Market value of $153 billion
The artificial intelligence and robotics market was worth US$10.7 billion in 2014 and is expected to be worth US$153 billion by 2020 and to have a disruptive impact of between US$14 to US$33 trillion. The component for artificial intelligence alone (without robotics) is worth US$70 billion. Artificial intelligence is expected to significantly impact financial services.
Where we see an impact
Globally, the areas that we believe at the Digital Finance Institute where artificial intelligence could play a dominant role that involve digital finance are traditional financial services; autonomous vehicles; medicine (in bionics and autonomous surgeries); rehabilitation (in particular, for wearable robotics to help the disabled and elderly compensate for diminished capacity), and with carebots who assist the injured, disabled and elderly with mobility management.
These areas of AI involve digital finance because, where they are consumer-facing, they will be connected to an autonomous payments system. AI services will not be free. For example, a self-driving vehicle that pays for parking or a carebot that helps the disabled to walk will have to be connected to a M2M payments system. The interaction between artificial intelligence and financial technology (FinTech) presents an enormous opportunity for tech development and growth.
The potential applications of artificial intelligence created specifically for financial services are varied, and include everything from credit scoring, analytics, customer service management, fraud detection, portfolio management, risk management, financial planning, and evaluating spending patterns of customers for behavioural coaching.
Banks believe artificial intelligence can improve efficiency, cut costs, and make more efficient use of employee time and resources through the use of processing massive volumes of customer data held by banks and creating algorithms from it for machine learning capabilities. Artificial intelligence is already enabling banks to use algorithms based on user behaviour patterns to predict transactional fraud, conduct money transfers and help customers in a number of different languages.
Examples of AI in banking
Many global tech firms are deep in the artificial intelligence space including Apple, NASA, IBM, Google, Facebook, Microsoft and Samsung.
Today’s bank customers, especially Millennials, are less likely to enter physical bank branches, with many preferring instead to bank online or from a mobile device. In the banking sector, tech for machine learning applications is growing fast globally. For example, Santander Bank announced it will support customer financial transactions using voice recognition on its banking app, and Swedbank’s artificial intelligence app already handles 30,000 customer conversations per month, resolving them 78% of the time.
In Hong Kong, startup Aidyia launched a hedge fund that makes all of its trades using artificial intelligence with no human intervention at all. Its machines analyze market prices, trade volumes, macroeconomic data and corporate material, making market predictions and then executing on investments. Another example in financial services is Wealthfront which uses artificial intelligence to track customer activity.
In India, one online bank, digibank, has begun to use artificial intelligence to provide virtual banking assistants that can converse with customers, eliminating human interaction in the banking experience. The digibank model is possible because of the government investment in Aadhaars necessary for digital banking to scale.
AI Cybersecurity risks in banking
A concern for financial services is how regulators will respond to the use of artificial intelligence generally, especially when there are security breaches associated with artificial intelligence systems in the financial services sector.
The US government has raised concerns about the implications of artificial intelligence being deployed in the economy because it increases vulnerabilities to cyberattacks, raises difficulties in ascertaining attribution, facilitates the advances of foreign weapon and intelligence systems through technology, increases the risks of accidents and substantially increases liability for the private sector including financial institutions. The reliance on artificial intelligence for autonomous decision-making by the public or private sector will create vulnerabilities to all sectors, including financial services, and may compromise financial infrastructure. In a recent survey of financial services professionals, 76% believed that regulations are not up to speed on artificial intelligence and 47% believed their own organizations do not understand its risks.
An inevitable downside of artificial intelligence is that it will decrease employment in certain traditional roles, with predictions of potential mass unemployment. In financial services alone, it is expected to replace 110 million full-time employees globally by 2025.
Lack of diversity
Artificial intelligence also appears to suffer from an additional challenge – the programming and therefore, the machines that will run certain functions for our society, lack diversity: its data sets are not equally created by women or with consideration of integrating diversity or inclusiveness.
Stay with us at AI Insights as the Digital Finance Institute explores where the world of AI is taking us.