AI in Finance: The Goods and Bads

February 15, 2019

Artificial Intelligence is beginning to branch into the financial sector, raising questions as to whether humans will be completely displaced by these high performance machines. Banks can now purchase robots that can replicate human activity, ranging from programmed trading to stock analysis, which can help in boosting bank revenues. in the US, 70% of trades are performed through pre-programmed algorithms, with emerging economies trading 40% with these bots. By 2030 there are predictions that over 800 million people will lose jobs to AI robots. Is society therefore better or worse off with this rise in mechanisation in finance?

 The world is already seeing AI in large doses. BlackRock, the world’s biggest investment group, has begun investment into its own laboratory for Artificial Intelligence, with the aim of creating algorithmic fund management. Jobs are most at risk in areas such as customer services however. J.P Morgan’s sales division uses a system that can predict future needs of clients and advise on financial products to invest in at a more efficient level to humans. These technologies are becoming increasingly more powerful and reliant because of their ability to learn from markets and over time, which will only cater more to the financial desires of customers.

 

However the reliance of these bots is questionable. There have been concerns as to whether these robots will be able to predict market trends from more ‘shock’ political outcomes. Using the example of Brexit, whereby the UK’s decision to leave the EU was contrary to what commentators and opinion polls had forecast. A robot might have therefore made a prediction that the UK would remain in the EU, consequentially making its market predictions false.

 

Humans losing jobs. The world being taken over by robots. Doesn’t sound great right? The positives for AI are however numerous. For one, there are now machines that can track and identify fraudulent banking such as credit card activity, or even insider trading. This includes identifying any mispricing or inflation of asset prices, which would therefore eradicate any market misinformation or stock bubbles from developing. It would otherwise take humans three times longer on average than computers to identify these behaviours.

 

In summary, whilst AI will inevitably bring job loss for some, it will also provide more employment opportunity in other industry. We will still need tech workers to preserve these robots, and continue improving the AI technology. Furthermore, humans will still be needed for face-to-face interaction with clients such as for pitching deals and various negotiations.

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