Artificial Intelligence (AI) is not just a technological advancement; it’s a paradigm shift that’s reshaping our world. Recent research and studies have underscored the transformative potential of AI, particularly in the realm of financial services. According to a report by the World Economic Forum, AI is set to create a financial revolution by bringing about unprecedented changes in the way financial institutions operate and serve their customers.1 This revolution is not just about improving efficiency or profitability; it’s about democratizing financial services and fostering greater financial inclusion.
Marking a significant step toward adopting AI to transform the finance sector, Franklin Templeton has recently partnered with Microsoft to build an advanced financial AI platform. The platform will use composable business applications to help Franklin Templeton rapidly embed AI in its processes and enable digital transformation at scale. The two firms—leaders in their respective industries—are aligning capabilities to facilitate continuous innovation within financial services.
With the exponential rise of AI in recent years, such as the above example, how can businesses, especially in the finance sector, embrace AI to enhance diversity, equity and inclusion (DEI), while also mitigating its potential risks?
I recently had the opportunity to talk with my colleague Deep Ratna Srivastav, Head of AI & Digital Transformation at Franklin Templeton, about the ways AI has been and will continue to transform the finance sector through broadening inclusion. Below is our conversation:
Regina: How can AI effectively address traditional barriers and foster more diversity and inclusion within the finance sector?
Deep: The biggest value that AI brings is scale. You can do things better, faster and cheaper. So almost by definition, it can allow for more inclusion. Especially in the financial industry, which traditionally has been able to focus more on certain communities and certain levels of wealth, AI can certainly broaden that base. You can bring costs down and you can start having an impact with people who never got access to financial advice and didn’t get the right education and information in the past. So, AI, in my mind, plays a huge role in how you can take something that has been accessible to certain elements of society and really broaden the base. If you do it right, it does. But the onus is on us, in the financial industry, to make it happen.
Additionally, almost every aspect of a financial services company can be improved through the use of AI. This includes recruiting more diverse talent, creating more customized products, having more efficient operations, and helping sales and marketing teams distribute products more successfully.
Regina: Going into specific examples, Franklin Templeton’s collaboration with Microsoft will seek to combine structured data and contextual financial information to deliver personalized experiences to differentiated financial services clients. This is different from many other AI initiatives that merely focus on limited capabilities, such as summarization and basic conversations.
Deep: Yes, Franklin Templeton envisions being able to give more sophisticated, personalized support to a broader set of clients. To do that, we need reasoning capabilities that really understand our clients, not just summarize a few data points. And if we can do these things for our clients, we can start doing them for the entire enterprise also.
Regina: Considering recent advancements and debates in the AI field, how do you envision the evolving relationship between AI and DEI in the future?
Deep: Like anything new, some people are worried about AI, and it is vulnerable to threats. AI is vulnerable to bad actors teaching it bad things. Added to this, as AI usage increases and becomes more powerful, it can start becoming the voice of every organization, of every industry. In my mind, AI needs DEI support to become part of the solution. We, as the technology builders, will have to be careful to make sure that we are bringing in the right culture when developing the applications. If we do that, AI will become highly inclusive, highly diverse and it will really help in driving equity. And so, these two really go hand-in-hand.
Also, as I mentioned earlier, AI can bring information and education to different sections of society who can then make the right decisions—allowing for more equity and inclusion. But this will only be the case if systems are trained, not only on those it has dealt with in the past, but also with other sections of society as well.
Regina: How can AI be leveraged to drive more equitable outcomes for underrepresented communities?
Deep: I think that goes straight to the heart of what AI does. For any AI application, if you leave it to a couple of engineers to create solutions, then they may end up inadvertently bringing in a lot of bias. How do you deal with that bias? The only way you deal with bias is by having a lot more diversity in the process from the start.
So right out of the gates, diversity becomes almost the driver to reduce biases—because you can train the systems on anything. The only way you can get it correct at the start is if you are using a lot of diversity in how you build it. This means bringing in a lot more diversity in how the system is being supervised and in how the system is being tested and monitored—the full feedback loop. In our world of AI, I would say that diversity almost becomes the foundational level that you need if you really want to get this process right.
