Here's What Happens When Consumers Get Access to Artificial Intelligence That's Just as Powerful as the Banks'

Here's What Happens When Consumers Get Access to Artificial Intelligence That's Just as Powerful as the Banks'

Here's What Happens When Consumers Get Access to Artificial Intelligence That's Just as Powerful as the Banks'

David Birch

David Birch

David G.W. Birch is an author, advisor and commentator on digital financial services.

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A couple of years ago, John Cryan, the then-CEO of Deutsche Bank, said that he was going to shift from employing people to act like robots to employing robots to act like people.

I’m fairly sure he's not the only bank boss planning this transition. It is a common narrative about the future of banking. 

I'm reading Richard Baldwin's "The Globotics Upheaval" at the moment, and he notes that 'white-collar robots' are already being used to support customers who are having to take more responsibility for big financial decisions (such as pensions). Fannie Mae has replaced teams of report writers with such robots. Goldman Sachs used to employ 600 traders in one New York office. Now it employs two traders and 200 IT staff.

The uses of artificial intelligence (AI) in banking are many and varied. Not all are customer-facing, of course. According to the Financial Times, around a dozen banks are already deploying IBM's Watson AI software to monitor the emails and messages of traders for compliance purposes — looking for phrases such as "Let's take this offline!" I fully expect the use of AI for compliance and anti-fraud purposes to explode. This will undoubtedly mean some structural shocks within institutions. As my good friend Brett King wrote in his book "Bank 4.0," banks need very different management skills to lead a team where the employees are algorithms.

But where is the disruption?

So far, this is all pretty uncontroversial — yes, change is coming. We all understand that in the savings and loans, payments and investment businesses, AI is going to mean financial services will be very different businesses in the not-too-distant future. 

But are these changes truly disruptive? After all, when it comes down to the business model, consumers are still being sold a loan by a bank, whether it is a person or a robot that you are chatting to on WhatsApp. The books, articles and conference presentations that I've seen recently all tend to focus on robo-advisers and chat interfaces, imagining that the use of AI by financial institutions to either cut costs or deliver new services will be the technologically determined future of banking. But, to paraphrase Fred Schwed's 1940s financial services classic, "Where are the Customers' Yachts?" (which I would highly recommend—  where are the customers' bots?Soon, customers will have access to AI that's just as powerful as the bank's.

This is a key question about the future of financial services. If you think about it, in the near future, customers will have access to AI that's just as powerful as the banks.' Google has just released version 2 of its TensorFlow open-source framework for machine learning. Microsoft has its open-source Cognitive Toolkit (CNTK). And Salesforce bought PredictionIO and contributed the platform to the Apache foundation. I could go on. Who knows what innovators around the world will build using these tools? But surely we can guess that it’s going to give consumers access to even greater AI technology.

When it comes to pattern recognition, neural networks and machine learning, banks certainly do not have exclusive use of these capabilities. And all of them will be available on demand to everyone else as well. 

This will inevitably mean that the customers' smartphones will connect them — permanently, 24/7 — to an intelligence far greater than their own. Thus, if a bank is trying to sell me a mortgage or a credit card, it will be wasting its time showing me incomprehensible advertisements involving astronauts riding horses through fields of purple daffodils and people singing, sending me intricate fold-out mailers or accosting me at the airport with special offers. Because I'm not the buyer, my bot is.

When your AI meets your bank's

My AI is going to negotiate with the AIs of regulated financial institutions in order to obtain the best product for me. Competition will move to a new front. If I'm not savvy enough to choose the right credit card, pension or car loan, then clearly I’m going to want my own white-collar robot to take care of things.

But that brings up another question — which robot? Should I choose the Citibank robot or the Nike robot? The Oprah robot or the best-performing robot over the past 12 months? Maybe the Google self-taught super intelligent robot that is also the world Go champion?

How the banks' robots will interact with the customers' robots is at the same time fascinating and frightening. I’m not sure I really want to be in the loop when the discussion of a pension plan or insurance project is taking place, but I do want some sort of confidence that there’s a regulator in the loop. Should push come to shove, I would want my robot to be able to explain why it made the decisions that it did. Assuming that this regulatory framework evolves in due course, and assuming that I can choose bots with moral and ethical frameworks that are congruent with mine, then why would I subvert my financial future by interfering in decisions?

Payments were invented before fun, because they're not. (Sorry, but it's true.) So what I can see on the near horizon is giving my robot access to my account (through open banking, for example) and then letting it decide who and when to pay. 

I want to be left alone to carry out more productive and rewarding activities, such as playing Dungeons and Dragons, watching Manchester City and complaining on the Movie Mistakes website when characters talk about their 'credit card' when clearly holding something that is actually a debit card.

The statements and opinions of the writer do not necessarily reflect those of TSYS.
David Birch

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David G.W. Birch

David G.W. Birch is an author, advisor and commentator on digital financial services. He is Global Ambassador for Consult Hyperion (the secure electronic transactions consultancy that he helped to found), Technology Fellow at the Centre for the Study of Financial Innovation (the London-based think tank) and a Visiting Professor at the University of Surrey Business School.

As an internationally-recognised thought leader in digital identity and digital money, he was named one of the global top 15 favourite sources of business information by Wired magazine and one of the top 10 most influential voices in banking by Financial Brand. Dave graduated from the University of Southampton with a B.S. in Physics.

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