Financial Services Struggle to Align Data with AI Goals

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In a data-driven world, financial services organizations are racing to harness the transformative power of AI. However, this journey is not without challenges. We know AI has a data problem. Without the right data in the right place, even the most sophisticated AI strategies fall short. 

IT leaders in the financial services sector understand that realizing the value of AI requires robust foundational strategies. This includes investments in data processing, infrastructure, storage, and advanced analytics tools.

To understand how financial services are navigating these complexities, Digital Realty conducted a survey of 362 IT decision-makers in the industry. The findings reveal that while IT leaders still face challenges with investment and leadership buy-in, they are on the right path to building a sustainable, data-centric future. 

More than two-thirds (70%) of the respondents shared that their financial services organization is executing a formal AI strategy. The aim is to leverage AI to drive innovation while increasing earnings and achieving growth.

Deloitte’s State of Generative AI in the Enterprise published in April 2024 revealed that 48% of companies are uncovering new insights with AI, 55% are reducing costs with AI, and 63% say GenAI is encouraging innovation and growth. 

This aligns with trends observed in the financial services sector, where businesses are actively executing formal AI strategies to enhance operational efficiency and introduce AI-driven offerings.

“If you don’t have the right data where you need it, then your AI strategy is broken before it starts,” said Dan Eline, VP of platform solutions at Digital Realty, in the report. “Data must be in the right place where AI can ingest it and create more data in a forever-perpetuating cycle.”

Digital Reality shared that with unstructured data expected to grow at 21.2% annually by 2026, according to IDC, financial services must adapt to handle this increase. However, more than half of the respondents (56%) shared that upgrading data infrastructure remains the biggest obstacle. Not only is there a greater need for comprehensive data strategy but more budgetary allotment and leadership commitment is vital for the successful implementation of the investments. The other major obstacles to drawing insights from data include customer reluctance to share data (44%) and data privacy regulations (41%).

The survey also highlights the importance of IT infrastructure in the right locations. Not having data at the right location can result in increased latency or not having enough support to facilitate the AI applications. Data localization is becoming a key focus for IT leaders, requiring IT locations to have the appropriate hardware to support technologies like AI. Additionally, these locations must comply with regional laws and standards that apply to the financial sector. This helps ensure functionality and regulatory alignment.

“If you don’t have the right data where you need it, then your AI strategy is broken before it starts,” emphasized Eline. “Data must be in the right place where AI can ingest it and create more data in a forever perpetuating cycle.” 

The financial services leaders are keen to find value in distributed data strategies. By allowing data to reside closer to those who need it most, 44% of IT leaders believe it enables faster and easier access. An equal percentage see it as a way to draw richer insights from their data. Latency requirements are a core element of IT location strategy, and data center service providers must ensure they can meet these demands effectively.

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IT leaders in the financial sector are aware of the importance of data localization. Digital Realty found that nearly two-thirds of financial services companies have IT infrastructure distributed across up to 10 global locations, and plans are underway to add more locations in the next two years. 

Extracting valuable insights from data offers multiple benefits to financial services organizations, as highlighted in the Digital Realty survey. It helps identify innovations that can create new revenue streams, make customer interactions more personalized,  improve forecasting for cost savings, and more. 

AI is central to these efforts, with 71% of IT leaders in the survey expecting it to enhance customer experiences. It can also help build AI capabilities into products or services (66%) and make business operations more efficient (51%). 

As noted in the report, cybersecurity stands out as a significant use case for data-driven insights in the financial services sector. Over half of the respondents identified risk mitigation and breach management as key strategic outcomes anticipated from leveraging these insights.

“Financial services companies can also use AI to enhance their cybersecurity efforts,” according to the report. “AI can monitor the attack surface for suspicious activity and compare any activity against vast security event databases and logs faster and more efficiently than humans could. AI can also automatically investigate and respond to alerts, like phishing emails, and can help security teams improve by analyzing performance.”

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