How are financial companies using AI?

UBS analysts indicate artificial intelligence is becoming increasingly central and transformative across financial services, including banking, insurance, payments, asset management, exchanges, and REITs. While the financial impact has been limited so far, firms are optimistic about AI driving material expense savings, efficiencies, and growth through improved data analytics, risk management, and customer engagement. Larger, established firms are positioned to benefit most by leveraging technology spending and early adoption to defend market share, with payment processors like Visa and Mastercard particularly well-placed and GenAI already boosting developer productivity by 10-30% at FIS.

Analysis

According to a recent UBS report, Artificial Intelligence is poised to be a transformative technology across the financial services sector, with significant applications emerging in banking, insurance, payments, asset management, and REITs. While the tangible financial impact has been limited to date, the bank is bullish on AI's long-term potential to drive material expense savings, operational efficiencies, and growth. Larger, established firms are expected to be the primary beneficiaries, as early adoption and substantial technology spending are seen as key to defending market share. The payments sub-sector is highlighted as a standout, with processors like Visa (V) and Mastercard (MA) considered well-positioned to capitalize on AI-driven opportunities due to their global scale and brand trust. Tangible evidence of productivity gains is already surfacing, with Fidelity National Information Services (FIS) management reporting a 10-30% increase in developer productivity from using GenAI coding assistance, providing an early indicator of the technology's operational leverage.

Key Decisions for Investors

• Consider tilting portfolio exposure towards large-cap, established financial institutions that demonstrate a clear strategy and significant investment in AI adoption, as they are positioned to benefit most from this technological shift.
• Evaluate overweighting positions in leading payment processors, such as Visa and Mastercard, which are specifically identified as prime beneficiaries of AI advancements in areas like agentic commerce and operational efficiency.
• Monitor company reports for quantifiable metrics on AI's impact, using figures like the 10-30% productivity gain cited by FIS as a benchmark to validate the thesis and distinguish between firms merely discussing AI and those executing on it.
• Exercise caution with financial firms that are laggards in technology spending, as they face a material risk of market share erosion to more innovative, AI-adopting competitors.