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TrendForce Forecasts Global Market for AI-Powered Financial Robo-Advisors to Expand by a CAGR of 75% From 2016 to 2020

The financial industry, which has been labor intensive and data driven, is one of the sectors most affected by the transformative changes brought about by artificial intelligence (AI). The latest AI market analysis by TrendForce finds that the fastest application growth for AI within the financial industry is taking place in the field of investment consultation services.

TrendForce moreover projects that the scale of the global market for AI-powered financial robo-advisors will grow at a CAGR of 75% from 2016 to 2020, hitting US$5.9 trillion by the end of the forecast period.

AI-based solutions can combine real-time market data and investors’ opinions across the Internet to create dynamic models for data analyses

The recent wave of advances in the field of AI has given rise to machine learning and natural language processing technologies that can be used to gather the latest market news and views. Furthermore, AI solutions can use these data to build dynamic investment strategy models that are more accurate in market forecasts and return estimates compared with traditional models that are based on limited sets of quantitative data.

According to TrendForce, the global market for robo-advisors used in investment consultation will reach about US$5.9 trillion in scale by 2020. The expansionary momentum is expected to be strongest in China, where the growing Internet banking and financial services industry is driving the demand for this type of technology.

Digitalization of financial services and financial inclusion are also helping the robo-advisor market to take off

TrendForce points out that the digitalization of banking has lowered the cost barrier for investment consultation services, thus opening up new market segments. Previously, traditional investment firms mainly focused on high-net-worth individuals. Now, both traditional financial institutions and new market entrants worldwide are adopting a mixed operation model that includes online services for a wider range of clients.

China-based Internet and technology companies, for instance, have recently crossed into the financial services market and raised the level of competition. Facing a squeeze in profit, established banking and investment institutions are also developing technology-driven solutions that can be offered at lower prices. At the same time, the current period of low interest rates is also spurring the consumer demand for wealth management services.

Remote identity verification and customer services are two AI applications that are also in high demand within the financial industry

Besides robo-advisors, other high-growth applications for AI in the financial sector include remote identity verification and customer services. As services are rapidly digitalized and move to the mobile platform, remote identity verification has emerged as a difficult challenge for financial institutions. Some solutions employ a biometric authentication method such as facial recognition to verify user identities and an AI technology that can instantly and securely process transactions.

Another popular application is virtual assistants that handle telephone and online inquiries. AI-powered chat bots can glean and analyze key data from their conversations with customers. Through machine learning, chat bots will be able to predict future inquiries and quickly direct customers to the services they want. Furthermore, the chat bots’ AI systems can also use the data that they have collected to find the potential needs of specific customers and generate corresponding advertisements.

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