Will AI Trigger Massive Job Losses in Financial Services?

In financial services, the adoption of artificial intelligence (AI) is growing rapidly, bringing in a plethora of opportunities for customer experience and personalisation. Yet, the question of regulation still lingers and must be addressed to tackle the potential risks of AI-driven processes and instil trust, experts said.

In a panel discussion on the use of AI in financial services, experts from UnionBank, Money Lion, Silot and InterSystems discussed the current state of AI adoption and addressed the opportunities of AI in financial services as well as the current challenges hindering adoption.

The session is made possible thanks to our sponsor Interystems is a vendor of software systems and technology for high-performance database. InterSystems has been named a Leader in the Gartner Magic Quadrant for Operational Database Management Systems.

Regulating AI in FSI

According to David Hardoon, a senior advisor on data and AI at UnionBank and a former chief data officer at the Monetary Authority of Singapore (MAS), regulation must be focused on the use of AI in financial services, rather than the technology itself.

“In my point of view, the need is not so much to regulate AI … from a financial sector point of view,” Hardoon said during the panel discussion. “It’s more about the use of AI within the financial services and about how the existing regulations need to adapt for the potential risks that come with the use of AI. For example, the difference between a relationship manager, and a digital relationship manager. How do you go from a potential risk for just a few people to, theoretically, an infinite number of people.”

“The regulation already exists, it’s just about how it can be applied to AI-driven functions and processes.”

And then, there’s the cross-industry dimension to AI where the technology will not just have an impact on financial services but also many other industries as well, shifting the focus on data itself, how it’s being collected and used.

“Now it’s more about the questions of privacy, data protection,” Hardoon said. “It’s challenging because the bigger question is who is the right regulatory body to take on the responsibility whereby it doesn’t neatly fall into any particular pillar.”

For Michael Hom, the head of financial solutions at software company InterSystems, governance is indeed a challenge for the industry. Creating a proper regulatory framework will not only mitigate the risks associated with AI, but also instil trust.

“I truly believe that we need to do better about how we govern AI,” Hom said. “There’s a lot of things that’s been done regarding data governance, and the corresponding thing is AI governance, or model governance.”

“That would assist with our privacy concerns, trust concerns. It’s all about how we can get comfortable that [the systems we’re deploying won’t] get out of hand. It’s about putting in a framework so we can understand and be able to control [AI], [and establish] traceability about what we are doing, and how we are doing it. Just making sure that we can fully manage the AI that’s been deployed and used, and [that we] know what is happening.”

Impact of AI on jobs in financial services sector

The panelists also addressed the perception and fear that AI will make people’s jobs obsolete. But for Hardoon, it is important to differentiate AI and automation.

“If you are talking about automation, then yes, it’s going to have a job loss because you are automating a function that humans have done previously,” he said.

“When you talk about AI, from what we’ve seen, is that it actually leads to job creation because the amount of insight, information that needs to be analysed and given an opinion on [by humans increases.]”

He also added that ultimately it depends on how you design AI, if companies design AI with the specific intention of replacing jobs then that’s what is going to do, if companies, however, is designed with the intention of augmenting jobs then you won’t see job losses.

For Hom, AI is here to stay and so the best way forward is to educate and prepare the workforce for what’s to come.

“From my view, you need to instil a culture where you can’t see it as a threat but as something that can help you do your job better. It’s not about a loss, it’s about changing your job … moving the human functions to more monitoring and controlling aspects,” he said.

“If we think in that manner, it will help us move forward. It’s coming so you might as well as do something about it. It’s about reeducation, educating people on new roles, partaking them in that change. How you can help build a culture where you are embracing it rather than shrugging it off.”

Foong however, disagrees with other panelists who are of the view that it ultimately leads to job creation.

“In my opinion, there will be winners and there will be losers. In MoneyLion, we write about 100,000 number of loans per week and we have zero human underwriters. We displaced 400 – 500 human jobs and replaced that with 10 data scientists.”

The transformative potential of AI in financial services

Overall, the panelists were unanimous that AI will have a transformative impact on financial services, enabling unprecedented product personalisation and operational efficiency.

AI allows companies to leverage the huge amount of customers data they’ve been collecting to uncover patterns and identify certain traits, Hardoon said, ultimately allowing them to understand their customers better, and adapt their services based on these patterns and behaviours.

“From an organisation point of view, it’s about increasing revenue. From a customer’s perspective is really about having the customer in mind, [and personalisation],” Hardoon said.

Foong Chee Mun, CTO and co-founder of US-based neobank Money Lion, said he’s particular excited about the use of AI and data for product development, citing the ability to automatically personalise products to be very specific towards small segmentations, something that would be economically impossible to do manually.

With AI, Foong said he foresees a future where financial services are more prevalent and eventually become invisible.

“I think AI is going to push the financial product very close to the edge,” Foong said. “It will become a lot easier for consumers to use financial services to a degree that financial services will become invisible.”

“You will not have a physical credit card. Instead, whenever you’ll purchase something on Lazada, for example, you’ll have a credit line that’s automatically extended to you by a financial institution, mostly invisibility. Going forward in the next couple of years, financial services will be a lot of prevalent in our lives and … will be invisible.”

Besides personalisation and a superior customer experience, AI can also be used to enhance and strengthen governance and reduce managing risks, Hardoon said.

Andy Li, founder and CEO of AI fintech firm Silot, said that all in all, “AI can be fitted into a lot of things.”

“I can see AI being the new engine for the financial industry, and data will be the oil of that new engine,” Li said.

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Article by & for FintechNews Singapore

Watch the full webinar at: https://www.youtube.com/watch?v=v48H9ch_-Ec&feature=emb_err_woyt