As I’ve written many times (e.g., here), it’s difficult to overestimate the impact of artificial intelligence (AI) on the financial services industry. As Wired magazine said, “It is no surprise that AI tops the list of potentially disruptive technologies”. With Forrester further forecasting that a quarter of financial sector jobs will be “impacted” by AI before 2020, there’s an urgent need for the island to begin to think about the next generation of financial services and begin to formulate a realistic strategy not only to copy with the changes but to exploit them.
It’s because the need is so urgent that I was delighted to be asked to give a keynote at the Cognitive Finance AI Retreat in September (which began with a beach barbecue – something I recommend to conference producers everywhere).
The event was put together by my good friends at Cognitive Finance, working with Digital Jersey (where I am adviser to the board), and they did a great job of bringing together a spectrum of subject matter experts and informed commentators to cover a wide variety of issues, and in providing a great platform for learning.
On the first day of the event, political economist Will Hutton emphasised that financial services will be at the “cutting edge” of the big data revolution, pointing out that not only does the sector hold highly personal, highly valuable data about individuals, but that it has more complex oversight requirements than most other sectors.
Clara Durodie, CEO of Cognitive Finance Group, kicked off the event by talking about the potential for AI to help to manage the colossal flows of data that characterise the financial sector, and I think she was right to highlight that the use of the technologies presents tremendous opportunities.
In his superb Radical Technologies, Adam Greenfield wrote of the advance of automation that many of us (me included, by the way) cling to the hope that “there are some creative tasks that computers will simply never be able to peform”. I have no evidence that financial services regulation will be one of those tasks, so in my talk I suggested AI will be the most important ‘regtech’ of all, and made a few suggestions as to how regulators can plan to use the technology to create a better (that is faster, cheaper and more transparent) financial services sector. The strategic core of my suggestion was that jurisdictional competition to create a more cost-effective financial services market may be a competition that Jersey could do well in.
Regulation, however, was only one of the topics discussed in a fascinating couple of days of talks, discussions and case studies. The surprise for me was that there was a lot of discussion about ethics, and how to incorporate ethics into the decision-making processes of AI systems so that they can be accountable. I hadn’t spent too much time thinking about this before, but I was certainly left with the impression that this might be one of the more difficult problems to address, and talking with very well-informed presenters.
Listening to experts such as Dr Michael Aikenhead, Kay Firth-Butterfield, Dr Sabine Dembrowski, Andrew Davies and many other leading names in finance and AI, left me energised with the possibilities and intrigued by the problems.
AI is an event horizon for the financial services industry. With our current knowledge, we simply cannot see (or perhaps even imagine) the other side of the introduction of true AI into our business. But we can see that our traditional ‘laws’ of cost-benefit analysis, compliance and competition will not hold in that new financial services space, which is why it’s important to start thinking about what the new ‘laws’ might be and how financial services can take advantage of them.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by Jozsef Bagota, Shutterstock.com