The Role of Artificial Intelligence in Financial Services: Transforming Banking, Investment, and Asset Management

Abstract

Background: The financial services industry has experienced a significant impact from artificial intelligence (AI) technology, influencing various areas such as banking, investment management, risk management, and regulatory compliance. Although the use of AI has increased, there is little empirical evidence that examines the effects of implementing AI on organizational performance. The study focuses on the impact of the use of AI on financial performance in banking, investment and asset management institutions. A quantitative research design was applied and the data were collected from the financial institutions which operate in different regions in the year 2020-2024. This study investigates how the intensity of AI adoption, investment in AI technologies, data quality, maturity of regulatory technology (RegTech) and legacy infrastructure impact organizational performance. Several statistical methods including descriptive statistics, correlation analysis and regression modelling, panel-data estimation were used to test the proposed hypotheses. The results suggest that the use of AI has a positive relationship with financial performance, operational efficiency, and fraud detection. Data quality and RegTech maturity, combined with the advantages of implementation, enhance the advantages of AI, and legacy infrastructure hinder performance outcomes. The results show that companies with higher levels of AI application achieve better returns and benefits than other companies with varying stages of AI application. The findings contribute to the existing body of knowledge on applying AI in the financial sector and provide practical insights for managers, regulators, and policymakers to maximize the value of their AI investment effectively.