Generative AI Solutions to Empower Financial Firms

Forthcoming in the Journal of Public Policy & Marketing

Shashank Shaurya Dubey

Doctoral Student
Indian Institute of Technology Delhi
IIT Delhi Main Road, Hauz Khas, Delhi 110016
(989) 929-6256 | [email protected]

Vivek Astvansh* (corresponding author)

Associate Professor of Quantitative Marketing and Analytics,
Desautels Faculty of Management, McGill University, Canada

Academic Director, Bensadoun School of Retail Management, McGill University, Canada

Adjunct Associate Professor of Data Science, Department of Informatics,

Luddy School of Informatics, Computing, and Engineering,
Indiana University Bloomington, USA | [email protected]

Praveen K. Kopalle
Signal Companies’ Professor of Management, Professor of Marketing
100 Tuck Hall, Tuck School of Business at Dartmouth
Dartmouth College
Hanover, NH 03755
[email protected]
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Generative AI Solutions to Empower Financial Firms

ABSTRACT

The advent of Generative AI (GenAI) has caused consternation across the industrial
landscape. The financial industry is no exception. The scramble to find GenAI solutions in
the financial industry has led to a proliferation in the academic and practitioner literature on
the subject. However, given the scramble, the field of knowledge remains scattered. The
authors offer four deliverables. First, using a survey of the literature and interviews of
managers in financial firms, they create a funnel-shaped, two-stage framework of how GenAI
can empower financial businesses. The top stage comprises seven GenAI value propositions
for financial firms, condensed into the EMPOWER acronym. The bottom stage includes three
functions for each proposition. Second, the authors propose 10 novel GenAI-based
applications spanning the five verticals of financial services, thus extending the current
industrial focus of GenAI applications. Third, they outline the benefits and risks of these
GenAI applications, visualizing them in a benefit-risk matrix to assist financial managers in
prioritizing these applications. Fourth, they propose research questions to guide academic
research and policymaking at the intersection of GenAI and finance.

Keywords: Generative AI, financial firms, finance, artificial intelligence, ChatGPT

INTRODUCTION

While Artificial Intelligence (AI) has already changed the way businesses operate,

Generative AI (GenAI) promises an even more transformative leap (Chui et al. 2023).

GenAI—a sub-variant of AI (Banh and Strobel 2023)—refers to large language models

(OpenAI et al. 2023; Vaswani et al. 2017) that self-learn from vast volumes of data to

generate text, images, audio, and video in response to natural-language prompts (Bommarito

et al. 2023). This ability to create multimedia content through natural language instructions is

what makes GenAI “transformative” (Kumar et al. 2024; OpenAI et al. 2023).

With technology embedded in the core of its business functions, the finance industry

is uniquely positioned to harness the power of GenAI (Feyen et al. 2021). Indeed, McKinsey

& Company estimated that adopting GenAI in banking could add an annual value ranging

from $200 billion to $340 billion to the industry (Chui et al. 2023). The Boston Consulting

Group considered GenAI a revolution that could disrupt every industry, offering a substantial

competitive advantage to industries that choose early adoption (Candelon et al. 2023). Banks

have begun to make leaps towards adopting GenAI (Evident Insights 2023). The Evidence
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Index Report 2023 revealed a remarkable escalation in GenAI-specific roles in the financial

job market, surging from just 11 active positions in March 2023 to a staggering 79 by August

2023 globally (Evident Insights 2023). Table 1 compares our article with prior research (all

preprints). We analyze the GenAI functions proposed in each paper and compare them to our

EMPOWER framework. The comparison helps elicit our article’s contribution.

Table 1. Prior Reviews on GenAI and Finance

Note: E = Enhancing Customer Experience, M = Managing Risk and Compliance, P = Personalizing Marketing,
O = Optimizing Operations, W = Working Productivity, E = Easing Portfolio Management, and R = Ramping
Innovation. ✓ indicates yes, whereas  means no. Classification of the method of review is based on Grant and
Booth (2009).

Research
Method Focus of review Source Framework
directions
E MP O WE R
Ali and Aysan (2023) Overview ✓       ChatGPT  
Barde and Kulkarni (2023) Overview ✓ ✓  ✓    Literature  
Chen, Wu, and Zhao ChatGPT +
Overview ✓ ✓   ✓    
(2023) Literature
Dong, Stratopoulos, and
Scoping review  ✓  ✓  ✓  Literature  
Wang (2024)
Kalia (2023) Overview  ✓    ✓  ChatGPT  
Krause (2023) Overview  ✓   ✓ ✓  Literature  
Li et al. (2023) Survey ✓ ✓    ✓  Literature ✓ 
State-of-the-art
Nie et al. (2024) ✓ ✓  ✓ ✓ ✓  Literature  
review
Mixed methods
Zhao et al. (2024) ✓ ✓ ✓   ✓  Literature  
review
Zhao and Wang (2024) Overview ✓ ✓  ✓ ✓   Literature  ✓
Mixed methods Interviews +
Current Study ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
review Literature

Considerable excitement around GenAI has spurred academic research on the topic.

Our review article synthesizes the current state of knowledge and outlines the scope of GenAI

solutions for financial firms (Snyder 2019). We also bind prior knowledge into a conceptual

framework that helps streamline and structure GenAI solutions for financial firms (Palmatier,

Houston, and Hulland 2018). This framework provides a lens through which researchers,

managers, and policymakers may analyze the potential of GenAI in finance, identify critical
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success factors, and frame effective regulation. Further, unlike prior reviews we adhere to a

systematic survey protocol—the PRISMA guidelines (Page et al. 2020)—to ensure the

transparency and replicability of our study (Palmatier, Houston, and Hulland 2018; Snyder

2019). Additionally, most reviews adopt a technical perspective on GenAI solutions in

finance, thus diluting the business focus of the reviews (Nie et al. 2024). We have overcome

this dilution by interviewing financial managers, thus lending a strong business focus to our

research (Astvansh, Antia, and Tellis 2024; Gioia 2022). Further, given the risks associated

with GenAI, we highlight key policy implications and propose a research agenda to guide

regulators, researchers, and practitioners.

Specifically, we contribute through four deliverables. First, (1) interviews of

managers in financial firms and (2) a review of the relevant literature (using the PRISMA1

method) help us create a funnel-shaped framework of how GenAI empowers financial

businesses. The framework (our first deliverable) comprises two stages. The top stage

consists of seven GenAI value propositions to financial firms. The first letters of these

propositions lead us to create the EMPOWER acronym. The bottom stage includes three

functions for each value proposition. Second, we highlight the current applications of GenAI

in financial firms and contribute by illustrating 10 novel GenAI applications for these firms.

We arrange these applications along five verticals of financial firms based on existing

classifications. Third, we specify the benefits and risks of the applications. We arrange the

application in a 2 × 2 benefit-risk matrix, which builds on two risk-based principles and

benefits accrued from core versus ancillary financial services (Ozment and Morash 1994).

Positioning the applications in the matrix allows managers to trade off the benefits and risks

and prioritize implementing applications that yield the greatest net benefits. Fourth, we

1
PRISMA is Preferred Reporting Items for Systematic Reviews and Meta-Analyses (Page et al. 2020).
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propose three research questions for each of the seven value propositions, flagging key policy

implications to guide academic researchers, regulators, and industry stakeholders.

Web Appendix A describes GenAI’s evolution and its current uses in finance. More

concretely, Table WA1 summarizes the current knowledge at the intersection of GenAI and

finance.

METHOD

We utilize the theories-in-use approach (Zeithaml et al. 2020) that blends qualitative

insights from practitioner interviews with the literature to conceptualize emergent themes

(Challagalla et al. 2014; Strauss and Corbin 1990). We further enrich the analysis by using

secondary sources—such as corporate reports, magazine articles, and web blogs—published

by professional firms engaged in or associated with financial business (Astvansh, Antia, and

Tellis 2024).

Practitioner Interviews

Sampling and interviews

Given the novelty of the research at the intersection of GenAI and finance, we

explored the knowledge at this intersection by interviewing managers from the financial

industry. The interviews aim to assess the current adoption and prospects of GenAI in

financial businesses. We followed an interview approach adopted in prior marketing and

public policy research (Astvansh, Antia, and Tellis 2024; Morgan and Zane 2022).

Specifically, we used our industry connections to employ purposive sampling in identifying

prospective interviewees (Challagalla et al. 2014). We contacted 20 prospects, out of which

10 accepted our invitations, and ended up with nine transcripts, as one remained incomplete.

Each participant held a management job title in a prominent financial firm (see Table 1 for

sample characteristics). Participants’ industry tenure had a mean of 17.5 years and a range of

five to 30 years. The participants’ functional backgrounds included finance, economics, and

data science, thus offering us broader perspectives (Creswell and Creswell 2018). The first
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author corresponded with the interviewees between March 2024 and April 2024. The

interview protocol was designed to explore GenAI functionalities currently in use, expected

to be used, and the benefits and risks that managers see in its adoption by financial firms. The

interview included an open-ended, predefined set of questions (see Web Appendix B for

questions). The first author followed up on the interviewee’s answers to seek clarification.

Table 2. Interviewees

Years of
Role Organization
Experience
Senior Product Manager Fintech with 7.5 billion USD market capital 8
Senior Manager Bank with over 4 billion USD market capital 5
E-commerce firm engaged in merchant financing with a
Senior Product Manager 10
40 billion USD market capital
Director - Products Fintech with 12 billion USD market capital 12
Vice President - AI-based customer support service provider for financial
21
International Business businesses
Assistant Vice President
Bank with a 42.73 billion USD market capital 10
(Strategy)
Data Scientist Bank with a 163.59 billion USD market capital 5
Vice President Bank headquartered in the United States 10
Ex-General Manager Bank with a 92.13 billion USD market capital 30
*Market capital figures have been sourced from Bloomberg Research Data Analysis

We followed Strauss and Corbin’s (1990) coding procedure to ensure analytical rigor

and transparency in our analysis. The first author coded interviewees’ answers to (1) Gen AI

tools their organization is using or may use and (2) business functions these Gen AI tools

may serve. Following Gioia, Corley, and Hamilton’s (2013) procedure, we elicited 40 tasks

that GenAI can perform for financial firms. Next, we grouped these tasks into GenAI

functions. Last, we combined the functions into Gen AI’s value propositions for financial

firms (see Table WC1 in Web Appendix C for our detailed coding scheme). We ensure the

reliability and accuracy of our coding procedure by enlisting two external reviewers who
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independently coded the transcripts. Codes had an inter-judge reliability of over 0.80, well

over the 0.70 threshold for exploratory research (Rust and Cooil 1994).

