Finding a balance between the role of AI and humans

was the last time we visited a physical bank branch? It will be a long pause before you can recall the date or the month. It is not that individuals are no longer using financial services or do not need banks to complete their financial needs. It is how the banks are transforming their basic services.

Welcome to the world of artificial intelligence (AI) and its application in the financial services.

Banking services globally are being transformed from human interaction into virtual assistants. For instance, Bank of America, one of the world’s largest banking institutions, has launched chat assistant Erica, an AI-driven virtual assistant to help its 25 million mobile clients.

Making use of AI, natural language and predictive analytics, Erica can search for past transactions, provide information about financial services and help arrange meetings with financial advisers.

HSBC Bank launched a similar chatbot, Amy, for its corporate banking clients. Amy understands English and simplified Chinese, and can provide prompt response to banking queries 24/7.

Malaysian banks have their own success in chatbots. CIMB Bank launched Enhanced Virtual Assistant (EVA) and since its inception in December 2016, EVA has generated around 130,000 downloads and 300,000 transactions. RHB Bank and RinggitPlus, meanwhile, jointly launched My RHB Easy, a chatbot which gives users the flexibility of applying for a personal loan 24/7, without the manual submission of application forms.

Chatbots are not the only AIenabled functionality being used by banks. Financial service providers are also heaping on other revolutionised technological innovations to streamline their business models.

Biometrics such as voice, facial, iris and fingerprint are becoming an integral part of authenticating individual customers, allowing faster approval and overcoming the challenges of manual signature-based verification. This is in line with a Forrester report which found that 73 per cent of bank customers value their time and is the most important thing a bank can do to increase customers’ experience.

Any discussion on AI-enabled banking transformation will be incomplete without including blockchain.

Banks and financial service providers are using blockchain as the backbone of their digital offerings to realise a new level of transparency, security and efficiency.

Blockchain is going to transmogrify the way individuals and institutions manage their money by providing the necessary tech infrastructure for digital currency, e-wallets, payments and financial records.

While all of the above look like a fairy tale for the financial service industry, there is also a dark side to it.

Increasing use of AI will also lead to the extinction of human bankers. Gone will be the days when customers will be greeted by a bright smile when they walk into a bank. Automation is leading to disruption in banking jobs.

United States-based Citibank recently announced that it may slash 10,000 jobs and replace human workers with robots over the next five years.

This would be a rapid surge in job losses in the banking sector, which saw 60,000 job cuts from eight of the world’s top 10 investment banks between 2007 and last year during the height of the financial crisis and lower economic growth.

Malaysian banking jobs will not be immune to automation.

The Malaysian Employers Federation has predicted that 50,000 Malaysians are expected to lose their jobs this year, the bulk of whom will be from manufacturing, insurance and banking.

Disruption in the banking sector is also due to the pressure created by the rise of financial technology (fintech) startups, which can provide innovative financial solutions faster at a much reduced cost. With fintech startups such as Venmo, WePay, TransferWise, and Monzo, banks are forced to innovate or lay off staff to remain competitive and profitable.

Most financial service providers are jumping on the AI bandwagon without a clear strategy of AI implementation, leading to their dependence on robotics and thus losing their human intelligence.

A recent report by Forbes Insight and Temenos noted that 93 per cent of wealth managers think that AI will play a role in the future of their businesses.

Interestingly, consumers aren’t ready to directly engage with AI yet, as only 24 per cent of clients are comfortable with the use of AI for communication and 32 per cent for investment advice.

This suggests that there is a mismatch between providers and users of the financial services when it comes to the use of AIenabled technology.

Clearly, AI has emerged as both a boon and bane for the financial service industry.

At one end of the spectrum, it is expected to streamline operations by providing efficiency and reliability while on the flip side, it will disrupt the role of humans in financial advisory.

It all goes back to the role of the policymakers and regulators to find a balance between the rise of the machines and the death of humanity.

Increasing use of AI will also lead to the extinction of human bankers. Gone will be the days when customers will be greeted by a bright smile when they walk into a bank.

The writer is Associate Professor of Finance at Henley Business School, University of Reading Malaysia. He can be reached at n.alam@henley.edu.my.