Financial services firms are gearing up for the opportunities presented by generative AI as well as preparing for the potential risks, according to a survey by UK Finance and management consultancy Oliver Wyman.

Nearly three-quarters (70%) of financial services firms surveyed said they are at the pilot stage for generative AI using ‘co-pilot’ type employee efficiency tools, but it is expected that return on investment will take between three and five years for more advanced use cases.

Three-quarters of firms believe they will benefit from generative AI, with the biggest opportunities expected from productivity improvement and operational effectiveness rather than customer-facing, revenue-related, use cases.

Jana Mackintosh, managing director of payments, innovation and resilience at UK Finance, said: “Generative AI is a new horizon for financial services, with clear opportunities for firms, from boosting productivity and growth, to improving the experience for customers. And as this report shows, a majority are already piloting the technology to find the best way to safely explore these exciting opportunities.

“At the same time, however, financial services firms are clear-eyed about the risks. The sector has been using predictive AI for years, and firms have enhanced their risk management processes to make sure the technology only ever adds to their accuracy, security and offering for customers. And the majority are already upgrading these processes to lock down the risks from generative AI.

“What firms want now is to collaborate with policy makers and regulators on a long-term, flexible approach to regulation that can keep pace with technological change, ensuring our FS sector can guard against any risks from this technology, while safely seizing its great competitive advantages.”

The survey suggests that firms are also clear about the risks posed by this new technology, and three out of five say they are already adapting their existing risk management frameworks to include generative AI.

To safely seize the opportunities from generative AI, four out of five firms (80%) want to collaborate with regulators to define best practice. Firms also want to ensure international alignment of regulations, with 65% saying conflicting rules between jurisdictions is one of their top-three concerns about AI policy. The report also includes a range of possible statutory and non-statutory options to tackle the policy challenges currently facing the sector.

Sian Townson, partner at Oliver Wyman, said: “Our survey shows that while adoption is widespread in the industry, firms are clear about the risks to ensure best practice to meet both customer needs but also wider competitive advantages that AI can bring.”

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