How AI is Transforming Banking and the Trading Floor (Part 1)

When it comes to our banking and financial services (FS) needs, we have three fundamental desires.

How AI is Transforming Banking and the Trading Floor (Part 1)

The ability to carry out transactions at any time, services tailored to our needs, and reassurance that our activity is secure. Technology has been a major driver of delivering on these promises.

Today, there is one innovation, above all else, that is shaping the future of the FS sector through the entire value chain, whether a retail bank or a global financial institution – and this is Artificial Intelligence (AI).

It’s difficult to read any analyst or trends reports about the future of banking and FS without mentions of AI innovation. In many respects, this is because AI is a tool that’s already having a significant impact. Take Swiss Bank UBS, which recently announced that it is using robots on the trading floor in an attempt to boost traders’ performance.

With AI set to continue changing the financial services landscape, it’s essential that business leaders think carefully about where AI can be integrated and how developments in this space are set to impact the banking and FS sector.

AI: Driving Innovation, Securely   

According to a recent TCS study into AI across 13 sectors, 86% of business leaders in the banking and FS sector said they were already using this technology. Fast forward a few years and almost every executive responding believed they will have incorporated AI into their operations at some point along the value chain by 2020. It seems clear that AI will play an increasingly important role in driving change in the financial services sector.

The sector has often been on the front foot when it comes to adopting new innovations and operating models, whether in the retail space with the introduction of the world’s first cash machine in London as far back as 1967, or the launch of contactless payments in more recent times. In the 1980s, the UK’s ‘big bang’ saw the deregulation of the sector, along with the introduction of electronic trading that fed rapid expansion and growth. But more recently, the wider FS sector has seen areas such as blockchain drive further change.

According to the consultancy firm Oliver Wyman, one of the major ways in which technology is changing the FS industry is through automation. In a study launched at this year’s Davos, it claimed that automation would allow the sector to cut costs as a proportion of revenues by 15%. And AI was cited as central to this development.

Take how AI is being used to improve customer service at Barclays Bank. Staff are developing an AI system not too dissimilar to Apple’s iPhone personal assistant, Siri, to let customers talk to a device and get information they need for vital transactions. And when it comes to the tough decision of whether a bank can lend to customers, AI can help here too. One quarter of banking leaders responding to our study, said that AI would increasingly be used to help them decide who to extend loans to and even where to invest.

Venture capital firm CircleUp uses AI and machine learning to determine which companies to fund. Its crowdfunding online platform – Classifier – has evaluated more than 10,000 potential deals carried out by the firm’s analysts in the last five years. Since March 2014, the system has helped the firm’s investment analysts screen deals, dramatically increasing the number of possible deal evaluations. And the numbers speak for themselves. With Classifier, a team of less than 10 analysts can review 500 opportunities per month, versus the 500 evaluations done per year by the average private equity firm.