Navigating AI through the 21st Century Beth Barnes, Riccardo Conci, Sobia Hamid, Daniel Hurt, Ed Leon Klinger, Gregory Lewis, Cameron Wallace
2.2.1 Commonalities with other service industries Common with other service sectors, companies in the financial services space require front-facing functions (sales, marketing, customer relations) and back-office support (Human Resources, Finance and Accounting). Many of these involve rote tasks apt for automation. A report by Cognizant17 which interviewed industry leaders in banking and insurance showed more than half anticipated cost savings of the order of 25% in these functions over the next 5 years, with commensurate reductions in fulltime equivalent staff.
2.2.2 Retail Banking The plurality of financial products (e.g. loans, insurance, mortgages) demand careful risk assessment. The likelihood of an adverse event for the vendor (a claim on an insurance policy, a default on a loan) needs to be weighed against the expected profit. If the vendor is too conservative, it leaves money on the table for competitors; if it is too aggressive, it risks a loss. Accurate calibration of risk given available data is thus extremely important, and is a field of intensive knowledge work - work which is increasingly being conducted ‘by computer’. One example would be Genworth Financial, which developed an end-to-end automated system18 for underwriting insurance applications. Another is UBS’s partnership with Singapore-based Sqreem, a system that recommends wealth management products based on customer data19. There are also moves to provide more personalised financial services directly to the user. Automated systems endearingly denoted as ‘robo-advisors’ have been developed by companies such as Schwab Intelligent Portfolios to recommend and manage an investment portfolio given input as to an individual’s risk appetite and investment goals20. With significantly lower overheads in comparison to traditional wealth management services, such lower cost systems are opening the door to personalised wealth management services for typically lower net worth individuals. Nowhere is this more apparent than the utilisation of IBM’s Watson by USAA to provide personal financial management to returning forces veterans21. Introduction of smart technology to consumer spending in the form of ‘smart wallets’ and related spending habit apps such as Wallet.AI have allowed for automated assessment and advice on spending decisions22.
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Schindhelm et al (2015) The robot and I: How new digital technologies are making smart people and businesses smarter by automating rote work 18 Bonissone et al (2008) Automating the underwriting of insurance applications 19 Vögeli, J. (2014) UBS turns to artificial intelligence to advise clients 20 Fleury, M. (2015) How artificial intelligence is transforming the financial industry 21 How artificial intelligence can help banks beat back tech firms 22 Kaushik, P., Contributors, I. and Space (2016) Is artificial intelligence the way forward for personal finance?
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