By: Jack J. Kelly
The Financial Times joined the chorus of mass media outlets excitedly reporting the demise of the human being office workers and rapid ascension of smart robot overlords.
Their genius theory is based upon the premise that technology, especially artificial intelligence (AI), will replace people because we are dumb, lazy, brazenly ask for salaries, and talk back to our mangers while technology is awesome and way cool.
AI is a term used by computer geeks (and non-techies who are trying to be hip and get on the good side of the robots) referring to computer systems that are able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages. Further, the smart robots can ultimately self-learn and improve their capabilities.
According to the FT, AI is now setting its beady dead eyes (I’m exaggerating, technology really doesn’t have eyes) on the Compliance sector. In the perfect sci-fi IT future, instead of having thousands of compliance analysts pouring through trading reports, a smart computer will do all the dirty work in nanoseconds.
AI technology will self-teach itself, ultimately creating better technology systems to help banks better crunch data and provide enhanced surveillance systems relative to anti-money laundering, sales and trading reports. Having better control of data will, according to the companies involved, cut down the need for employing annoying armies of compliance professionals.
FinTech and now RegTech (cool names made-up for using technology) start-ups are sprouting like wild weeds. The companies consider themselves self-styled “disrupters” seeking to reinvent Wall Street and banking through new, cool technology. Why do you need a bank when you can use an app on your phone?
For instance, new technologies mean that banks could make vast savings in compliance, according to Richard Lumb, head of financial services at Accenture. Lumb estimates that “thousands of roles” in the banks’ internal policing could be replaced by automated systems.
The financial industry, for example, has spent billions of dollars hiring tens of thousands of new compliance personnel since the financial crisis to deal with increased regulatory requirements and responding to never-ending scandals.
“We are seeing work with clients today which is very much around big data and robotic process automation, where in compliance — take anti-money laundering — you can take out thousands of roles,” Lumb told the Financial Times at last week’s World Economic Forum in Davos.
“That is coming quite quickly now and that will sweep across the industry.” He said many of the jobs created by banks in recent years for compiling and checking data on customers and transactions had already been moved offshore to lower-cost countries. In the next wave of automation they will simply disappear.
The timing is interesting, coming on the heels of President Trump’s demands to repeal regulations across the board. Also, Wall Street and other industries are undergoing a regulatory and compliance backlash. Furthermore, regulatory agencies such as the Securities and Exchange Commission are losing executive talent at an alarming rate, and under Trump’s edict to freeze government hiring, they may not be replaced. With this backdrop of weakness, it is the perfect time for proponents of AI to attack.
While I recognize that technology could help with the overwhelming burdensome amount of data that needs to be reviewed and analyzed by compliance professionals, it may not be a panacea for the banks.
Wall Street would love the chance to downsize compliance and replace them with IT systems. Executives are giddy with prospect of getting rid of the pesky compliance people and also saving millions of dollars in salaries and benefits. After all, machines don’t take vacations, coffee breaks, complain or call in sick (in the movies, however, they do sometimes go berserk and kill their owners).
As much as they would like to sell the idea of smart machines as a means to save money and improve Compliance programs, it is impossible to have AI replace the human touch. I recognize that every industry and professional under assault by technology makes this claim. In this instance, a major part of the job is to speak and interact with traders, bankers, brokers, clients, peers and regulators. The human involvement is paramount and irreplaceable.
Just in case, I’m looking into finding out how to recruit computers. Also, do you think our new computer overlords will read newsletters and blogs?