Just as we’ve seen in video entertainment, transportation, and advanced manufacturing, there’s no doubt that the financial industry will change, too. In fact, change is already underway as fintech, in the form of mobile payment, cryptocurrencies, tax preparation software, and even loan and investment alternatives like Kickstarter.
These changes aren’t solely emerging from Silicon Valley — banks and financial firms themselves are offering more and more new kinds of tech for customers to manage their finances, a trend largely driven by millennials (25% of millennials would switch banks just for an institution that offered a better mobile app). However, the introduction of AI will bring about a shift in financial services like we’ve never seen before. In fact, this coming trend is among the reasons why the PWC predicts that 20% of financial services companies are at risk of going out of business by 2020!
So, given that this situation is upon the industry now and it doesn’t look like there’s any way to avoid it, how do business leaders in this space prepare and make decisions to ensure success throughout this journey? To answer that question, let’s first take a look at an industry that automation and AI has already revolutionized: The advanced manufacturing sector.
The Shakeup of Advanced Manufacturing
As we’ve written about previously, automation, robotics, and the IoT have all converged to revolutionize advanced manufacturing. Today, roughly 10% of all manufacturing is automated, which has surely contributed to the fact that the U.S. has lost five million manufacturing jobs since 2000. As automation handles more and more unskilled and repetitive tasks, it has surely diminished the need for human presence in assembly lines and factories.
But it’s not all doom and gloom. A slim majority of respondents in a recent Pew survey believed that technology will not replace more jobs than it creates by 2025. We’ll still need people for more creative or analytical roles, and new types of jobs will emerge to help advance technology even more. Specific to manufacturing, experts have pointed out that automation and robotics in manufacturing can often handle tasks that would be extremely dangerous for human workers.
But What about Finance?
Automation and AI obviously will not have the same role in the financial industry as in manufacturing, but the advancements of machine learning could mean that the impact will be just as significant. AI is now at the point where it can supplement or even replace more than just repetitive tasks. As we’ve explored in the legal industry, it is now moving into white-collar fields and becoming advanced enough to take over research and analytical functions.
Financial services is in an interesting position because it is where, more than in any other industry, differentiation between competitors is almost entirely based on higher returns and lower costs. After widespread adoption of smart and automated technology, it’s likely that the functionality of the technology itself will not vary much among competitors, so it will be relatively easy to select and implement. Simply having and effectively leveraging the latest technology is what will be most important, but this will almost definitely impact employment at financial firms as the firms look to cut costs and eliminate redundancies.
A final thing to consider in finance is how much more consumer-driven it has become (a charge that is largely led by millennials). Convenience and cost are the major motivations behind choosing to use mobile apps and other alternatives in working directly with a finance company. AI will introduce a third option, in between do-it-yourself banking/accounting and hiring an expensive firm to do it for you, and financial companies will need to market their value to consumers more than ever before.
How Can Business Leaders Prepare?
In order for business leaders to start down this unavoidable path, they need involvement, understanding and commitment from the entire organization. Practicing good corporate citizenship will be important, as solutions other than mass layoffs must be explored. With this in mind, buy-in from everyone is essential, and individuals will need to place the greater good of the business ahead of themselves and their comfort zones. Employees will need to accept new roles because many old jobs will be going away — perhaps as many as 20,000 industry-wide!
In addition to buy-in, a roadmap is essential. The AI revolution will not hit financial services overnight, but it will be a fast-paced evolution that will impact different aspects of a business at different times. Think about how and when AI can be integrated with your business strategy, and make sure you’re tuned into industry news channels so that you’re aware of when the time is right, what your options are, and how to choose the best tool for your needs.
Finally, as you consider what your business will look like with more advanced AI in place, think about the decisions you make today in regard to people, data, security, and budgeting, and project how these decisions will adapt with AI in the picture. Can you anticipate how laws, regulations, and guidelines might change? A forward-thinking firm has a greater chance for success, now more so than ever.