Seven in ten businesses using AI in their financial operations

New research from KPMG International has found that over seven in ten (71 %) businesses are using artificial intelligence (AI) to some degree in their financial operations. Currently, 41 % of them are using AI to a moderate or large degree – and this is predicted to rise to 83 % over the next three years.

In just six months since the first wave of research, the spread of AI is already visible. Whereas in April 2024, 40 % of organizations in the original 10 countries were using traditional AI in their finance operations to a moderate or large degree, this has increased to 45 %.

The use of Gen AI has also grown. The percentage of companies with no intention to use Gen AI has fallen from 6 % to just 1 % now. Gen AI has become a key focus and a top priority for the future, with 95 % of leaders and 39 % of others expecting to selectively or widely adopt it within financial reporting in the next three years.

The research also underlines the extent to which AI is being utilized and actively explored in countries around the world, albeit with some wide variations. While companies in the US, Germany and Japan are well ahead in AI usage, other major economies, such as Italy and Spain, are behind. The same dichotomy is evident in emerging markets, with China and India ahead in AI usage, and Saudi Arabia and the African countries further behind.

By industries and sectors, there has been something of an equalization since the first wave of research as organizations have increased their efforts – most sectors have a similar %age of leaders, although financial services heads the pack (29 %) while healthcare is lagging behind (16 %). Companies with larger revenue sizes tend to be more advanced (41 % of companies with revenue over $10bn are leaders).

David Rowlands, Global Head of AI, KPMG International, said “Our research confirms it – AI is truly a global phenomenon that is being adopted by finance teams across markets and sectors. The benefits it can bring, and the return on investment it can deliver, make it a key strategic focus. The journey is only going to accelerate as new capabilities come on stream. Businesses need to act if they are to stay competitive. The same applies to auditors – which is why we ourselves are investing significantly in AI capabilities to transform the quality, effectiveness and insights of the audit.”

Companies are turning to AI in every area of corporate finance. Financial reporting is the most widespread usage area, with nearly two-thirds of companies piloting or using AI for reporting, accounting and financial planning. But other areas are following suit: nearly half of companies are now piloting or using AI for treasury and risk management. This can generate better debt management, cash-flow forecasting, fraud detection, credit risk assessment, and scenario analysis in the treasury and risk management functions.

Tax management, however, sits slightly further behind. Less than one-third of companies piloting or using AI in this area, although about half are in the planning stage. Usage here may be further behind for a variety of reasons, including the complexity of tax regulations, a lack of up-to-date data, onerous legacy systems, and the reliance on human judgment for many tax-related decisions.

Leaders are showing the way, with more than three times as many leaders (87 %) as others (27 %) using AI in finance to a moderate or large degree. Leaders are moving fast and have on average developed six use cases for AI, almost double the number amongst others. Top areas for usage are research and data analysis (85 %), fraud detection and prevention (81 %), predictive analysis and planning (78 %), and using Gen AI for composing documents and other content (75 %).

Leaders are achieving success through a combination of factors:

• Investment – Leaders are spending nearly twice as much as others in enterprise-wide AI activities as a proportion of IT budgets (13 % vs 7 %).
• Resourcing – Leaders are building up their own internal AI resources including the organization’s central AI team, a central team within finance itself and, in many cases, separate AI resources within each department of finance. Nearly half also make use of external AI resources, such as technology outsourcing companies or consultants.
• Governance and assurance – Leaders have taken more actions to bolster AI governance. Over half of leaders gain third-party controls assurance over AI processes and controls, more than twice as many as others. They often turn to their auditors to do this – and expect their auditors to be using advanced AI tools themselves in their audit work and communicating with them about AI.

As a result, leaders are surmounting the barriers to AI adoption (which confront all organizations) more successfully. Common barriers that all companies encounter include data security vulnerabilities (57 %), limited AI skills and knowledge (53 %), gathering consistent data (48 %) and costs (45 %) – but leaders are better able to navigate these through the steps they have taken. Their chief barriers become more advanced ones, such as integrating AI solutions with existing tools and overcoming any residual staff resistance.

As the use of AI in finance grows, the dividends multiply. When starting out, finance teams report two to three benefits. By the time they are leaders, that number is seven.

Just as the benefits from AI can rise with its usage, so does the potential return on investment. As a result, a remarkable 57 % of leaders say ROI is not just meeting but exceeding their expectations. Even amongst less advanced adopters, nearly one third (29 %) report the same.

Rowlands, concluded “It’s hard to think of another business capability where reported levels of return are so high. There are barriers and challenges to overcome, which is why businesses need to proceed with robust governance in place and a clear focus on the outcomes they’re looking to achieve – but the potential benefits are multiplying as we get further into a new era powered by AI.”