There is no denying 2015 was Fintech’s year. Every start startup or VC conference had at least one panel dedicated to the subject. What is fintech? It is usually defined as subset of the tech universe which is focused on disrupting debt and equity transactions, payments, transfers, as well as asset management – basically applying disruptive technology to the financial services sector.
According to Accenture investment in fintech reached more than $12Bn by the end of 2014 and the hottest fintech market in 2015 was Europe, where investments grew by more than 200% compared to a year earlier. In a strange twist, banks, and other financial institutions are already calling for more regulations to protect their industry from further disruption.
When compared to the $12Bn invested in Fintech, the $700Mn CNBC estimates was invested in Artificial Intelligence (AI) would appear to be a paltry sum. However, AI may well be the future of the financial services industry. According to Josh Sutton, Global Head of Artificial Intelligence Practice at Sapient, more and more C-Suite executives are looking at AI as a way to minimize risks related to identifying illegal activities such as insider trading or money laundering.
Some banks have taken it so far as to utilize AI in combination with Big Data and machine learning to replace historical monitoring methods to review trade information. The system helps to aggregate data in ways traditional compliance officers could never hope to achieve.
Besides compliance issues, banks are increasingly relying on AI to bolster their middle and back offices by automating everything from trading to know your customer (KYC), and anti-money laundering (AML). This is just the beginning. A growing number of banks have pushed deployment of AI-enabled technologies into other areas and the industry is at a crossroads as leaders compare the prowess of AI to analysts and traders.
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For example, RBS (Royal Bank of Scotland) recently announced implementation of a decision-making support tool, which will be used to create more personalized services regardless of whether the interaction is online, on the phone, or in a branch. While customer preferences, especially in private banking, wealth management, and trading continue to value human interaction, the technology is positioned to transform the role of a financial advisor.
In many ways, it is a Paul Bunyan moment for legions of would-be investment bankers and the machines appear to be winning. The shortlist of high profile bank layoffs announced in the past month includes Canadian-based BMO, UBS, BNP Paribas, HSBC, and J.P.