In a groundbreaking shift for the financial services industry, Deloitte’s “2024 Financial Services Industry Predictions” report reveals that retail investors may soon rely heavily on generative AI (GenAI) for investment advice.
This trend is poised to transform retail investing, offering unprecedented opportunities and challenges.
Deloitte predicts that GenAI-enabled applications will likely become the primary source of investment advice for retail investors, growing from its current nascent stage to a staggering 78% usage by 2028. By 2027, GenAI could become the leading source of retail investment advice.
“As financial services firms face an ever-changing landscape, they should think about what’s on the horizon,” said Monica O’Reilly, vice chair, U.S. financial services industry leader, Deloitte & Touche LLP. “Market pressures, emerging risks, and new growth opportunities will shape business strategies, and firms should prepare now.”
The report outlines several other significant trends that could affect financial services businesses. They include:
1. Magnified Risk of Deepfakes and Fraud in Banking
The creation of hyper-realistic fake content has become easier and more convincing, increasing the risk of fraud. Deloitte predicts that AI-enabled fraud losses in the U.S. could reach $40 billion by 2027, up from $12.3 billion in 2023. The report encourages banks to invest in advanced AI technologies to detect and prevent these threats.
2. AI Insurance Coverage as a Blue Ocean Opportunity
The demand for AI insurance is expected to surge, driven by regulatory guidance, large losses, and market needs. Insurers and insurtech startups are developing products to meet this demand, with Deloitte forecasting a potential $4.7 billion in annual global AI insurance premiums by 2032.
3. Climate Change Impact on U.S. Commercial Real Estate Insurance Costs
The ongoing effects of climate change are predicted to significantly increase insurance costs for commercial real estate. Average monthly insurance costs for commercial buildings in the United States could rise from $2,726 in 2023 to $4,890 by 2030.
4. Homeowners’ Insurance and Climate Change
Severe weather events are also affecting the profitability of the U.S. homeowners’ insurance sector. Investments in residential dwelling resiliency measures could potentially save insurers up to $37 billion by 2030.
Other Trends
The report also outlined other projections affecting financial services, not all directly connected to AI.
• Deloitte’s report forecasts massive growth for in-app payments. It projects them to grow from $19.1 billion in 2024 to $94.5 billion by 2030, it said.
• Compared with other industries, the U.S. real estate business faces a “retirement cliff.” Deloitte predicts that 59% of existing commercial real estate executives — about 761,000 people — will reach retirement age over the next decade.
Deloitte provides audit, consulting, tax and advisory services to nearly 90% of Fortune 500 companies and more than 8,500 U.S.-based private companies.
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