Database: Search and Screening Protocol

Our search and screening of manuscripts followed prior marketing studies’ quality

criteria (Astvansh, Antia, and Tellis 2024; Jorzik et al. 2024). We selected Scopus because it

is the largest academic research database, containing 95% of peer-reviewed articles (Donthu

et al. 2021). Next, we searched the Scopus database for published manuscripts and

conference proceedings with the keywords “Generative AI” and “fin*.” We read the resulting

articles and included them in our search string frequently appearing author-specified

keywords (see Figure 1). We included journal articles from the Australian Business Dean

Council-listed A* and A or rated 4*, 4, or 3 by the Chartered Association of Business Schools

(Kraus et al. 2022). Further, we included papers from leading management and computing

conference proceedings (Astvansh, Antia, and Tellis 2024). Following Kraus et al. (2022), we

excluded (1) documents outside the domain of “Business, Management, and Accounting” and

“Economics, Econometrics, and Finance,” (2) book chapters and books because they are not

peer-reviewed, and (3) non-English documents because English is the academic lingua

franca. We read the remaining documents by reading the title, keywords, and abstracts,

followed by a full-text reading.

We also searched for preprints on Social Science Research Network and arXiv—two

large databases for pre-published literature (Bagchi, Malmi, and Grabowicz 2024). We

screened the preprint documents based on the relevance of the subject domain, title,

keywords, and abstract. For example, we excluded arXiv documents outside the subject area

of “economics and quantitative finance.” We searched SSRN documents in the “economics,”

“finance,” “financial investment and planning,” and “management” categories. Additionally,

we read forward- and backward-cited articles and included relevant documents in our data
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set. We included all cross-references that we found relevant to the review and that satisfied

the quality criteria. We remain abreast of industry developments by supplementing the

academic literature with 14 reports from consulting and financial firms and eight web

pages—mostly press releases—collectively called industry reports. Subsequently, our corpus

included 152 “documents,” which we analyze next.

Figure 1. Search Protocol and Screening Criteria based on PRISMA

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GENAI’S VALUE PROPOSITIONS AND FUNCTIONS IN FINANCIAL FIRMS

Practitioner interviews and our academic and practitioner literature review led us to

seven value propositions (see Table WC1 in Web Appendix C). The first letters of the

propositions form the EMPOWER acronym. Each proposition is implemented via three

functions. In the seven subsections that follow, we introduce the value proposition, and

discuss the three functions one by one, emphasizing how GenAI empowers a financial firm in

implementing the function.

Figure 2. A Funnel Framework of How GenAI Empowers Financial Businesses

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Enhancing Customer Experience

“It (GenAI) has helped create chatbots that can curate smart responses based on millions of data points as it’s
sitting on a wealth of knowledge that a human cannot possibly possess.” – Authors’ interviewee

Customer experience is the sequence of interactions between a customer and a firm

across the prepurchase, purchase, and post-purchase journey (Puntoni et al. 2021). Across

these three stages, customers may interact with a bot to receive personalized

recommendations, delegate tasks, and/or engage in interactive communication (Puntoni et al.

2021). By offering (1) quick query resolution, (2) human-like responses, and (3) a

personalized service experience, GenAI-based bots can augment customer support,

eventually enhancing the overall customer experience. We elaborate on these three functions

next.

Providing quick resolution: Real-time and relevant responses to customer queries are

critical in fostering customer trust in the firm (Adam, Wessel, and Benlian 2021; Huang and

Rust 2018). Our interviewees expressed optimism that GenAI-enabled chatbots would

facilitate swift query resolution and generate intelligent responses, enabling financial firms to

enhance customer service efficiency. One of the interviewees noted:

“GenAI-based customer-facing virtual assistants and chatbots provide instant query resolution.”

McKinsey & Company cited a study that found that an organization experienced a

14% rise in issue resolution rate per hour and a 9% decrease in handling time by employing

GenAI chatbots (Chui et al. 2023). Further, GenAI can also empower human service agents

by instantly retrieving customer data, framing customized responses, and allowing them to

address inquiries more effectively on the first contact (Huang and Rust 2023). GenAI-

powered virtual assistants have also been reported to accelerate the account reconciliation

process in financial firms—with a 95% accuracy—by generating on-demand, quick, and

accurate information for customer queries (Yadav et al. 2024).

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Giving human-like responses: Compared to predictive AI-based chatbots, GenAI bots

carry more feeling capacity, enabling them to recognize, understand, and reciprocate human

emotions (Huang and Rust 2023). The ability to generate more human-like responses fosters

experiential value, intimate consumer-brand relationships, satisfied customers, and positive

brand perceptions. In this context, one of our interviewees noted:

“Our GenAI-based “x” customer support channel solves customer issues without needing a human
agent contact.”

Chatbots’ empathetic responses can generate value for a firm by enriching the

customer’s affective and social experience and engendering loyalty and customer well-being

(Liu-Thompkins, Okazaki, and Li 2022). Contextualized understanding of language enables

GenAI to adapt its responses to customers (Huang and Rust 2023; Mei et al. 2024). Such

responses reciprocating customer empathy could build symbiotic interactions that will be

valuable to the firm, strengthening customer satisfaction and the propensity to forgive firms

in cases of service dissatisfaction (Huang and Rust 2023; Liu-Thompkins, Okazaki, and Li

2022).

Personalizing service experience: Additionally, customer experience can be enhanced

by offering a personalized service experience to the customers (Lo, Ross, and Harris 2024).

GenAI’s ability to process information and generate responses based on past customer

conversations and behavior patterns enables the personalization of the service experience

(Fieberg, Hornuf, and Streich 2023). In this context, our interviewees responded:

“GenAI can provide personalized and proactive customer experiences.”

Research has reported GenAI facilitates personalized financial advisory services for

retirement plans (Lo, Ross, and Harris 2024), investment portfolio selection (Fieberg, Hornuf,

and Streich 2023), and personal asset management (Huang et al. 2024). Such machine

intelligence enhances chatbots’ existing capabilities to not only streamline the service

experience but also foster a sense of valued interaction due to more fine-tuned responses
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(Huang and Rust 2023). The superior experience could eliminate frustrating wait times, and

language barriers as transformer-powered models enable multilingual translation in real-time,

fostering a more inclusive customer experience (Dong, Stratopoulos, and Wang 2024;

Kopalle et al. 2022).

Managing Risk and Compliance

“Private banks can leverage Gen AI tools to strengthen their risk management processes and mitigate potential
financial risks effectively.”

The financial regulatory regime presents a contrasting picture: one, of overregulation

and regulatory complexity in the banking industry, and two, of under-regulation and

regulatory uncertainty in the financial technology (FinTech) space (IMF 2022). Businesses

must navigate this complex and dynamic ecosystem, making them prone to the risk of

regulatory breaches. In this pursuit, GenAI can aid financial businesses in risk management

and compliance through (1) accurate risk profiling, (2) regulatory reporting, and (3) fraud

detection. We describe each function next.

Profiling customers accurately: GenAI can extract and process multi-sourced

unstructured data—text, image, and audio—quickly and accurately (Wu et al. 2023; Zhao et

al. 2023). This technological superiority enables investment firms to use GenAI to build a

more accurate customer risk profile (Cao et al. 2024; Yin et al. 2023). Higher accuracy not

only ensures more effective Know-Your-Customer (KYC) compliance but also reduces the

risk of onboarding potential fraud firms (Moody’s 2024). Indeed, one interviewee quipped:

“GenAI can be used to manage financial risks more effectively, including credit risk, market risk,
and operational risk.”

Unlike predictive AI, GenAI can perform context-specific sentiment analysis.

Research has shown that contextual analysis of news headlines about commodity price

movements can more accurately predict industry-specific risks (Breitung, Kruthof, and

Müller 2023). An accurate analysis of industry risks will allow financial firms to dynamically
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adjust credit provisioning, setting aside appropriate reserves to mitigate the risk of

bankruptcy. Similarly, by evaluating semantic discrepancies in earning call responses—by

managers vis a vis GenAI—researchers have unveiled potential hidden risks that were

undisclosed in manager responses to earnings calls (Bai et al. 2023). In related research,

GenAI was utilized to analyze earnings call transcripts to uncover corporate risk by

evaluating firm exposure to political, climate, and AI-related risks (Kim et al. 2023). These

capabilities enable financial firms to accurately risk-profile current and prospective

customers.

Enabling regulatory reporting: The financial industry is globalized, and businesses

must comply with not only national regulations but also global regulatory requirements

(Shabsigh 2023). Navigating international regulations can be time-consuming and error

prone. GenAI’s ability to retrieve and process data and generate information makes it

particularly adept at the task of regulatory reporting (Cao and Feinstein 2024). Firms can use

GenAI to automate report creation, ensuring accuracy and consistency in language and

compliance with ever-evolving regulations (Dowling and Lucey 2024). This automation can

allow people to focus on core business activities. Our interviewee notes:

“Gen AI tools can help private banks ensure compliance with regulatory requirements.”

Financial firms have traditionally managed the operational risk of an event by

collecting data on past losses, calculating capital provisioning requirements, and reporting

these data to the regulator (BCBS 2023). In this context, Cao and Feinstein (2024) reported

how GenAI can interpret complex financial regulations to ease banks’ regulatory reporting.

Similarly, research has shown how financial firms can adhere to sustainability reporting

norms by developing a GenAI-based audit prompt framework (Föhr et al. 2023) and fine-

tuned conversational chatbots such as “chatclimate” (Vaghefi et al. 2023).

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Detecting fraud: Financial frauds have been categorized into payment-related fraud,

bank-related fraud, corporate fraud, insurance fraud, money laundering, and terror financing

(BCBS 2023; West and Bhattacharya 2016). A data paradox constrains fraud detection. The

sheer volume of transaction data can generate noise and false positives. Further, the scarcity

of fraud-related sample data prevents effective training of predictive AI models to detect

fraud (Hilal, Gadsden, and Yawney 2022). In this respect, our interviewees note:

“GenAI can be used to detect fraudulent activities, identify suspicious patterns, and assess credit
risks more accurately.”

GenAI can solve the problem by generating synthetic data that mimics real-world

samples of fraud data (Loukas et al. 2023). Such data sets can be utilized to train fraud

detection models, enhancing their ability to identify suspicious activity with greater precision

(Lu and Sester 2024; Schwarz 2024). Indeed, Leippold (2023) demonstrated the vulnerability

of existing keyword-based approaches—used by predictive AI—in measuring the sentiment

of manipulated financial data. Instead, they suggest using context-aware approaches like

BERT to detect and mitigate data manipulation in financial reporting more accurately. Firms,

such as Mastercard and Stripe, are leveraging this suggestion to bolster their fraud detection

efforts (Mastercard 2023; OpenAI 2023).

