Machine learning, artificial intelligence (AI), and cognitive computing are all hot topics in the industry. When discussing these subjects, questions revolving around the impact of AI on human labor typically come up.
Vikram Pandit, the former CEO of Citigroup, was recently asked what the banking sector might look like in the future. He said that with the advancements in AI, robots, and natural language processing jobs, he would not be surprised if 30% of jobs in the industry are replaced within five years.
One might think that automation and robots will simply eliminate jobs. However, if you dive deeper and talk to most experts in the space, you will find that this is not the case. Instead, automation should be viewed as a shift in roles. Fewer people will perform basic tasks; instead, they will receive training to undertake more complex, skilled work. There will be more programmers and more people supporting and operating the new technology.
According to an article in Financial Times, John Cryan, chief executive officer of Deutsche Bank, said that robots will replace a “big number” of his current staff. “The truthful answer is we won’t need as many people…In our banks we have people behaving like robots doing mechanical things, tomorrow we’re going to have robots behaving like people.” However, like many leaders in the space, Mr. Cryan does not believe that technology and robots will always replace people. Instead, he believes many of the bank’s employees will be “upskilled” to perform more interesting and productive work.
Igor Tulchinsky, founder, chairman, and CEO of WorldQuant, said that AI has created many jobs in his company. In the very beginning, the company had 100 trading signals (alphas). Today it has millions of signals. For WorldQuant to operate and grow, it requires many intelligent people to service its solutions and ensure they are deployed well.
Tom Farley, president of the New York Stock Exchange (NYSE), recently shared a similar viewpoint when he said we will always need people who can help with new technology, not to mention people who can apply strategy and sound judgment. A balance between technology and people is always necessary.
Brian Chin, managing director and CEO of global markets at Credit Suisse, shared how his organization is leveraging AI and how it could impact employees. According to Mr. Chin, the company has approximately 20 robots performing a variety of functions. In fact, the company recently won a competition, held by the Financial Conduct Authority (FCA), which was centered on innovation.
The team at Credit Suisse developed a robot named Reggie (think Amazon’s Alexa), which is programmed to answer questions about regulations. While the robot can currently answer only simple questions, the company expects that it could eliminate 50% of inquiries into its call center. However, according to Mr. Chin, Credit Suisse’s own headcount has gone up alongside innovation.
While technology can eliminate jobs or require employees to be upskilled, one thing remains true: the financial services industry’s difficult regulatory operating environment requires financial institutions to employ a large number of human capital. Look at the tax code to understand why. That said, if the government reformed the tax code, people would be more productive and innovative, therefore producing more societal benefits.
The same logic can be applied to a host of financial regulations. The more regulations in place, the more people (and technology) needed to help with compliance. This ultimately results in higher costs and lower productivity.
Using anecdotes and commentary from company executives, we wrote a guide that explores the state of the financial services industry as it pertains to the impact that data and technology have on innovation, regulatory and compliance, customer service, and human labor. From these very examples and our active work in the industry, we highlight several trends that we expect to continue to transpire in 2018.