The rise of iFinance: How AI and Blockchain will impact the banking industry - GetSmarter

Dec 20, 2017

At Barclays Africa, an AI system, reminiscent of Apple’s intelligent personal assistant, Siri, is being created to assist with customer queries.

Ripple, a San Francisco-based technology firm, provides global financial-settlement solutions powered by blockchain to not only decrease the total costs of settlement but to equip banks with the ability to transact directly with each other.

Swiss Bank UBS recently announced its use of robots on the trading floor in an effort to boost the performance of traders. With more than 78% of bankers believing AI will enable simpler user interfaces that will help banks create a more human-like customer experience, and Bitcoin setting record highs with every passing week, artificial intelligence and blockchain technologies are already shaping the future of the financial services sector.

But the question that’s been on everyone’s lips since these innovations started making themselves known in the industry is, are they a threat?

Job creation versus job extinction

In early 2016, a Citigroup report warned that 30% of banking jobs - between 2 million and 6 million, could be lost between 2015 and 2025, mainly due to retail banking automation. But with 91% of Efma/Deloitte survey respondents believing that new technology will not replace employees but rather empower and support them, the threat of automation should be called into question.Blockchain 1

In the words of Charles Darwin, speaking on evolution: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”

Perhaps today humanity is facing a different kind of evolution.

AI and Blockchain in the banking industry: opportunity or threat?

Just as the emergence of the internet in the 1990s caused a stir in the finance industry, there is no doubt that broader adoption of technologies such as blockchain and AI will mean that certain roles will no longer be needed. But in reality, job roles will most likely evolve to accommodate the presence of these technologies rather than become extinct. On top of that, companies will have to create new jobs in order to develop and manage AI and blockchain innovations.

Last year, tech giant IBM announced the creation of a new company, Watson FInancial Services, which will be a fusion of cloud and other blockchain-related offerings, specifically aimed at the banking and financial industry. An entirely new company is being born because of blockchain - a company that will no doubt need skilled staff to run its operations. In fact, out of the banks surveyed in a Tata Consultancy Services (TCS) in September 2017, all reported having AI presence in their companies resulted in an average increase of 10% in jobs in 2015 in the departments using the technology and they projected the number should increase to 16% brand new jobs on average within the next eight years.

And for banks utilising blockchain technologies, new roles in security fields such as encryption and identity protection will have to be created as firms will still need to protect themselves from cyberattacks, potential fraud or other threat sources.

One of the biggest challenges banks are facing with the emergence of AI and blockchain is not the possibility this technology poses to existing job roles but rather finding the right talent to take on new roles. Employees at banking firms who want to survive the threat of job extinction should be willing to upskill.

Already, world-renowned universities such as the Massachusetts Institute of Technology (MIT), the University of Oxford and HarvardX are taking proactive steps in bringing future-focused skills development to those recognising the need to adapt and evolve their skill set by offering executive online courses - with the content being focused on AI, fintech, blockchain and cybersecurity.

Whether it be gaining the ability to pioneer the integration of AI technologies into business operations; learning how to utilise blockchain strategically in order to make better business decisions; being equipped to launch new Fintech ventures or developing vital cyber risk management skills to counter the ongoing cybersecurity concerns in financial services firms, the future of job roles in a world of disruptive technologies is left in the hands of employees who can choose to either see the threat to their careers, or take advantage of the immense opportunities.

Blockchain and AI could meet the needs of Africa’s “unbanked”

With more than 326 million people on the continent who don’t use formal or semi-formal financial services, according to McKinsey and Company, Africa is the perfect destination for new technologies to be employed in order to extend banking services to poorer communities. 

Fintech company, MyBucks, is already utilising AI to provide a range of financial services to these areas and, according to Disrupt Africa, close to 30% of the total venture capital investments into the continent have been in fintech, which amounted to nearly $50 million in 2015 alone.

“Fintech innovations such as prescriptive analytics and credit technology are being used in Africa to provide a simplified and more direct approach to banking allowing greater integration of the traditionally un-serviced or under-serviced customer into the banking system,” says Pillsbury counsel Tina Blazquez-Lopez, who co-leads the law firm’s Africa initiative.

But that doesn’t mean adoption of the innovation doesn’t come with its own set of challenges. Blazquez-Lopez points out that a number of factors will need to be considered, namely: the regulatory framework of this relatively new industry; the lack of appropriate supporting institutions; corporate liability; and high upfront costs. But beyond these challenges, what will success look like? Willem Van Der Post, Managing Partner at the Deloitte Centre for the Edge Africa believes that “AI will be able to not only reduce costs through fintech process applications, but also converge with needs like education and financial literacy to liberalise consumers across the continent.”

The impact on business ROI

The 2017 PWC Global Fintech Report highlights the financial impact of blockchain technologies on incumbents, with a 20% annual ROI on Fintech-related projects.

Following that report, Accenture Consulting and capital markets benchmarking provider, Mclagan, recently teamed up to conduct an in-depth analysis on the ability of blockchain technology to improve efficiency within the industry. Their findings? Blockchain could save banks billions. After mapping more than 50 operational cost metrics against Accenture’s model, the analysis revealed the following:

  • 70% potential cost savings on central finance reporting
  • 50% potential cost savings on centralised operations
  • 30-50% potential cost savings on compliance

Due to traditional methods being unable to improve profitability in the wake of incremental capital costs, they concluded that this disruptive technology has the potential to save up to 50% of costs for high performing financial services firms. Artificial intelligence is not much different than it’s innovative counterpart when it comes to the financial gains it could have on the banking industry. A study conducted at the WEF 2017 Davos convention claims that automation has the potential to cut costs in the financial sector by 15%, with AI being a central component to this happening.

In fact, banking and financial services executives have revealed their investments in and integration of AI into their companies has aided in the decrease of production costs by 13% with a 17% average revenue increase in the area of their AI-centred initiatives.

These technologies are could be the savior of financial services industry but the only way for the banking industry to get these returns is to invest in learning more about how to manage, integrate and develop them. With 86% of business leaders in the banking and financial services industry using AI technology and blockchain investment expected to increase by $1 billion this year, there’s no ignoring the imminent total takeover of these disruptors.

If embraced for the opportunities they offer, rather than avoided for the threats they could pose, these technologies could be the saviors of the financial services industry. But the only way for the banking industry - employers and employees alike - to capitalise on the financial potential of AI and blockchain, as well as benefit from the hundreds of new job roles that could emerge, is to place an increased investment in skills development.

Learning how to manage, integrate, develop and maximise the potential of these technologies will be the difference between seeing them as a threat or an opportunity.


SourceGetSmarter is a premier online education company that partners with prestigious universities and leading organisations to offer continuing education short courses to working professionals throughout South Africa.

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