Personalizing Marketing

“Gen AI tools can analyze user’s financial data, investment preferences, and risk tolerance to offer personalized
financial planning and investment advice.”

While traditional personalization methods—based on predictive AI—rely on basic

segmentation and rule-based targeting, GenAI enables hyper-personalization at scale (Jansen

et al. 2024). Concretely, GenAI can adapt responses in real-time and generate human-like

responses that mimic the prompt-writer’s linguistic style and emotion (Huang and Rust

2023). Based on these abilities, we believe GenAI can empower financial businesses by (1)

enabling adaptive marketing, (2) strategizing the sales approach, and (3) omnichannel

marketing.
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Enabling adaptive marketing: GenAI can transform marketing and sales activities to

be more adaptive and data driven. For example, GenAI-based models can craft persuasive

messages (Kapoor and Kumar 2024), incorporate customer response (Huang and Rust 2023),

and develop effective sales approaches based on real-time feedback (Sinha, Shastri, and

Lorimer 2023). This approach enables GenAI-driven marketing to achieve hyper-

personalization at scale, which is not possible with predictive AI (Jansen et al. 2024). Our

interviewee concurred:

“GenAI tools can be used to provide personalized offers to clients.”

Research evidence supports our claim. For example, Kapoor and Kumar’s (2024)

GenAI-generated personalized video ads resulted in a 6% to 9% increase in viewer

engagement. Personalization has additional benefits, such as superior brand experience and

effective customer relationship management (Kumar et al. 2019). Another study

demonstrated how firms can customize GenAI models by training them on images to craft

effective visual marketing collaterals (Jansen et al. 2024). Indeed, GenAI-produced images

achieve higher engagement at each stage of the purchase funnel compared to human-

generated images (Jansen et al. 2024).

Strategizing sales approach: GenAI-powered tools can also be valuable for sales

agents working in a highly dynamic, customer-facing environment (Sinha, Shastri, and

Lorimer 2023). They can utilize GenAI to obtain a real-time customer feedback analysis by

manually feeding responses or using voice-to-text tools (Deveau, Griffin, and Reis 2023).

Such analysis could help agents adjust their interaction style and sales pitch based on these

inputs, resulting in a more adaptable sales force (Marinova et al. 2017). Our interviewee

offered examples:

“Utilizing GenAI for analytics—trend analysis, lead scoring, and lead generation.”

GenAI models can be trained on sales-specific data (Nie et al. 2024). Additionally,

these sales inputs can be fed back into the training model to fine-tune it and empower the
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sales teams to constantly refine their approach to create targeted content (Sinha, Shastri, and

Lorimer 2023). Therefore, GenAI can significantly improve conversion rates and overall

sales performance by nurturing leads with personalized content throughout the sales funnel

(Deveau, Griffin, and Reis 2023).

Driving omnichannel marketing: Potential customer touchpoints have grown

substantially with the expansion of marketing channels. Consequently, omnichannel

marketing is crucial in ensuring consistent messaging, as disjointed communication may

jeopardize customer loyalty (Mainardes, Rosa, and Nossa 2020). However, data access and

integration, and customized content generation have been a challenge, preventing financial

firms from achieving successful omnichannel presence (Cui et al. 2021). GenAI models can

revolutionize omnichannel marketing for financial firms. One of our interviewees elaborated:

“GenAI could be used in marketing for generating copies for ads, blogs, (and) social media posts.”

GenAI can extract and process data from multiple customer touchpoints—mobile

apps, websites, and social media—and generate a unified customer profile, thus allowing

consistent messaging across channels. Along similar lines, GenAI can identify customer

preferences across channels and deliver personalized content optimizing content generation

across channels (Huang and Rust 2023).

Optimizing Operations

“KYC verification is one important process of onboarding a business as one of the documentation requirements.
Gen-AI has helped make this 10X faster and (more) efficient.”

Regulatory mandates and the sensitivity of financial services require banks to engage

in extensive record-keeping (Arner et al. 2017). Concurrently, large organizational structures

build inertia, making these organizations unwieldy and unwilling to change. GenAI can

address these challenges by undertaking three functions: (1) automating routine tasks, (2)

managing internal knowledge, and (3) standardizing data practices thereby optimizing

operational efficiency. We elaborate on each next.

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Automating routine tasks: Financial firms handle volumes of customer data, often

involving manual processing of application forms for account opening, Know-Your-Customer

(KYC) norms, and other verification procedures (Li and Vasarhelyi 2024). This manual

approach is not only slow but also prone to errors. GenAI-based models can be trained to

perform clerical and time-consuming tasks such as invoicing, writing memos, and preparing

inventory (Sarmah et al. 2023). The automation of routine work, which currently takes about

60% to 70% of work time, would relieve employees of repetitive and time-consuming tasks

(Chui et al. 2023). An interviewer summarized:

“GenAI would help in managing mundane financial tasks.”

This automation could free up valuable human capital, which can be deployed to

focus on higher-value activities that boost firm productivity (Rasouli, Chiruvolu, and Risheh

2023). Additionally, GenAI-based automation has been reported to enhance the efficiency and

effectiveness of audit processes—both internal (Eulerich et al. 2023) and external (Fotoh and

Mugwira 2023). Gerling and Lessmann (2023) built a classifier that can process multimodal

data to achieve 75% model performance—based on accuracy—with as little as 30% training

data, which can open doors to expedited automation in financial firms.

Managing internal knowledge: As per McKinsey & Company, tasks mostly involving

the application of natural language occupy about 25% of the total work time at financial firms

(Chui et al. 2023). These tasks consume a significant portion of employee effort in searching

for existing knowledge, piecing together information from various sources, and processing

this information to draw relevant knowledge. GenAI-based tools can synthesize knowledge

from disparate sources, generating summaries that consolidate key insights and saving

employees valuable time and intellectual effort (Zhao and Wang 2024). An interviewee

offered us an example:

“GenAI can be used for the quality monitoring of voice calls in the form of script and summary of
each voice call in contact center environment.”
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In two widely acknowledged assessments for professional knowledge workers—the

Certified Public Accountants (CPA) exam and the Regulation (REG) exam—GPT-3.5

performed exceedingly well, answering 57.6% of the questions correctly (Bommarito et al.

2023). The results demonstrate GenAI’s transformative potential to excel as a knowledge

worker, optimizing internal knowledge management and facilitating the creation of novel

insights at higher efficiency and quality.

Retrieving unstandardized data: Banks often store customer data in siloed servers

across branches, leading to the problem of unstandardized data (Berner and Judge 2019).

GenAI models can solve this problem. For example, Wang et al. (2023) demonstrated how

GenAI can decode complex spatial layouts of documents and summarize relevant information

in natural language. An interviewee concurred:

“Gen AI tools help improve data retrieval and documentation verification process.”

GenAI can draw information from content with irregular layouts, potentially

addressing the critical problem of unstandardized data in banks. GenAI’s information

extraction ability has been further demonstrated for documents that comprise numeric and

text data, which in turn may be in narrative and tabular forms (Li et al. 2024b; Yue et al.

2023). Imagine a loan officer asking: what are Mary Kay’s total assets across all our

systems? Instead of the officer manually searching through fragmented databases, they may

type this question in a GenAI tool. The tool can understand the prompt and synthesize

information from varied sources, reducing processing time and human error rates

significantly (Li et al. 2024a; Wang et al. 2023).

Working Productivity

“Tools will vary by use cases. For example, for colleague productivity improvement, Microsoft Copilot is used
amongst several banks - For software development, GitLab is used - Several banks are also developing their
own proprietary tools.”

While global labor productivity registered modest growth in the decade from 2011 to

2020, productivity gains have been marginal in the past few years following the surge during
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COVID-19 (OECD 2024). Given the aging demographics in the developed world,

productivity growth might be further constrained, dragging economic recovery in the long

term. Research has shown that GPT models could boost annual productivity between 1.4%

and 2.7% across developed markets for the next ten years (Albrecht and Aliaga 2023). Gains

in workforce productivity will materialize through (1) informed decision-making, (2) cost

optimization, and (3) increase in software developer efficiency.

Making informed decisions: GenAI-based models could substantially augment

employee capabilities through quicker retrieval of information that will enable faster and

more informed decision-making (Huang, Wang, and Yang 2023). Financial businesses are

training GPT models on proprietary data to cater to their specific needs and offer customized

support to their employees. For instance, Morgan Stanley is training GPT-4 to aid and assist

their consultants in answering basic investing and financial queries (Forbes 2023), and

BloombergGPT—a 50-billion parameter language model—is equipped to generate short

news headlines, answer financial queries, and retrieve financial data (Wu et al. 2023). An

interviewee told us:

“GenAI enables managers to extract actionable insights from large volumes of data.”

In separate studies, GenAI was found to augment the productivity and quality of work

carried out by financial consultants (Dell et al. 2023) and the research capabilities of tax

professionals (Alarie et al. 2023). Yang et al. (2023) built InvestLM—a fine-tuned GenAI

model—capable of evaluating financial texts and advising investment-related queries, helping

augment the productivity of financial consultants. These models open doors beyond task

automation, with significant benefits in knowledge management, decision-making, and

ideation (Bouschery, Blazevic, and Piller 2023; Li et al. 2024a).

Optimizing costs: Firms are also expected to gain productivity benefits due to cost

optimization, as higher workforce productivity would enable the same output level in a short
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time and with fewer employees (Albrecht and Aliaga 2023). This optimization is

consequential because our interviewees viewed cost as a barrier to leveraging opportunities.

GenAI-based tools can address this concern by streamlining knowledge management, which

is a significant time and resource drain in many institutions (Bommarito et al. 2023). A

manager of a private bank agreed with this perspective:

“GenAI will lead to increased operational efficiency and cost savings for private banks.”

Additionally, GenAI can enable financial firms to insource more tasks by their

employees, thereby cutting agency costs (Allen, Berg, and Potts 2023). Kanbach et al. (2023)

demonstrated how using GenAI could bring down the cost of content generation. The saved

resources can be invested to upgrade technology, enabling productivity gains and cost

optimization to build the firm’s long-term competitive advantage.

Increasing developer efficiency: GenAI is also a powerful tool for augmenting the

efficiency of software developers (Kamalnath et al. 2023). Because financial firms depend

heavily on software, several interviewees affirmed using GenAI in coding assistance and

software development, like GitLab, to streamline software delivery. Other potential GenAI-

driven applications could include code generation, automated testing, bug detection, and

performance optimization (Banh and Strobel 2023). An interviewee quipped:

“GenAI could serve as coding assistants and (in) software development.”

