Legal & General On AI In Financial Software

The global financial software solutions market is expanding at a considerable pace, with projections indicating a market value of US$24.4bn by 2026, a substantial increase from US$5.51bn in 2024.

This rapid growth is fuelled by increasing consumer demand for seamless digital banking experiences and the pressing need for institutions to enhance operational efficiency.

As financial institutions globally pivot from outdated legacy systems, the integration of sophisticated new technologies is reshaping the industry’s landscape. This transition is not merely an upgrade of IT infrastructure but a fundamental change in how financial services are developed delivered and secured.

With a majority of banking institutions now deploying integrated digital platforms, the reliance on advanced software has become a central component of modern business strategy enabling them to stay competitive in a fast-evolving market.

AI integration and client services

At the core of this transformation is the accelerating adoption of artificial intelligence (AI) and generative AI. Initially known for improving back-office workflow efficiency AI has been reported to reduce manual processing times and streamline complex processes. Today its application has broadened considerably.

Financial institutions are leveraging AI to manage vast and complex information automate repetitive tasks and fundamentally enhance the customer experience. For instance AI-powered chatbots and virtual assistants now provide 24/7 customer support while robo-advisors offer personalised investment advice to a wider audience.

According to insights from OpenText and Tata Consultancy Services the integration of advanced AI is positioned to alter traditional business processes from underwriting and credit scoring to fraud detection and client services.

Speaking with FinTech Magazine, Ed Patrick, Head of Business Alignment and Strategy for the Technology Division at Legal and General Investment Management commented: "The asset management community is now operating ‘beyond PoC’ (Proof of Concept) with AI-driven service engagement being a key trend for delivering an enhanced client offering.”

This signifies a move from small-scale trials to full-scale implementation of AI solutions that directly impact client interaction and satisfaction.

Navigating security debt and cyber risk

However this rapid technological advancement introduces increased risk particularly in cybersecurity. The pressure to innovate and deploy new software quickly has contributed to an accumulation of ‘security debt’, a term for the long-standing unaddressed security flaws that build up over time.

A report by Veracode indicates that a concerning 76% of financial organisations are carrying this debt with half of these flaws classified as critical. This vulnerability is dangerously amplified by a rise in sophisticated AI-powered cyberattacks creating a high-stakes environment for an industry built on trust and data security.

Malicious actors are now using the same advanced technologies to orchestrate more effective phishing campaigns and identify system weaknesses. The report also highlights that resolving flaws in third-party code takes on average 50% longer than in proprietary software adding another layer of complexity for already stretched security teams who must manage dependencies outside their direct control.

Strategic digital transformation

In response, major players are making strategic moves to bolster their digital capabilities. Lloyds Banking Group, for example, continues its digital transformation journey through a long-standing partnership with Tata Consultancy Services focusing on data modernisation and cloud adoption to create a more resilient and responsive infrastructure.

Similarly a digital-first approach led by Legal & General Investment Management highlights the industry-wide recognition that innovation is a necessity for survival and growth. This involves not just adopting new tools but also fostering a culture of continuous improvement and adaptation.

Ed also said he hopes the panel will “stimulate discussions and knowledge-sharing across industry peers many of whom recognise the mutual value in exchanging insights on common non-commercially sensitive activities.”

This collaborative spirit is crucial for tackling shared challenges such as evolving cybersecurity threats and navigating complex regulatory landscapes ensuring the entire sector can build resilience together. The future of finance will likely be shaped by those who can effectively harness the power of software while diligently managing its inherent risks.