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By this point, roboadvisors are expected to manage more than $3 trillion
Unsecured loans issued via AI underwriting platforms will reach $315 billion in value by 2025, estimates Juniper Research.
This would be a major increase from $24 billion in 2020, driven by lenders leveraging AI to streamline operations following the COVID-19 pandemic. Consumer lending is projected to account for 66% of loans by value underwritten by AI by 2025.
Pressed by increased competition from digital-only challengers, traditional financial institutions are seeking new efficiencies to lower their operating costs. Many banks have already added AI-enabled automation services, such as chatbots and roboadvisors.
Juniper estimates that roboadvisors – where AI systems are used to manage investments for users – will account for more than $3 trillion in assets under management in 2025, an increase from $500 billion in 2020.
“Rather than selling services directly to users, roboadvisors should partner with large banks,” the study stated. “This would enable roboadvisors to access large groups of potential users who are underserved by current wealth management propositions; growing revenue while keeping customer acquisitions costs low.”
For example, chatbots can increase customer response times and free employees for other tasks by automating common query responses, with some advanced bots offering financial advice.
For the study, Juniper defined AI as “a computer program that uses a combination of digital building blocks, such as mathematics, algorithms and data, to solve complex problems normally performed by humans.”
Some of the complex problems include using AI to track customer spending patterns and mange budgets, providing a competitive advantage via around-the-clock, automated digital support, and the ability to increase potential new account generation.