Eloundou et al. (2023) reported that access to GenAI will enable about 15% of the

working tasks—mostly software-related—to be completed at the same quality of work but

significantly faster. Similar results are reported by JPMorgan, which projects worker

productivity to increase by 1.4% to 2.7% annually across developed markets over the next ten

years (Albrecht and Aliaga 2023). Another study reported that software developers who use

Microsoft’s GitHub Copilot completed tasks 56% faster compared to those who did not use
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Copilot (Chui et al. 2023). Therefore, the integration of GenAI is expected to augment

developer efficiency.

Easing Portfolio Management

“GenAI can be deployed in studying market dynamics and current trends in the industry, set portfolio markers
and triggers based on the risk appetite of the bank.”

Managing portfolios is a complex activity fraught with unexpected twists and turns.

Our interviewees acknowledged the potential application of GenAI in portfolio management

and identified various enablers that could make this possible. Broadly, these enablers

included (1) predicting stock profitability, (2) detecting marketing anomalies, and (3)

promoting investor awareness.

Predicting stock profitability: Several studies have reported GenAI to outperform

predictive AI in sentiment classification tasks, thereby predicting stock price movements and

returns with greater accuracy (Fatouros et al. 2024; Guo and Hauptmann 2024; Hu et al.

2023). For example, Cao et al. (2024) demonstrated GenAI’s power in analyzing earnings call

transcripts—combining text classification, sentiment analysis, and audio segment analysis—

to comprehensively understand stock performance drivers. An interviewee who specializes in

wealth management offered us the following insight:

“GenAI tools (are being used) in the front office like (for) wealth management and trading.”

Researchers have fine-tuned GenAI models to create knowledge graphs, which have

been shown to improve the accuracy of stock price forecasting (Chen et al. 2024; Qian et al.

2024). Further, GenAI has been reported to outperform current stock pricing benchmarks—

based on predictive AI models—in picking profitable stock portfolios (Ko and Lee 2024).

Similarly, GenAI-based modeling of stock price movement—based on the favorability of

news about a firm—was found to be a more precise indicator of stock return (Lopez-Lira and

Tang 2024). Last, by training GenAI on stock-related data, researchers have built specialized

models for investment forecasting—which include, InvestLM (Yang, Tang, and Tam 2023),
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InvestAR (Gupta 2023), Ploutos (Tong et al. 2024), QuantAgent (Wang et al. 2024), FinMem

(Yu et al. 2023), and TradingGPT (Li et al. 2023).

Detecting market anomalies: Predicting market anomalies has been fraught with

failures and has relied mostly on expert judgments (Chen et al. 2023). Signs of market failure

are associated with information demand and supply over the internet (Nikkinen and

Peltomäki 2020) and characterized by buildup phases leading to market crisis (Chen et al.

2023). Our interviewees were optimistic about the use of GenAI in flagging market

anomalies. They believed that GenAI could assist in establishing portfolio triggers, thereby

facilitating adjustment in investment strategies based on real-time risk assessments (Kim

2023; Liu 2024). One interviewee suggested:

“GenAI can be utilized to set portfolio markers and triggers, and identify good and bad segments of the
portfolio.”

Research has demonstrated the potential of GenAI in predicting market anomalies by

analyzing investor sentiment on social media (Vamossy and Skog 2023). Additionally,

augmenting the capital asset pricing model (CAPM) with narrative analysis using GenAI

caused an increase in not only the CAPM’s explanatory power but also its effectiveness in

flagging abnormalities in asset price movement (Zhang 2023). In another study, Tepelyan and

Gopal (2023) performed risk forecasting—by measuring volatility and value at risk—by

training a GenAI model on the joint distribution of all Standard & Poor 500 companies. They

found it to perform better than predictive models. Similarly, Song et al. (2024) and Wang et

al. (2023) showcased how GenAI can be trained on historical financial data to build an early

warning system for flagging financial risk in stock markets.

Promoting investor awareness: Investor education is another promising application of

GenAI. Financial data can be overwhelming and complex, impeding individual investors’

decision-making. GenAI can generate clear and concise summaries of large, abstract data and

thus help solve the problem. For instance, GenAI can efficiently summarize complex
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corporate disclosures and analyze them to predict the direction of a firm’s future earnings

(Kim, Muhn, and Nikolaev 2024). These summaries may empower investors to draw insights

into future earnings, enabling them to manage their portfolios better. One of our interviewers

who advises investors suggested:

“GenAI can be utilized for providing financial advisory services.”

Similarly, GenAI-based sentiment analysis of monetary policy announcements was

reported to predict future policy rates more accurately, empowering investors to make

informed decisions (Smales 2023). By breaking down complex financial vocabulary and

drawing analysis based on nuanced differences, GenAI can harbor a more informed and

engaged investor base (Alemany 2024). Additionally, GPT achieved a near-perfect score on

the financial literary test, making it a tool for spreading financial literacy (Niszczota and

Abbas 2023).

Ramping Innovation

“By analyzing customer behavior, market trends, and economic indicators, banks can make data-driven
decisions, identify new business opportunities.”

Our literature review identified potential applications of GenAI for fostering

innovation in financial institutions. We align these applications with the different stages of the

new-product development process (Schilling and Hill 1998), and explain how GenAI can

drive innovation in financial firms, specifically in (1) opportunity identification, (2) concept

development, and (3) product and process design.

Identifying product opportunity: Opportunity identification is crucial for initiating

product innovation. GenAI trained on market research data can carry out a comprehensive

analysis of multimodal data—text, image, audio, and video—to identify customer pain points

and unmet market needs (Feng et al. 2024). An interviewer agreed:

“GenAI can be used to identify new business opportunities.”

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Customers may often not articulate these needs. Therefore, GenAI could be

particularly useful by analyzing social media data to uncover these latent needs articulated in

natural language (Dowling and Lucey 2024). Competitor analysis is also key in identifying

market opportunities. Through an analysis of competitor offerings, pricing fluctuations, and

marketing campaigns, GenAI can bring out market gaps, which help in planning the

innovation roadmap (Bouschery, Blazevic, and Piller 2023). Once the gaps are identified,

GenAI can articulate the innovation problem and assist in choosing the most optimal solution

suitable for addressing the given problem (Bouschery, Blazevic, and Piller 2023).

Developing the product concept: GenAI can help develop creative product ideas

within financial organizations. During the crucial concept-development stage, GenAI can

overcome the limitations of conventional thinking by analyzing vast volumes of data—

including market statistics, competitor offerings, and customer reviews—to produce a holistic

analysis and draw meaningful insights on product conceptualization (Bouschery, Blazevic,

and Piller 2023). An interviewer who specializes in customer insights offered us the

following insight:

“GenAI can classify product users into segments and conceptualize products accordingly.”

GenAI’s iterative prompting can build upon initial ideas, creating a chain of thought

that refines the concept and ensures it remains relevant to the market as the product cycle

evolves (Wang et al. 2022). This ability to iterate and improve on initial concepts based on

contextual awareness of the environment will allow financial firms to develop products that

are not only innovative but also have a higher chance of success in the marketplace.

Additionally, the use of GenAI is expected to optimize the product conceptualization cycle by

minimizing time, maximizing product fit, and squeezing the cost of the process (Mariani and

Dwivedi 2024).
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Designing the product and process: GenAI can offer valuable assistance during the

product and process design stages. GenAI-powered models can effectively assess patent

value and the likelihood of patent acceptance by analyzing complex data sets through text

embedding techniques, enabling the estimation of the quality and impact of a product

invention (Yang et al. 2023). An interviewee told us:

“GenAI can aid in brainstorming go-to-market strategy for products, writing product requirement
documents, (and) understanding product user segments.”

GenAI models can be trained on customer demographic data and suggest tailored

product configurations for specific segments (Bouschery, Blazevic, and Piller 2023).

Additionally, GenAI can assist in planning initial design iterations by generating diverse

testing scenarios (Bouschery, Blazevic, and Piller 2023). The application of GenAI could

affect the business-model innovation process by optimizing resource allocation, reducing the

cost of innovation, and expediting time-to-market—overall, shortening the product

innovation cycle (Kanbach et al. 2023). Because of the given facts, we expect GenAI to ramp

up the innovation process.

GEN AI-BASED APPLICATIONS IN FIVE FINANCIAL VERTICALS

Next, we prescribe GenAI applications along five verticals of financial services (see Table 5).

These applications are based on a current snapshot of GenAI use cases and we expect them to

change as the technology evolves. The five verticals are based on industry classification

(Ehrentraud et al. 2020), literature (Eickhoff et al. 2018; Gomber et al. 2017)and our manager

interviews. We exercised our judgment in plotting the applications based on the interviewees’

responses and current literature. Two interviewees—each a senior financial manager—

checked and approved our matrix.

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Table 3. GenAI applications in financial verticals

Existing GenAI Applications Potential GenAI Applications

• British financial startup Monzo is using • Optimizing payment methods:
GenAI to optimize marketing messages for GenAI will be used to recommend
existing users (Cortez 2023). payment methods to shoppers based
Payments, • ING and TD Bank built GenAI-based on their transaction patterns.
Clearing, and chatbots that give expedited responses to • Nudging for prosocial behavior:
Settlement customers (Marotta 2024; Del Miglio et al. GenAI-based chatbots provide
2024). DBS unveiled a GenAI assistant with customized information to users
speech recognition capability for feedback regarding their consumption habits
tailored to local languages (DBS 2024). to encourage prosocial consumption.
• Deutsche Bank is utilizing GenAI for • Assessing creditworthiness:
detecting market abuse and ensuring Building risk profiles for borrowers
compliance—using automated transcriptions with limited credit history to push
Savings,
of conversations (Christopher and financial inclusion.
Credit, and
Jhunjhunwala 2024). • Streamlining insurance claims:
Insurance
• Capital One leverages GenAI to augment its Using GenAI to streamline claims
AI-powered fraud detection systems (AIM process for quicker turnaround
Research 2024). times.
• JPMorgan Chase unveiled GenAI-based • Generating expert reviews: Using
IndexGPT which optimizes investment GenAI to create concise summaries
Investment,
opportunities through theme-based of complex financial data to guide
Trading and
investment indexes (Son 2023). and empower investors.
Asset
• Goldman Sachs Asset Management sees • Cloud-based portfolio management:
Management
potential in GenAI to augment systematic Floating GenAI cloud platforms to
investment strategies (Goldman Sachs 2023). ease portfolio management.
• Customizing content for
• CommBank Copilot will help customers
accessibility: Using GenAI to
dissect financial data and help them manage
Information connect with individuals left out of
their money better (CBA 2024).
Aggregation the financial net.
• JPMorgan’s GenAI assistant enables
and • Bridging the industry-academia
corporate treasurers to access complex data
Dissemination gap: Using GenAI to interpret and
and draw data-driven insights (J.P. Morgan
summarize complex financial data
2023).
sources.
• GenAI could be used to predict • Optimizing smart contracts: Using
cryptocurrency price movements (Murray et GenAI for parsing code and writing
Other
al. 2023). proof-of-concept.
Financial
• McKinsey suggests using GenAI for • Building regulatory sandboxes:
Services
regulatory compliance and reporting (Chui et Using GenAI to build testing
al. 2023). scenarios for product prototypes.
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Payments, Clearing, and Settlement

Firms providing services within this vertical process payments, clear transactions, and

settle funds (Eickhoff, Muntermann, and Weinrich 2018). Currently, GenAI applications

provide expedited and tailored customer services. We suggest extending applications to

optimize the payment cycle and promote prosocial consumption.

