Did anyone say that financial markets were slow and cautious when it comes to technology? Look again. Banks are now born on the internet, without a physical branches. Foreign exchange websites are eliminating middlemen from currency conversions. Customers can make payments over social websites. Crowdsourcing and P2P lending is becoming commonplace. If any industry has a voracious appetite for technology it is financial services. So don't be surprised if they become the first to take a few bold steps with Artificial Intelligence (AI).
AI - defined as a set of computer science techniques that enable systems to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making and language translation -- is already a part of the industry. Today, AI manages routine tasks such as payments and money management. Now, it is getting closer to the more human aspects of financial systems such as customer service and interaction. Take for example, Swedbank's Nina Web assistant that conducts about 30,000 customer conversations per month1 and had a first-contact resolution of 78% in its first three months of operation. Others are not far behind. Barclays has introduced voice recognition services to its corporate customers; Santander recently became the first UK bank to provide secure transactions2 to 15 million customers using voice recognition; Royal Bank of Scotland is providing 1,200 of its staffers with AI that helps respond to customer queries faster3; Switzerland's UBS is doing the same. In part this is a response to successful robo-adviser start-ups such as UK-based Nutmeg and Wealthfront in the US that are challenging the industry.
Clearly, financial services will see a quickening and intensification of the AI arms race in the coming months.
A global study done by The Economist Intelligence Unit (EIU) and sponsored by Wipro called Artificial intelligence in the real world: The business case takes shape found that AI was gathering momentum. According to 75% of the respondents in the study, which covered financial services, manufacturing, healthcare and retail, AI will be "actively implemented" in their companies within the next three years. Another 3% said this is already the case.
Ben Goertzel, chief scientist at Aidyia, an AI-powered hedge fund based in Hong Kong told EIU researchers: "We're seeing a burst of energy in machine learning, deep learning and other kinds of AI. Every major financial firm is hiring loads of AI experts now."
What are the primary reasons for adopting AI? "Ultimately it starts with improving the customer experience," said Chris Gelvin, chief operating officer for Group CEO Functions at UBS, a Swiss bank. "Customers will notice the faster responses, reduced error rates and new insights we're able to provide." However, he cautioned that banks that approached AI as a cost play would end up limiting the possibilities these technologies present. And in face, our study reflects this thinking. Of the executives surveyed in the finance industry 38% said that AI would improve decision making and 22% said it would improve customer service.
While the cost of adopting AI is a challenge (this was cited as the #1 challenge to implementing AI by survey respondents), smaller businesses are taking advantage of open source AI platforms. Gerrit van Wingerden, managing director of Tokyo-based Tora Trading Services, reported that small firms like his were utilizing such platforms to good effect. "The rates are affordable," he observed. "Plus, you don't really have to worry about the software because it's fairly easy to use the platform. Now many more firms can use these algorithms."