who are just beginning to adopt these tools, know the main limitations of
AI (Huang et al., 2019; Pettersen, 2019).

6 Conclusions

Innovation and digital transformation are two growing concerns across various sectors of
the economy. The financial sector is no exception, and has relatively lagged behind other
industries in this respect, and is currently undergoing structural changes with the
transition to the AI era, with several companies under pressure to innovate in their
operating model and suffering the impacts of the clash between companies with models
that have adopted AI and companies with conventional models (Iansiti and Lakhani,
2020; Shaikh, 2017).
As the transition to the AI era is something we are currently witnessing, some
literature is starting to exist regarding its adoption in several sectors of economic activity,
such as transportation, cybersecurity, or entertainment. Although literature on the
potential tools and benefits that AI can accrue to the financial sector is starting to be
published, this study fills the gap on the issue of implementation, namely the impact it
will have from an operational perspective. Thus, the main research objective of the
present investigation has been to study and analyse the impact of the implementation of
AI and AI-based systems in the financial sector, with a special focus on the role that these
systems may play in the structure and business models of the sector, the impact that their
implementation will have on stakeholders and the challenges to their adoption.
The results allow for the conclusion that, at the operational level, fears concerning
structural changes in the industry and in financial institutions are not as prevalent as at
more executive levels (Allas et al., 2018). All the new competitive dynamics that may
arise in the financial industry derived from the adoption of AI, namely the entry of new
companies with competencies that are not dominated by current companies, may generate
anxiety within the strategic layers of organisations. It is important to underline that the
prevalent culture in companies is not yet ready for the transition to the AI era, something
that Fountaine et al. (2019) had already studied, as the companies that are looking into
adopting AI and intelligent systems need to make changes in their business,
implementing teams with different skills and accepting the risks inherent to these new
technologies.
Still, this research also allowed us to conclude that the establishment of strategic
partnerships between existing companies in the financial sector, which already have a
customer base and licenses for operations in this sector, and new technology companies,
which have the patents, a developed IT infrastructure and know-how that the former do
not have (Brandl and Hornuf, 2017; Fountaine et al., 2019) is an important factor in the
84 R.L. da Costa et al.

adoption of AI in the financial sector. The entry of new technology companies that had
no previous relation with the financial industry will disrupt this sector in the coming
years.
Regarding the various advantages directly associated with AI technologies that were
listed throughout this research, there is a set of attributes that are of great importance in
this sector. The attribute that assumes the greatest weight corresponds to the ability of
these algorithms to automate tasks and increase the productivity of certain functions
(Güngör, 2020; Halpin and Dannemiller, 2019; PwC Financial Services, 2018) an
important capability in a sector characterised by some repetitive and routine tasks. This is
no surprise since the conclusions of this study are mainly based on the opinions of
operational layers of the companies, which are the ones that will benefit the most with the
automation of certain tasks, providing a better service to the customers.
Thus, this study shows once again the difference between the priorities of companies’
operational layers and the more strategic layers, in that, although both value the cost
reduction that comes with the adoption of intelligent systems and AI, the former,
represented in this study, do not value it as much as the latter, which is represented in
(Güngör, 2020) study. Even so, this is naturally an important attribute and one that also
increases the chances of AI adoption in the financial industry.
Throughout this research, it became apparent that the topic of AI adoption in the
financial sector is becoming increasingly important, with a growing number of studies
being published, and that it is an area where there are still questions to be explored and
contributions to be added.
This study has contributed to the development of business management and strategy
and the state-of-the-art by presenting a set of important conclusions. In summary, the
following contributions of this study can be highlighted: (1) perceptions regarding the
adoption of AI in the financial sector, from an operational perspective; (2) the importance
of the entry of new companies in the financial sector for the transition to the information
age and the adoption of AI.
As for the limitations of this study, as previously mentioned, these include the results
of this study, which should be read with due caution since the sample is considered small.
The characteristics of the sample should also be highlighted since data were collected
from a specific context (only financial sector professionals and AI experts), in a specific
country (Portugal). In this sense, when it comes to external validity, that is, the possibility
of generalising the results found to other contexts, although this study has reinforced
some of the existing theory regarding the perceptions of AI and the impact of its adoption
in the financial sector, this was only an exploratory study that cannot be generalised or
representative.
Regarding future research, it would be interesting to further study the various industry
segments in the financial sector. While this study adds insight to the financial sector in
general, future research could carry out the same study regarding the perceptions on IA
and its adoption in segments such as insurance companies, credit institutions and
stockbrokers. Additionally, it would be advantageous to extend the sample to other
industry stakeholders, namely customers, company shareholders, managers and
eventually deepen the investigation and understand what the perceptions on IA are on the
different stakeholders.
 Artificial intelligence and its adoption in financial services 85

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