Optimizing payment methods: Financial firms can use GenAI to recommend a

payment method to shoppers based on their past purchase history, credit score, and payment

preferences (Huang, Wang, and Yang 2023). More concretely, financial technology (fintech)

apps can use the value and volume of the transaction, potential reward programs, or cashback

offers tied to specific payment methods and suggest the most optimal payment method to a

shopper. Shoppers would be spared the need to manually select a payment method,

optimizing their payment process by reducing one step from it. This streamlined process

could increase transaction volume and enhance shopper satisfaction by prioritizing

convenience and maximizing potential financial benefits.

Nudging for prosocial behavior: Based on data on the spending profile of a customer

across different periods, GenAI can provide detailed spending analysis to the customer within

the payment application (Bommarito et al. 2023; Huang, Wang, and Yang 2023).

Additionally, through real-time analysis of the consumption patterns, GenAI can provide

customized information to the customers regarding their consumption habits, potential

benefits and risks of their consumption behavior, and suggestions for optimization of their

consumption patterns (Vaghefi et al. 2023). When fed to GenAI models (Pasch and Ehnes

2022), consumption data can promote prosocial consumption patterns among customers by

inducing moral nudges in the form of summaries of the environmental impact of their

purchases (Vaghefi et al. 2023).

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Credit, Deposit, and Insurance

The savings, credit, and insurance businesses offer services, such as risk management,

credit extension, and insurance provision (Thakor 2020). Current applications include

detecting market fraud and ensuring regulatory compliance. We propose applications to

facilitate financial inclusion and optimize insurance claims.

Assessing creditworthiness: Traditional credit-scoring models rely mostly on past

credit history, making it difficult for individuals new to the financial system or those from

underserved communities to access loans (Feng et al. 2023). By processing information from

multiple data sources—such as mobile phone usage patterns, utility bill payments, and social

media activity (with user consent)—GenAI can create a holistic profile of an individual

borrower (Feng et al. 2023; Wu et al. 2023). For instance, Sanz-Guerrero and Arroyo (2024)

demonstrated the potential of LLMs in credit risk assessment by leveraging loan application

data from peer-to-peer lending platforms. This demonstration enables the creation of nuanced

risk profiles, even for borrowers with limited credit history. Imagine a lender using GenAI to

assess a loan application based on the applicant’s record of paying utility bills, even though

the applicant has no credit history. Such assessment empowers financial firms to broaden

their reach and offer essential financial services, such as savings accounts, credit products,

and insurance to underserved populations (Sanz-Guerrero and Arroyo 2024).

Streamlining insurance claims: Processing insurance claims takes time, involves

much documentation, and is often subject to various types of fraud—including, forgery of

data and overstatement of claims (Hilal, Gadsden, and Yawney 2022). GenAI tools offer

significant benefits for insurance companies. GenAI can streamline the claims process

through faster document processing, leading to a shorter claim turnaround time (Telnoff et al.

2023). Multimodality enables generative models to process a variety of data—such as text,

image, and audio evidence—associated with claims to detect potential fraud and mitigate its
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risk (Li et al. 2024b). Also, the use of GenAI tools can expedite document generation during

the claims cycle, benefiting the insurance company and the claimant (Wang et al. 2023). The

ability to retrieve information more accurately and quickly from unstructured data sets is

particularly valuable because claim details often come in an unstructured format (Telnoff et

al. 2023), making GenAI a powerful tool for accurate claim evaluation.

Asset Management and Trading

Financial firms offering this basket of services engage in investment advisory,

portfolio management, trading platforms, and asset allocation strategies (Ehrentraud et al.

2020). We look beyond the existing focus on efficiency to emphasize democratizing financial

information and scaling GenAI applications through cloud integration.

Generating expert reviews: Expert stock and trading reviews are invaluable resources

for individual investors, informing their investment strategies. However, time constraints and

resource limitations often hinder financial experts’ ability to produce timely reviews. Carlson

et al. (2023) presented a potential solution, where they trained a transformer-based model on

review data to generate human-like, unbiased expert reviews for the wine and beer industry.

Financial firms can adopt this approach. GenAI models can be trained on a rich data set

encompassing industry reports, regulatory filings, and online data (Lu et al. 2024). By

processing this information, these models can generate concise summaries to empower

investors and guide their decision-making (Carlson et al. 2023; Li et al. 2023).

Cloud-based portfolio management: Portfolio management is a data-intensive

exercise requiring machines to access and process vast data sets in real-time (Kim 2023).

However, financial firms must host the data on localized servers, which adds to infrastructure

costs (Cheng et al. 2022). We propose integrating cloud platforms with GenAI (George

2024). Based on a serverless architecture, cloud-based platforms offer financial firms a cost-

effective and scalable solution by providing them with the necessary infrastructure to store
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and process vast datasets (Cheng et al. 2022). A firm can host its training data set on the cloud

server, train the GenAI model on the server, and run the model on a need basis, thus incurring

lower fixed costs and controlling variable costs. This control empowers financial institutions

to overcome current limitations and enable real-time analysis, faster modeling, and

ultimately, more accurate investment decision-making (George 2024).

Information Aggregation and Dissemination

Firms under this vertical gather, analyze and distribute financial data and insights to

clients (Eickhoff, Muntermann, and Weinrich 2018; Gomber, Koch, and Siering 2017). We

extend the current focus to facilitate the cross-sharing of knowledge across stakeholders.

Customizing content for accessibility: Firms can harness GenAI to connect with

individuals left out of the financial net. Low financial literacy is often a barrier to accessing

financial services. GenAI can create customized content for readers with low financial

literacy (Niszczota and Abbas 2023). Individuals can personalize financial news by

prompting their socio-demographic characteristics, such as language proficiency, education,

age, location, and occupation. GenAI-based chatbots can tailor the content’s complexity and

language to resonate with the individual’s background and financial literacy (Dong,

Stratopoulos, and Wang 2024). GenAI can also create interactive visuals for younger

audiences, build custom layouts for accessibility, and incorporate locally relevant contexts in

much shorter times, helping achieve scale (Hatamizadeh et al. 2023; Nie et al. 2024). Thus,

GenAI can help create a more inclusive financial system by breaking down language barriers

and adapting content to different learner levels.

Bridging the industry-academia gap: The chasm between industry needs and

academic deliverables has been a longstanding concern. The gap prevents the cross-sharing of

knowledge and stops academic research from reaching the industry. We propose that GenAI

can bridge this gap (Li et al. 2023). GenAI’s ability to understand context enables it to dissect
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complex linguistic formations in financial data sources, such as journal articles (Niszczota

and Abbas 2023). Further, GenAI’s ability to generate summary text in natural language

allows complex information to be available to practitioners (Li et al. 2023). Financial analysts

can access this information through prompts based on their specific needs. Therefore, GenAI

can deliver deeper yet simplified insights that facilitate the exchange of knowledge between

academia and industry (Kim et al. 2023).

Emerging Financial Services

Emerging financial services include innovations such as platforms and tools for

cryptocurrency management, price forecasting, and risk compliance (Ehrentraud et al. 2020).

We propose innovative uses of GenAI for optimizing smart contracts and building regulatory

sandboxes.

Optimizing smart contracts: Blockchain is a decentralized distributed ledger that

enables trustless transactions through cryptocurrencies (Nakamoto 2008). Transactions on the

ledger occur through a consensus mechanism. Smart contracts—which are predefined codes

on the blockchain—automate these transactions when specific conditions are met (Buterin

2014). They enable transactions between nodes on a blockchain through a secure and

transparent process (Buterin 2014). Currently, high-quality code comments are mostly

unavailable for smart contracts, constraining the comprehensibility of the code among

developers (Yang et al. 2021). GenAI can help generate quality code comments through

effective code interpretation. A related use of GenAI is in auditing smart contracts to test their

security and reliability (Du and Tang 2024). Given the volume of blockchain transactions,

manual auditing of smart contracts is time-consuming and error prone. GenAI can audit smart

contracts by parsing code and writing a proof-of-concept (Du and Tang 2024). This use case

becomes more critical as research has found nearly a quarter of cryptocurrency trades are

routed for illegal activities (Foley, Karlsen, and Putnins 2019).

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Building regulatory sandboxes: The rapid growth of fintech innovations calls for a

critical assessment of their benefits and risks. The concept of a regulatory sandbox has been

proposed to help this assessment. A regulatory sandbox is a safe space where businesses can

test their product prototypes before introducing them to the market. The sandbox prevents the

firm from incurring legal costs if the product violates regulatory norms (FCA 2015). GenAI

can help build regulatory sandboxes. These models trained on historical data, prevailing

regulations, and contemporary events can generate a diverse range of scenarios for testing

new financial products and services (Moody’s 2024). The sandbox allows regulators to assess

potential benefits and risks within a controlled environment before real-world

implementation. Further, GenAI can analyze vast amounts of regulatory text, highlighting

relevant regulations and potential compliance hurdles for the proposed innovation (Cao and

Feinstein 2024), streamlining the commercialization process.

GENAI IN FINANCIAL FIRMS: BENEFITS AND RISKS

We have thus far focused on the value propositions, functions, and applications

GenAI can create for financial firms. We also explicitly asked our interviewees to list the

benefits and risks they expect from GenAI-based solutions. While specific benefits and risks

may vary based on a firm’s core business and target market, some broad themes emerge from

our interviews and literature review.

