Today in the technology space, you fall between two groups. You are either the avid fan of the breakthroughs in Artificial Intelligence (AI) technologies, excited to see how industries are being fundamentally changed with this type of technology, or you are the nervous skeptic; in denial of how fast this type of technology is becoming a reality or if you have embraced it becoming part of life as we know it, you are nervous and quite against how it will take over jobs conventionally performed by humans. My personal belief is that all industries now need to be aware and prepared for potential disruption by this technology and the industry I will focus on in this post, is one that affects many if not all; the financial sector.
Before we dissect the various ways in which this industry will most certainly or is most certainly being disrupted, it is crucial to define AI first. AI is not one type of technology but rather a group of related technologies. This group consists of natural language processing which is the improvement of interactions between humans and computers, machine learning which are computer programs that possess the ability to “learn” when exposed to new data and expert systems which are software programs designed to give advice. All of these combined give machines the ability to comprehend, sense and act in ways similar to the human brain.
The combination of these features is the technology behind innovations such as virtual agents, the computer generated bots, which usually serve as customer service representatives. AI is also behind identity analytics, which are solutions that combine big data and advanced analytics in order to manage user access, certification and recommendation systems, provided by algorithms used to match users and producers of good services. All of these have radically transformed the ways in which companies now view the overall customer experience.
So how is this technology being used in the financial sector? There are a number of ways in which this is being done but I will highlight a few which have had my attention of late. A Silicon Valley based computer scientist responsible for laying the groundwork for Apple’s Siri, Babak Hodjat, has been in the news recently due to his belief that humans are too emotional to be trusted with the stock market. His solution to this? Replacing functions conventionally performed by humans, where they let their biases and sensitivities affect the choices they make, with machines. These functions include AI not only being used to generate ideas but to control the entire trading processes. Sentient Technologies Inc, the start-up Hodjat co-founded specialises in AI and is currently doing this by allowing machines to ‘through an algorithm look at data, make a decision, act and repeat’ whilst the human still has full autonomy. Venture capital firms are watching closely to see if this technology is feasible but it is obvious it will present a huge disruption should it work.
Another way in which the financial sector is being affected is through general operational efficiency and Goldman Sachs predicts that this will mean $34 billion to $43 billion in annual costs savings and new revenue opportunities within the financial services sector by 2025. Institutions using AI to maximize trading opportunities, reduce credit risk and lower compliance and regulatory costs will enable this.
This possible blow to employment in the financial services sector follows the significant cuts made at the height of the global financial crisis. Big institutions like Lehman Brothers, Washington Mutual and Bear Stearns retrenched a substantial amount of their labour force leaving them with fewer employees than they had in 2008. Jobs in the financial sector predicted to be most affected include bank tellers, these are expected to decline by 8% between 2014 and 2024, insurance underwriters which are expected to drop by 11%. The positive side of this prediction is that more and more financial institutions are now hiring software developers and data scientists, which are earmarked as areas of employment growth.
The financial sector, much like many other industries, is and will be disrupted even further by advances in technology, especially AI but instead of worrying about how employment will be affected, this information should act as an indicator of types of expertise we need to be investing in, in terms of education especially for the younger generation. We should view these latest breakthroughs in technology as great opportunities for the human race, rather than threats.