Artificial intelligence has been around for a long time, but it is only starting to take shape as an innovative piece of technology in financial services as of this year. The emergence of AI has been described as the beginning of a new frontier for banks and switching to more automated services could mean big things for an industry that is historically set in its ways. 2016 has also seen banks and other financial institutions partner with fintechs and we heard from three leading figures in their respective sectors who showcased how they use AI in their company and for their customers at the Innotribe area at Sibos this year.
The power and necessity of AI
Eric Rosenblum from Palantir started off by saying that he and his colleagues are AI sceptics and that it is unusual that he is at a discussion on this particular form of technology. The reason he gave for this is because he regards artificial intelligence, not as elaborate, but as a “toolkit structure that can be used for other industries because of the data analytics technology associated with it.” When it comes to AI, it is all about how you manage data flows, but it can get a little bit difficult when you try to do it on legacy systems and use manual processes. This is why it is important to get the system right in the first place.
When Garry Kasparov beat the supercomputer, people thought that this technology was going to be the first “harbinger of the apocalypse,” as Rosenblum said. However, several years later, with the emergence of freestyle chess it was discovered that although a strong machine is powerful, a weak human combined with a weak machine and strong interface is what is most powerful. Rosenblum explored how using machine learning to assist the human with an interface is the easy part. “The technology should be intuitive and beautiful,” he said.
“Clients are interested in artificial intelligence but they need to be thinking about why they need it tactically. People are not good at processes, but again they need to think about why they need AI,” Rosenblum said. And it all comes down to compliance at this point.
Trust and simplicity is key
Lisa Huang from Betterment stated that the online financial advisor can operate at a lower cost in comparison to the traditional sector because they leverage tech in order to automate everything. “Our mission is to simplify everything. We are the self-driving car of the financial management and this is through automation and innovation,” Huang said. She went on to explore how trust is very important and companies should allow customers to set it out and forget it – “they have to believe that you’re doing everything for them and you should use data to understand their customer behaviour and to personalise their services.”
In addition to this, understanding customer data is one thing, but it can be a deterrent. Huang advised understanding customer data at an aggregate level. Customers are withdrawing money because they need money, but the difficulty here is that people are market timing, which Betterment describes as bad behaviour, so they want to mitigate that because it could be costly to the investor. However, “not every customer is stressed about the markets and this is where artificial intelligence and machine learning can be leveraged to use a predictive model to make a targeted intervention.
Betterment also give data back in the form of vital information for the customers that could save them money. Information like paying extra taxes could result in a significant reduction of real life gains and that’s because people care about taxes. “Personalisation is the next evolution in the digital space, but many are already doing it.”
No one is eternal
AI will be an important form of technology but we still don’t know how much we need and how far we need to go. “The world is increasingly becoming binary: there is only one Google, one Facebook and one Uber. Today, if you have the magic formula, you could succeed and as a result, a well-established bank could disappear in one week,” Edouard d’Archimbaud from BNP Paribas CIB explored. He went on to provide an example in his personal life when his first day at the Lehman Brothers turned out to be his last day. “We can’t miss any new technology shifts because just because you’re big, you’re not eternal.”
He explored that clients need artificial intelligence embedded into the systems that they use because you and me are already used to smart products, and in the same way, we expect the same from banks. “We are living in an exponential world and we have to be prepared,” d’Archimbaud said. Within 15 years, we will be able to replicate the human brain on a computer and in the same way, the business sector is shifting also. “We are managing financial transactions with clients, but now we provide data to them and process their information. We live in the time of the self-driving car and now we have to invest in intelligent technology to provide the best advice.”
“Data is a diamond and the value comes from the structure.”