Regina: Thank you Deep for your insights.
As we embrace the AI-driven transformation in finance, we have a critical opportunity to enhance inclusivity and equity. AI can democratize financial services, but achieving this requires integrating DEI principles right from the start. As leaders in financial services, we must ensure AI is developed ethically—with diverse teams and unbiased algorithms—for the benefit of all segments of society.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Investment strategies that incorporate the identification of thematic investment opportunities, and its performance may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. Investing in information technology-related industries carries much greater risks of adverse developments and price movements in such industries than investing in a wider variety of industries.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Brazil: Issued by Franklin Templeton Investimentos (Brasil) Ltda., authorized to render investment management services by CVM per Declaratory Act n. 6.534, issued on October 1, 2001. Canada: Issued by Franklin Templeton Investments Corp., 200 King Street West, Suite 1500 Toronto, ON, M5H3T4, Fax: (416) 364-1163, (800) 387-0830, www.franklintempleton.ca. Offshore Americas: In the U.S., this publication is made available by Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906. Tel: (800) 239-3894 (USA Toll-Free), (877) 389-0076 (Canada Toll-Free), and Fax: (727) 299-8736. U.S. by Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com. Investments are not FDIC insured; may lose value; and are not bank guaranteed.
Issued in Europe by: Franklin Templeton International Services S.à r.l. – Supervised by the Commission de Surveillance du Secteur Financier – 8A, rue Albert Borschette, L-1246 Luxembourg. Tel: +352-46 66 67-1 Fax: +352-46 66 76. Poland: Issued by Templeton Asset Management (Poland) TFI S.A.; Rondo ONZ 1; 00-124 Warsaw. South Africa: Issued by Franklin Templeton Investments SA (PTY) Ltd, which is an authorized Financial Services Provider. Tel: +27 (21) 831 7400 Fax: +27 (21) 831 7422. Switzerland: Issued by Franklin Templeton Switzerland Ltd, Stockerstrasse 38, CH-8002 Zurich. United Arab Emirates: Issued by Franklin Templeton Investments (ME) Limited, authorized and regulated by the Dubai Financial Services Authority. Dubai office: Franklin Templeton, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E. Tel: +9714-4284100 Fax: +9714-4284140. UK: Issued by Franklin Templeton Investment Management Limited (FTIML), registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL. Tel: +44 (0)20 7073 8500. Authorized and regulated in the United Kingdom by the Financial Conduct Authority.
Australia: Issued by Franklin Templeton Australia Limited (ABN 76 004 835 849) (Australian Financial Services License Holder No. 240827), Level 47, 120 Collins Street, Melbourne, Victoria 3000. Hong Kong: Issued by Franklin Templeton Investments (Asia) Limited, 62/F, Two IFC, 8 Finance Street, Central, Hong Kong. Japan: Issued by Franklin Templeton Investments Japan Limited. Korea: Issued by Franklin Templeton Investment Trust Management Co., Ltd., 3rd fl., CCMM Building, 12 Youido-Dong, Youngdungpo-Gu, Seoul, Korea 150-968. Malaysia: Issued by Franklin Templeton Asset Management (Malaysia) Sdn. Bhd. & Franklin Templeton GSC Asset Management Sdn. Bhd. This document has not been reviewed by Securities Commission Malaysia. Singapore: Issued by Templeton Asset Management Ltd. Registration No. (UEN) 199205211E and Legg Mason Asset Management Singapore Pte. Limited, Registration Number (UEN) 200007942R. Legg Mason Asset Management Singapore Pte. Limited is an indirect wholly owned subsidiary of Franklin Resources, Inc. 7 Temasek Boulevard, #38-03 Suntec Tower One, 038987, Singapore.
Please visit www.franklinresources.com to be directed to your local Franklin Templeton website.
__________
1. Source: “AI has started a financial revolution-here’s how.” World Economic Forum. February 4, 2020.