Benefits

Our interviewees agreed that GenAI would help financial firms improve their core

offerings. As we explained in the preceding section, these offerings would vary by the firm’s

core business: for banks, lending—retail and wholesale; and for payment platforms—online

payment processing. Augmenting core offerings would help firms sustain competitive

advantage. An interviewee guided by commenting:

“The biggest constraining factor is investment - there is always a finite amount and appropriate
decisions need to be made on how to allocate limited resources to meet objectives.”
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Achieving resource optimization is a key lever in ensuring firms’ long-term

competitiveness (Silvi and Cuganesan 2020). Our interviewees underscored the need to

reduce costs by optimizing processes. Firms incur these costs by undertaking activities such

as regulatory compliance, human resource management, technology-related acquisitions, and

sales and services. The integration of GenAI suggests that organizational costs on these fronts

might drop, helping firms achieve resource efficiency and better allocation of finances (Allen,

Berg, and Potts 2023; Nie et al. 2024). Additionally, GenAI would aid in a faster transition to

a digital ecosystem. This transition is plausible because of GenAI’s ability to take instructions

and generate output in natural language, which expedites adoption and comprehension by the

workforce, many of whom would be non-coders (Dellarocas 2023). An interviewee told us:

“Building and maintaining AI capabilities require a skilled workforce with expertise in data
science, machine learning, programming, and domain knowledge.”

Managers also see GenAI as a potent tool to hedge the skills gap that leads to higher

time-to-market. Through personalized skilling modules, training scenarios, and real-time

mentorship and feedback, employees can receive more dynamic and customized training

based on their level of competence (Dellarocas 2023). GenAI's user-friendly technology

interface also enables faster technology adoption and better productivity, as we discussed in

the “working productivity” subsection. In an interviewee’s words:

“Large banks are slow in decision-making - the larger the bank, the more governance structures
there are for decision-making, which makes the processes very inefficient and slow.”

Organizational agility could be another benefit of adopting GenAI in financial firms.

Through faster information retrieval and processing, GenAI could make organizations more

responsive, adaptive, flexible, and competent in responding to external changes. If industry

leaders decide to integrate GenAI and reprocess business value chains, the change could yield

a democratized and agile organizational structure (Dong, Stratopoulos, and Wang 2024). Our

interviewees also opined that financial businesses vie to retain and expand their customer

base. Loyalty programs are a valuable tool for retaining customers and fostering brand loyalty
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(Alemany 2024). Firms can use GenAI to enhance personalized customer support services

and build customer trust and satisfaction, encouraging customer loyalty (DBS 2024; Huang

and Rust 2023).

Risks

We describe the risks next. We begin each risk with an interview quote and then
elaborate on it.
“Every piece of code written with the help of GenAI is manually reviewed before deployment since we cannot
afford a bug in a product in the financial services domain. So, quality of code development is a risk.”

While our interviewees expressed excitement about integrating GenAI into financial

firms, they also flagged potential risks. They raised concerns about the reliability of the

content generated by GenAI. These concerns include data hallucination—the generation of

incorrect or nonexistent facts as responses (Sarmah et al. 2023), raising issues of data

integrity and brand reputation for financial businesses (Romanko, Narayan, and Kwon 2023).

Misinformation could expose a financial firm to customer lawsuits and strategic

missteps (Dencik, Goehring, and Marshall 2023). The inherent risks associated with new

technologies create resistance against their adoption. A part of this risk—specifically toward

the adoption of GenAI—also stems from the nature and complexity of the technology.

Though GenAI addresses the issue of the lack of explainability in AI models (Nie et al.

2024), some managers are still uncertain regarding its scale deployment (Lumley 2024).

“Privacy is a big concern for a typical bank, since consumer data leakage through the model may lead to
reputational risks. That is why many banks prefer to run pilots for colleague productivity use cases, rather than
client-facing use cases”

Customer data privacy is another concern that interviewees flagged. A leak of

sensitive customer data, such as financial, health, and family-related data, could risk the

privacy and identity of customers and their families and cause reputational damage to the

financial firm (Dencik, Goehring, and Marshall 2023). This risk is preventing many firms

from adopting GenAI in customer-facing operations (Moody’s 2024).

“I'm worried that during its (GenAI) interactions with customers, how can we be 100% certain that
it won't say something offensive, incorrect, or unethical - which may reflect poorly on the brand”
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Ethical concerns also arise from algorithmic biases as customer queries could be

related to sensitive issues, such as health, gender, identity, or family (Banh and Strobel 2023).

Interviewees remarked that GenAI is a relatively unknown technology, and they are

concerned about the risk of offensive, incorrect, or unethical responses that could reflect

poorly on the brand (Dencik, Goehring, and Marshall 2023). A study found algorithms to be

picking up societal biases and associating more negative customer psychographic attributes

for women than men (Rathee et al. 2023), potentially reinforcing gender stereotypes.

“Lack of clear accountability - There may be copyright text or media used as training data for the
GenAI foundation model, leading to copyright infringement.”

The lack of clear accountability becomes a serious constraint in GenAI’s adoption

(Stahl and Eke 2024). Interviewees expressed a lack of clarity on who would be held

responsible for a breach of operational and regulatory norms. Will it be the firm, the

employee, the technology provider, or a combination?

“Private banks may rely on third-party vendors or service providers for Gen AI tools”

Another concern relates to the sharing of data with third-party providers of technology

services (Culotta and Mattei 2024). Developing proprietary GPT models is a cost-intensive

exercise. Therefore, most financial firms may outsource the training and running of GPT

models to technology providers (e.g., OpenAI, Google, Amazon, or Microsoft). The

outsourcing might raise the firm’s dependence on tech companies and raise concerns about

data ownership (Culotta and Mattei 2024).

 Page 36 of 58

Benefit-Risk Matrix for GenAI Applications for Financial Firms

Figure 3. Benefit-Risk Matrix of GenAI Applications for Financial Firms

Next, we aim to help financial firms prioritize the GenAI applications by trading off

their benefits and risks to the firms. Based on our interviews and a survey of the literature, we

developed a 2 × 2 benefit-risk matrix to pursue this aim. This matrix visually depicts the net

value of GenAI applications by comparing their potential benefits and risks.

Our matrix uses the following two risk-based principles. First, external-facing

applications (e.g., insurance claims processing) are high risk because errors could harm the

brand’s reputation and expose the firm to legal liability. Compared to external-facing

applications, their internal-facing counterparts (e.g., skilling employees) pose a lower risk as

mistakes can be internally corrected. Second, the purpose of the applications—ancillary

versus core—is key. Educational applications (e.g., generating reviews and cross-sharing

knowledge) have a lower risk profile because errors in a financial literacy tool might be a

misjudgment in content and can be quickly corrected without affecting user finances directly.

In contrast, applications involving core financial services (e.g., market anomaly detection,
 Page 37 of 58

cloud-based portfolio management, and optimization of payment methods) carry greater risk

because errors might directly affect customer wealth and could invite legal consequences.

Relatedly, applications at the firm-regulator interface (e.g., regulatory reporting and building

regulatory sandboxes) carry high risk due to legal ramifications for compliance violations.

Benefits are assessed based on their impact on the firm. We utilize the core and

peripheral service-based classification to plot these applications (Ozment and Morash 1994).

GenAI applications in core services of financial firms (e.g., saving, lending, investment,

trading, or insurance) are associated with high benefits as these may materialize into long-

term gains in terms of customer loyalty (Walsman et al. 2014). Compared to them, peripheral

services (e.g., financial education or nudging), though important, might not translate into

long-term benefits if financial firms fail to deliver their core services (Walsman et al. 2014).

Relatedly, applications that mitigate operational risks (e.g., fraud prevention, anomaly

detection, and regulatory reporting) provide high benefits since failure of compliance could

lead to long-term costs for firms (Moody’s 2024). Consequently, building cloud-based

portfolio management, market anomaly detection, streamlining insurance claims, and

creditworthiness assessment are categorized as high-benefit GenAI applications due to their

focus on mitigating these risks. Similarly, applications that assist financial firms with

regulatory reporting provide high benefits due to their potential to ease compliance

procedures. Subsequently, applications like nudging, content accessibility, and cross-sharing

knowledge have been placed in the low-benefit and low-risk quadrant. Optimization of smart

contracts and building regulatory sandboxes have been placed in the low-benefit and high-

risk quadrant as, currently, our interviewees do not see high benefits accruing to financial

firms from these applications.

 Page 38 of 58

PROPOSED QUESTIONS FOR FUTURE RESEARCH

We propose three questions for future research on each of the seven value

propositions. The research questions have also been listed in Table 4 .

Table 4. Proposed Research Agenda

GenAI Proposed Questions for Future Research

Functionalities
1. What language should a financial firm use to disclose that a customer is
chatting with a bot without losing customer trust and preventing
information overload?
Customer
2. What is the most failsafe de-identification technique that achieves legal
Experience
compliance while minimizing the odds of identity theft?
3. How can a firm trade off local and cloud data storage to avoid the adverse
consequences of outages and privacy breaches?
1. How can a financial firm measure (a) bias in training data and (b) bias in
predictions of a GenAI model trained on these data?
2. How should a financial regulator (e.g., U.S. Consumer Financial
Risk and
Protection Bureau) ensure that financial firms’ GenAI-based profiling of
Compliance
customers is not biased against underrepresented minority groups?
3. How can financial firms ensure that GenAI-driven risk profiling remains
unaffected by disinformation and misinformation?
1. How does GenAI-based personalized content influence customers’ risk
attitude toward financial products?
Personalization 2. How can financial firms regulate GenAI-created marketing campaigns to
and Marketing ensure the audience’s perceived inclusivity?
3. What linguistic features of disclosure terms boost customers’ trust in
financial firms?
1. What contractual terms between financial firms and GenAI service
providers boost customer data privacy?
2. How can financial firms communicate GenAI use to customers, ensuring
Optimizing
transparency and avoiding misunderstandings that could lead to regulatory
Operations
scrutiny?
3. Which operational business activities would benefit the most from using
GenAI?
1. How can a firm design a GenAI solution that summarizes disparate
financial sources of information?
Workforce 2. How can financial firms check malicious actors' deliberate manipulation
Productivity of GenAI outputs?
3. Who (e.g., GenAI service provider, financial firm) will be accountable for
adverse outcomes of GenAI-based decisions?
1. How should capital market regulations be amended to check for unethical
profiting using GenAI?
2. How can stock market regulators protect investors from GenAI-based
Portfolio
misinformation and disinformation?
Management
3. How can the regulator ensure fairness and consistency in the financial
advice generated by proprietary GenAI models trained by investment
firms?
 Page 39 of 58

1. As financial firms use GenAI to develop products, how should the

regulator (e.g., USPTO) adjust its procedure for evaluating patent
applications?
Research and
2. How should laws be amended to unambiguously attribute the rights, titles,
Innovation
and interests of parties involved in GenAI-created IP?
3. How will a regulator (e.g., CFPB) distribute responsibility among
stakeholders for the failure of a GenAI-based innovation?
Customer Experience

While interacting with GenAI chatbots, users may be exposed to several risks,

amplified by the lack of clear data policies. For example, OpenAI’s privacy policy doesn’t

state for how long the firm will store a customer’s personal data (OpenAI 2024). This lack of

information is contrary to the data minimization principle—under regulations like General

Data Protection Regulations (GDPR) and the California Consumer Privacy Act (CCPA)—

which requires firms to delete personal information after a certain period (CCPA 2018; GDPR

2016). Further, Google and OpenAI claim that they anonymize user data before using them to

train their GenAI models. However, the firms do not disclose their anonymization procedure

(Meta 2024; OpenAI 2024). This nondisclosure curtails customers’ ability to decide whether

to use Google’s and OpenAI’s tools. Therefore, we propose the following questions:

1. What language should a financial firm use to disclose that a customer is chatting with
a bot without losing customer trust and preventing information overload?

