Readers of this column know that we are big experimenters with artificial intelligence. We use it to set strategy (trying to figure out what really drives bank performance), use it in our loan pricing model (to offer suggestions of improvement) and to assist in credit analysis. We have also experimented with “smart systems” in a number of areas including compliance, HR, credit analysis, writing Suspicious Activity Reports and even writing this column (and you never even knew). Some of these applications are amazingly ready for prime time while others have a ways to go. However, the deeper reality is that the next 5 years will bring amazing change to our banking industry, a change that will cause an adjustment to most every job in financial services.
Why Banking Is Particularly At Risk
We are not going to argue if having a bank filled with robots is good or bad for we will leave the morality for water cooler chatter. We can tell you that the need to reduce cost, increase engagement with our customers and scale will continue to pressure banks to employ more and more of this technology. Banking, in part, is about numbers, analytics and money all of which led itself exceedingly well to robotic automation. Before you complain too much, remember the ATM is a robot and deftly handles the basics of banking transactions. New ATMs have expanded capabilities that can scan a driver’s license and input the data into a loan application. But it is more than that.
Before you retort, “Sure, a robot can handle basic transactions but what about transactions with more complexity?” To that, we say let us introduce you to Eva, a banking chatbot by Transfer Corp that can not only handle more than 170 different types of transactions and inquiries, but takes care of these often better than a human.
By sending a simple text (below), you can see if a particular check has cleared, send a wire (with authentication), transfer funds, get the latest CD rates, ask to speak to a specialist (who may also be a chat bot), find out what “APR” stands for and much more. This, of course, can happen 24/7 and like Uber, is a markedly better experience than having to dial a call center or log in to your browser-based online banking application.
While systems have been helping bankers spread financial statements for years, in 2015, we saw the first credit underwriting system for small business and commercial credit. Enter digitized financial statements into the application and not only are trends analyzed, but a narrative is produced complete with a list of open items to further request or inquire about. In the demo we did with real financial statements, the system picked up on an inventory turn/accounts payable issue that was missed by an analyst. The time it took to produce this report – less than 2 seconds. The cost – less than $20 (depending on how much you use it).
While most sales positions are likely safe (although portions of sales and marketing are already automated), banks are full of route tasks in all areas that are ripe for automation. Banks are already, automating portions of compliance by employing artificial intelligent bots to write SAR reports (below) developed by Narrative Science, thereby freeing up staff to handle more challenging and higher order tasks.
We took a group of banking jobs and looked at how the current pace of technology was likely to unfold and what percentage of jobs or job functions that could be automated. When you see that COOs have a 20% likelihood of their job going away in 5 years, you can also interpret that as 20% of the job responsibilities will be automated. We grant you that this is a rough, big-thumb approach, but we looked at a list of common responsibilities in order to determine what portion can already or is slated to be automated. We note that in many cases, technology such as IBM’s Watson can already suggest the best mortgage, investment portfolio strategy or detect payment fraud.
If you are shocked and scared by any of these figures, we agree. Automation, from a human standpoint, is never pretty. However, hopefully, this list inspires you to increase your skill set and take on new responsibilities to stay ahead of the machines. Artificial intelligent applications will hopefully reduce some of the more boring tasks of our job while making it easier for our customers. This will hopefully result in more profitability and more rewarding work for all.
Submitted by Chris Nichols on April 21, 2016