On Thursday, a report from Deloitte said Artificial Intelligence (AI) and climate change would have a significant impact on the financial services industry over the next three to five years.
According to the report, “2024 Financial Services Industry Predictions,” AI could transform retail investing, enabling deepfakes and fraud in banking, as well as drive new insurance offerings. Additionally, the report found that climate change will continue to increase insurance costs for commercial real estate property owners and impact profitability of insurers.
“The seismic shifts we will see in financial services as a result of emerging technology and innovation will likely be transformative and provide new opportunities for growth,” Jim Eckenrode, managing director, Deloitte Center for Financial Services, Deloitte Services LP, said. “At the same time, financial services organizations will face new risks and resiliency challenges, including market volatility, impact from climate change, talent gaps and new regulations, and organizations should plan now for what’s on the horizon.”
The report said it anticipated that retail investors may soon rely on Generative AI for financial investment advice, and that Generative AI is expected to magnify the risk of deepfakes and other fraud in banking. Deloitte predicts that GenAI could bring U.S. fraud losses to $40 billion by 2027, up from $12.3 billion in 2023.
The report also said climate change was expected to increase U.S. insurance costs for the foreseeable future. The average monthly cost of insurance for a commercial building in the United States could increase to $4,890 per month in 2030, up from $2,726 in 2023. Climate change is similarly expected to affect the profitability and sustainability of U.S. homeowners’ insurance sector.
“As financial services firms face an ever-changing landscape, they should think about what’s on the horizon,” said Monica O’Reilly, Vice Chair, US Financial Services Industry Leader, Deloitte & Touche LLP. “Market pressures and emerging risks as well as new growth opportunities will shape business strategies, and financial services firms should prepare for that now.”