The elimination of millions of jobs by battalions of artificial intelligence-powered robots makes for sensational headlines. But like many stories regarding both the threat and opportunity from technological change, the real story is both more nuanced and more interesting.
A recent report from the World Economic Forum predicted that intelligent automation could eliminate five million jobs in developed countries by 2020. So, you would think a recent spate of announced job reductions in Japanese banking over the next decade – over 30,000 in total at the three major banking groups – would be a cause for concern. Instead, on a recent trip to Tokyo, I heard from a senior executive at one of those banks that automation is vital to deal with a shrinking labor force as the country ages, and that busy robots are a better alternative for the country than unfilled job vacancies.
Despite this story of long-run job displacement in Japan, it’s wrong to conclude that intelligent automation will inevitably lead to fewer jobs in the financial services industry. Indeed, recent Accenture research suggests that – for those firms who embrace intelligent automation – revenues could rise by 32% by 2022, but critically employment could also increase 9%.
Just as in every other industrial revolution, job growth will also be associated with job change and evolution. Crucially, the nature of many jobs will reflect new partnerships between man and machine. Humans will be required to teach, monitor, and maintain the automated technology, while intelligent automation will amplify and improve human skills and judgement. Of course, there will be areas in banking where machines will fully displace humans, but those roles will typically be in areas where the work is tedious and repetitive for current employees. There will also remain many roles that require creativity, empathy, and judgement, where machines will continue to play a limited role for the foreseeable future. Ultimately, if we can better understand and define the symbiotic rather than destructive relationship between man and machine, we will be able to create not only more jobs, but also more interesting and higher value-added roles in the financial services industry.
Accenture’s recent 2018 North America Banking Operations Survey finds that this transition has already begun, with many firms using data and artificial intelligence to improve all manner of processes, from customer service to employee training. 22% of North American banks are already using AI, machine learning, and natural language processing, and another 55% intend to do so within the next year. Nearly one in five banks are already using robotic process automation technology and another 63% plan to do so within a year. The research also shows that many North American banks understand the symbiotic nature of these relationships, with 54% of firms saying human-machine collaboration is important in achieving their strategic goals.
Accenture’s global Talent & Organization lead for financial services, Andrew Woolf, says the challenge for banks, insurance companies and others is to “pivot their workforce to enter an entirely new world where human ingenuity meets intelligent technology to unlock new forms of growth.” While it is easy to point to job losses from increased automation, there are also many examples of humans being augmented by technology to improve their productivity and the service they provide to customers. For example, we have seen a proliferation of robo-advisers in wealth management over the last few years. In some situations, they provide automated advice to consumers who often can’t afford to pay the fees associated with traditional financial planning. However, in other situations, rather than replacing financial advisers, AI now makes those advisers more productive. Fintechs like AdvisorEngine can support the asset allocation process, leaving advisers with more time to focus on personalizing advice for clients and doing what humans do best – building relationships. As one senior wealth management executive commented to me “A machine can put a large inheritance into the right investment portfolio, but it can’t ask you what your parents did to accumulate that wealth and express appropriate sympathy at their passing.”
AI is also helping to reduce risk and lower compliance costs. AI and natural language processing can be used to automatically produce anti-money laundering and know your customer (KYC) reports, and to gather data for regulatory stress tests. Using AI for such tasks can cut bank compliance costs by up to 30%, according to the International Banker, saving billions. This automation also spares the thousands of risk and compliance staff who have sat in large warehouses since the financial crisis the tedium of repetitive, mundane tasks and frees up their time for more rewarding work.
Even when robots are deployed in customer-facing roles, there will still be plenty of need for humans to train and maintain them, as even the best struggle with the nuances of human behavior. For example, bots struggle with recognizing such things as sarcasm, and while platforms like Alexa may be able to fake a sense of humor on demand, they are still a long way from being able to handle the full range of human emotions. So, just like a puppet, the robot will need a human to figuratively pull its strings as it learns to navigate the complex, subtle and often culturally-specific landscape of human interactions.
Similarly, humans will need to be able to explain automated decisions to make sure banks don’t fall afoul of regulators: A machine can make credit decisions about whether someone should get a credit card or an auto loan based on the factors it is programmed to look at, but there also need to be processes in place to make sure those decisions don’t discriminate based on race or geographic location. As American Banker notes, “AI has yet to prove that it is more capable than humans in avoiding both safety and soundness and consumer protection pitfalls related to credit decisions. Indeed, humans will still be involved at key steps in the process.”
Ever since the computer HAL went berserk in the 1968 movie 2001: A Space Odyssey, people have worried that humankind might be usurped by machines. The reality in banking will likely be evolution not revolution, with the machines taking on the tasks they are best suited for and the humans focusing on what they do best. However, there will also be a huge array of activities where it will be the ability to combine the humans and the machines that will separate the leading banks from those who will struggle to thrive in this new world.