2. What is the most failsafe de-identification technique that achieves legal compliance
while minimizing the odds of identity theft?

3. How can a firm trade-off local and cloud data storage to avoid the adverse
consequences of outages and privacy breaches?
Risk and Compliance

Social media firms, such as Meta Platforms, use information posted on their platforms

for training AI models (Meta 2024). This usage raises questions about embedded biases

within GenAI models because vulnerable groups are often subjected to marginalization on

social media (Pearce, Gonzales, and Welles 2020). Such an eventuality could lead to their

financial exclusion and run against principles of equity and inclusion outlined as part of the

sustainable development goals (UN DESA 2023). Additionally, GenAI models draw on real-
 Page 40 of 58

time content on social media platforms. Such content may include disinformation and

misinformation, which take time to verify and correct (Biancotti and Ciocca 2021). These

bear three specific research questions:

1. How can a financial firm measure (a) bias in training data and (b) bias in predictions
of a GenAI model trained on these data?

2. How should a financial regulator (e.g., U.S. Consumer Financial Protection Bureau)
ensure that financial firms’ GenAI-based profiling of customers is not biased against
underrepresented minority groups?

3. How can financial firms ensure that GenAI-driven risk profiling remains unaffected
by disinformation and misinformation?
Personalization and Marketing

The Federal Trade Commission (FTC) has proposed introducing rules against the

misuse of AI, including GenAI, for impersonation fraud. FTC fears GenAI may not only

proliferate the creation of deepfakes but also enable them to be created with greater precision

(Federal Trade Commission 2024). FTC has flagged the deliberate misuse of design elements

in ads to trick people into making adverse selections (Atleson 2023). In addition, financial

firms must disclose when an ad is made using GenAI, and customers must know if they are

communicating with a human or a machine (Atleson 2023). These concerns lead us to the

following questions:

1. How does GenAI-based personalized content influence customers’ risk attitude

toward financial products?

2. How can financial firms regulate GenAI-created marketing campaigns to ensure the
audience’s perceived inclusivity?

3. What linguistic features of disclosure terms boost customers’ trust in financial firms?
Optimizing Operations

Another regulatory impasse is over the sharing of data with third-party providers.

Meta and OpenAI state that they can share the collected information—both provided by a

platform user and automatically collected—with their affiliates (Meta 2024; OpenAI 2024).

However, regulations such as the General Data Protection Regulations (GDPR) prohibit
 Page 41 of 58

sharing personal information without the user’s explicit consent (GDPR 2016). Currently,

there is opacity regarding what information is shared, whom it is shared with, and under what

agreements (Ferraro et al. 2023). While GenAI is deployed to manage internal knowledge,

the explainability of GenAI-based outputs remains a key concern (Shabsigh 2023). In this

event, financial firms must be careful of how they use GenAI and, more so, how they

effectively report and explain their decisions based on GenAI analysis (Shabsigh 2023). This

point leads us to three questions:

1. What contractual terms between financial firms and GenAI service providers boost
customer data privacy?

2. How can financial firms communicate GenAI use to customers, ensuring transparency
and avoiding misunderstandings that could lead to regulatory scrutiny?

3. Which operational business activities would benefit the most from using GenAI?
Workforce Productivity

While studies show workforce productivity improves with GenAI use, the credibility

of decisions informed by GenAI remains doubtful. This doubt is due to the lack of

traceability—the ability to find the correct source of information for GenAI content

(Schneider et al. 2024). The risks of disinformation by malicious actors also threaten the use

of GenAI despite self-check features within GenAI models (Ferraro et al. 2023; OpenAI

2024). Another problem relates to the lack of a legal framework that addresses responsibility

for faulty decisions informed by GenAI outputs (Moody’s 2024).

1. How can a firm design a GenAI solution that summarizes disparate financial sources
of information?

2. How can financial firms check malicious actors’ deliberate manipulation of GenAI
outputs?

3. Who (e.g., GenAI service provider, financial firm) will be accountable for adverse
outcomes of GenAI-based decisions?
 Page 42 of 58

Portfolio Management

The application of GenAI in portfolio management has significantly accelerated the

pace and precision of stock selection and trading. However, this acceleration has also

amplified the risk of market manipulation (Shabsigh 2023). While GenAI educates investors

about stock trading, its autonomous use can potentially lead to losses as these models are

prone to errors (Ko and Lee 2024). Also, while providing financial advice to clients, firms

must disclose the use of GenAI as FTC guidelines mandate that customers be informed of the

use of nonhuman agents (Walsh 2023). This leads us to the following questions:

1. How should capital market regulations be amended to check for unethical profiting
using GenAI?

2. How can stock market regulators protect investors from GenAI-based misinformation
and disinformation?

3. How can the regulator ensure fairness and consistency in the financial advice
generated by proprietary GenAI models trained by investment firms?
Ramping Innovation

Recent lawsuits—against OpenAI, GitHub, and Microsoft—demonstrate the potential

for GenAI models to infringe on intellectual property (IP) rights, such as copyrights and

licenses (Walsh 2023). This issue arises since GenAI models utilize large amounts of data

without properly attributing the data source (Schneider et al. 2024). Another issue relates to

owning the rights, title, and interest of the IP created using GenAI. For example, OpenAI

reserves the right to use both the user’s input and the output generated (OpenAI 2024). This

renders existing IP regulations ineffective at protecting rights of ownership in GenAI use

(Ferraro et al. 2023). These legal and regulatory issues must be resolved to ensure responsible

and sustainable innovation.

1. As financial firms use GenAI to develop products, how should the regulator (e.g.,
USPTO) adjust its procedure for evaluating patent applications?

2. How should laws be amended to unambiguously attribute the rights, titles, and
interests of parties involved in GenAI-created IP?
 Page 43 of 58

3. How will a regulator (e.g., CFPB) distribute responsibility among stakeholders for
the failure of a GenAI-based innovation?
CONCLUSION

Our research fills the knowledge gap surrounding GenAI applications in financial firms.

While the enthusiasm surrounding GenAI has led to a spurt in academic literature, it remains

scattered, and industry reports lack depth and coverage. Through a combination of literature

review and interviews with financial managers, we identify seven key value propositions

encapsulated in the EMPOWER acronym. We elucidate three functions for each proposition,

demonstrating how GenAI integration can enhance their speed and efficiency. The resulting

funnel-shaped framework illustrates how abstract value propositions translate into specific

GenAI functions for financial firms. Further, we showcase novel GenAI applications across

five financial verticals. We also enumerate the various benefits and risks associated with

GenAI applications and visualize a benefit-risk matrix, aiding practitioners in prioritizing

GenAI applications across business functions. Last, we propose research questions flagging

key policy implications to guide future exploration in this domain. In sum, the research lays

the groundwork for further advancements in GenAI applications within financial firms.

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Generative AI Solutions to Empower Financial Firms

Shashank Shaurya Dubey, Vivek Astvansh, and Praveen K. Kopalle

Forthcoming in Journal of Public Policy & Marketing

Web Appendices

Web Appendix A: GenAI × Finance

Evolution of GenAI

GenAI is a large language model (LLM) that evolved from simpler language models,

such as the statistical and neural language models introduced in the 1990s and early 2000s,

respectively (Chu et al. 2024). LLMs are essentially intelligent software codes (or

“machines”) capable of identifying, interpreting, and representing complex patterns in

language (Zhao et al. 2023). With advancements in machine learning algorithms—such as the

introduction of Hidden Markov Models (HMMs), Recurrent Neural Networks (RNNs), and

Latent Dirichlet Allocation (LDA)—machines’ ability to model and compute complex

dependencies within data sets enhanced substantially (Chu et al. 2024). This improved the

performance of downstream tasks, such as text classification, clustering, and information

retrieval (Kumar et al. 2024). In this chain of developments, the emergence of Variational

Autoencoders (VAEs) marked a significant advancement, enabling the creation of new data

points through a probabilistic framework (Kingma and Welling 2013).

The decade from 2011 to 2020 witnessed a deep learning boom with increased

computational power and the availability of big data (Zhao et al. 2023). The introduction of

Generative Adversarial Networks (GANs) was a momentous development, enabling machine

learning models to create highly realistic synthetic data (Goodfellow et al. 2014; Kumar et al.

2024). However, the introduction of transformer architecture (Vaswani et al. 2017), based on

a self-attention mechanism, marked a giant leap in the development of generative models

(Chu et al. 2024). The self-attention mechanism allows the transformers to process entire data

sequences simultaneously, grasp complex language patterns, and capture long-range

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dependencies in textual data (Carlson et al. 2023; Vaswani et al. 2017). This global

understanding and efficiency boost propelled advancements in GenAI tasks, such as text

translation, summarization, and question-answering (Nie et al. 2024). Ever since, a race to

build superior LLMs began. Bidirectional Encoder Representations from Transformers

(BERT), released in 2018, further refined language understanding capabilities by employing

bidirectional context (Huang, Wang, and Yang 2023). The subsequent development of

Generative Pre-trained Transformer (GPT) models showcased the potential of transformers

for generating human-like responses (Li et al. 2023). The landscape expanded in 2021 with

the emergence of multimodal models like DALL-E, demonstrating transformers’ versatility

beyond text (Chu et al. 2024). Most recently, ChatGPT, a fine-tuned GPT model, brought

conversational AI to the forefront, crystalizing the groundbreaking impact of transformers in

machine learning (OpenAI et al. 2023). This has followed rapid development with a series of

models like Llama by Meta , Co-Pilot by Microsoft , GEMINI by Google , and GPT by

OpenAI .

GenAI in Finance

GenAI models are trained on extensive text corpora comprising billions of data points

(Dong, Stratopoulos, and Wang 2024). Compared to predictive AI—which refers to AI that

aims to predict behaviors and/or outcomes rather than generate content (Caballar 2024)—

GenAI has several unique capabilities that have driven its rapid adoption in the financial

industry. GenAI’s ability to understand the context of a text significantly enhances its

accuracy in performing classification tasks such as sentiment analysis—a critical requirement

in finance where firms deal with complex language (Breitung, Kruthof, and Müller 2023).

GenAI models can read multimodal data—such as text, image, and audio— which enables

deeper analysis, as analysts can combine insights from multiple sources rather than relying on

only text-based sources (Li et al. 2023). GenAI breaks the “black box” of predictive AI
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through its ability to express output in natural language. This ability allows the customer to

find why and how the model reached a certain conclusion (Schwarz 2024). Additionally, any

general-purpose GenAI model (e.g., ChatGPT or Gemini) can be fine-tuned for domain-

specific tasks through training on limited data sets (Guo and Hauptmann 2024). This fine-

tuning is critical because scarce data limit accurate financial analysis—such as in fraud

detection and borrower risk analysis (Agarwal et al. 2024; Sanz-Guerrero and Arroyo 2024).

GenAI’s ability to process much larger data sets and generate real-time insights lends a

competitive edge to financial firms in a rapidly changing financial environment (Li et al.

2024). Recognizing the superior capabilities of GenAI, financial firms have moved swiftly to

integrate the technology. The rising industry excitement has also caused a surge in the

academic literature in the domain. Table WA1 lists key studies on GenAI and finance—

structured around our EMPOWER framework—that will help set the context for our review.

Table WA1. List of Studies on GenAI and Finance

Value
GenAI Functions Studies
Proposition
GenAI-based virtual assistants will expedite the resolution
Providing quick
process (Yadav et al. 2024) and assist human service agents in
resolution
reducing response time (Chui et al. 2023).
GenAI-powered chatbots enable human-like responses (Huang
Enhancing Giving human-like
and Rust 2023) and give contextualized reactions to a different
Customer responses
framing of the same situation (Mei et al. 2024).
Experience
GenAI will personalize portfolio selection based on customer
Personalizing service preferences (Fieberg, Hornuf, and Streich 2023; Lo, Ross, and
experience Harris Professor 2024) and provide financial advisory services
(Huang et al. 2024).
GenAI can assess default risk and borrower delinquency (Krause
Profiling customers
2023b; Wu et al. 2023) and flag hidden risks in firms (Bai et al.
accurately
2023; Breitung, Kruthof, and Müller 2023).
Use of GenAI to interpret complex regulations to ease financial
Managing
Enabling regulatory reporting by banks (Cao and Feinstein 2024) and facilitate
Risk and
reporting reporting on ESG compliances (Föhr et al. 2023; Vaghefi et al.
Compliance
2023).
Awareness of text context enables GenAI to facilitate fraud
Detecting fraud detection in financial statements(Leippold 2023) and evaluate
tax compliance behavior (Choi et al. 2024).
GenAI-based personalized video ads drive high engagement
Personalizin Enabling adaptive (Kapoor and Kumar 2024) and enable more effective brand-
g Marketing marketing building than human-generated marketing content (Jansen et al.
2024).
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GenAI can power sales functions (Deveau, Griffin, and Reis

Strategizing sales
2023) and the various opportunities it brings for the salesforce
approach
(Sinha, Shastri, and Lorimer 2023).
We did not find a paper on how GenAI could drive omnichannel
Driving omnichannel
marketing, but practitioners have suggested this as a GenAI
marketing
solution relevant to financial firms.
GenAI can be used to optimize accounting practices through
Automating routine
automation (Beerbaum 2023; Emett et al. 2023; Eulerich et al.
tasks
2023; Fotoh and Mugwira 2023; Li et al. 2024a; Li et al. 2024b).
Studies report GenAI's superiority as a knowledge worker in
Optimizing Managing internal
managing accounting practices (Bommarito et al. 2023) and
Operations knowledge
internal audit processes (Emett et al. 2023).
How GenAI can be used for information retrieval from complex
Retrieving
financial datasets (Wang et al. 2023; Yue et al. 2023) and
unstandardized data
unstructured sources (Li et al. 2024a).
Research demonstrates how GenAI can improve the decision-
Making informed
making and research capabilities of financial consultants (Dell’
decisions
et al. 2023) and tax professionals (Alarie et al. 2023).
Studies show that integrating LLMs into financial firms could
Working
Optimizing cost optimize agency costs (Allen, Berg, and Potts 2023) and reduce
Productivity
content creation costs (Kanbach et al. 2023).
GenAI would enhance developer efficiency (Eloundou et al.
Increasing developer
2023) and improve worker productivity across the developed
efficiency
world over a ten-year horizon (Albrecht and Aliaga 2023).
Several studies report the superior performance of GenAI in
predicting stock returns (Bond et al. 2024; Chen et al. 2024; Hu
Predicting stock et al. 2023; Kirtac and Germano 2024; Lopez-Lira and Tang
profitability 2024; Vamossy and Skog 2023) and in portfolio selection (Ko
and Lee 2024; Lu et al. 2024; Mai 2024; Oehler and Horn 2024;
Easing Pelster and Val 2024) compared to predictive AI.
Portfolio Research shows that GenAI is superior in tracking asset price
Detecting market
Management movement (Vamossy and Skog 2023) and asset price modeling
anomalies
(Zhang 2023).
Studies show how GenAI can break complex concepts down,
Promoting investor summarize them, and educate investors on financial decisions,
awareness which was less feasible with predictive AI (Kim et al. 2024;
Smales 2023).
Identifying product GenAI can help identify, articulate, and select an innovation
opportunity problem (Bouschery et al. 2023; Feng et al. 2024).
GenAI optimizes the process of product conceptualization to
Developing the product
Ramping maximize product-market fit and cut costs (Bouschery, Blazevic,
concept
Innovation and Piller 2023; Mariani and Dwivedi 2024).
GenAI facilitates patent value evaluation and acceptance (Yang
Designing the product
et al. 2023) and fosters business model innovation in financial
and process
services (Kanbach et al. 2023).
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Web Appendix B: Interview Questions

We asked the following questions to the interviewees:

1. What opportunities in the financial business are currently available to your

organization?

2. What—if anything—prevents you from leveraging these opportunities?

3. Generative AI (such as ChatGPT) generates content, such as text, image, audio, and

video, based on user prompts. What Gen AI tools – if any – has your organization

used, is using, or may use to leverage these opportunities?

4. Please tell us about the business functions these Gen AI tools may serve.

5. What benefits do the current Gen AI tools offer your business?

6. What risks do the current Gen AI tools pose to your business?

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Web Appendix C: Coding the Interviewers’ Quotes

Table WC1. Coding the Interviewer’s Quotes

GenAI’s value
GenAI
Representative quotes for tasks that GenAI can do for financial propositions
“functions” for
firms for financial
financial firms
firms
• “GenAI helps improve customer support” (I1)
• “Creating an interactive bot for understanding the customer
• Providing
(needs)” (I2)
quick
• “Our GenAI-based "x" customer support channel solves customer
resolution
issues without needing a human agent contact” (I3) Enhancing
• Giving
• “Communication with customers using LLM-based BOTs.” (I5) Customer
human-like
• “GenAI-based customer-facing virtual assistants and chatbots Experience
responses
provide instant query resolution” (I6)
• Personalizing
• “GenAI-based digital assistant for personalized investment
service
strategies” (I6)
experience
• “GenAI can provide personalized and proactive customer
experiences” (I7)
• “Create statistical models to help predict the loss—probability of
default” (I2) • Profiling
• “Reshaping back-end operations, like risk and compliance” (I6) customers
• “GenAI for fraud detection” (I6) accurately
Managing Risk
• “GenAI tools can help private banks ensure compliance with • Enabling
and
regulatory requirements” (I7) regulatory
Compliance
• “GenAI can be used to manage financial risks more effectively, reporting
including credit risk, market risk, and operational risk.” (I7) • Detecting
• “GenAI can be used to detect fraudulent activities, identify fraud
suspicious patterns, and assess credit risks more accurately” (I7)
• “GenAI in marketing for content writing, visual design, ad copies,
videos, etc.” (I1) • Enabling
• “GenAI could be used in marketing for generating copies for ads, adaptive
blogs, (and) social media posts” (I4) marketing
Personalizing
• “Utilizing GenAI for analytics—trend analysis, lead scoring, and • Strategizing
Marketing
lead generation” (I4) sales approach
• “GenAI for content generation” (I5) • Driving
• “GenAI tools can be used to provide personalized offers to clients” omnichannel
(I6) marketing
• “GenAI for marketing and sales” (I7)
• “Gen AI tools help improve data retrieval and documentation
• Automating
verification process” (I1)
routine tasks
• “GenAI to create scorecards for various units like sales, credit,
• Managing
collection, etc. based on various input parameters (and) create
internal Optimizing
dashboards” (I2)
knowledge Operations
• “GenAI would help in managing mundane financial tasks” (I5)
• Retrieving
• “GenAI can be used for quality monitoring of voice calls in the
unstandardized
form of script and summary of each voice call in contact center
data
environment” (I5)
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• “GenAI for report synthesis” (I6)

• “GenAI in voice recognition” (I8)
• “GenAI for developer efficiency” (I1)
• Making
• “GenAI for coding assistance and reviewing pull requests” (I4)
informed
• “GenAI will increase workforce productivity” (I6)
decisions
• “GenAI could serve as coding assistants and (in) software Working
• Optimizing
development” (I6)” productivity
costs
• “GenAI will lead to increased operational efficiency and cost
• Increasing
savings for private banks” (I7)
developer
• “GenAI enables managers to extract actionable insights from large efficiency
volumes of data” (I7)
• Predicting
• “GenAI can be utilized to set portfolio markers and triggers” (I2)
stock
• “GenAI can provide insights on the good and bad segments of the
profitability
portfolio” (I2) Easing
• Detecting
• “GenAI tools (are being used) in the front office like (for) wealth Portfolio
market
management and trading” (I6) Management
anomalies
• “GenAI can be utilized for providing financial advisory services”
• Promoting
(I7)
investor
• “GenAI can be used in cloud computing” (I8)
awareness
• Identifying
• “GenAI to set targets for product teams by studying market
product
dynamics and current trends in the industry” (I2)
opportunity
• “GenAI can aid in brainstorming go-to-market strategy for
• Developing Ramping
products, writing product requirement documents, (and)
the product Product
understanding product user segments” (I4)
concept Innovation
• “GenAI can be used to identify new business opportunities” (I7)
• Designing the
• “GenAI can classify product users into segments and conceptualize
product and
products accordingly” (I7)
process