The Financial Technology Service Providers Association (FITSPA) is holding its 6th annual conference at Kampala Sheraton Hotel under the theme “Collaboration for Growth: Leveraging Partnerships and Collaboration to Drive Innovation and Growth in Uganda’s Fintech Sector”. The two-day conference (scheduled to end tomorrow, October 4th) is led by inter-sector dialogue and conversations highlighting the relevance of mutually beneficial engagement and collaboration between sectors and shedding light on proven strategies and models for building the fintech ecosystem.
The conference has gathered industry leaders, innovators, and professionals eager to understand the evolving digital landscape and harness its potential for their organizations. The keynote speaker, Mr. Dave Birch, a commentator on digital financial services, shared his vast knowledge and insights in the fintech sector —among the things he shared was AI in the financial sector, the future of banking run by robots, digital trust, and quantum computing, among other things. Here’s our takeaways from his keynote;
AI replacing humans in key decision-making roles
Artificial intelligence (AI) is the most professional in many specialized areas and could be released only in few years from now. In the health department, AI is installed for medical use and is even more effective than health experts in the visual scan portion. While now practiced to validate medical availabilities, the speed with which AI is progressing suggests that such backup of human intervention is less and less certain. However, the real dislocation occurs in the wave of AI that comes later: digital agency.
The artificial intelligence market has already shifted its direction as today’s hot topic is the development of “people agents”—autonomous bots that are capable of performing human tasks. These types of bots will not only assist but also do away the need for human input in cases of analysis and probability-based decision-making. It won’t be long before companies need active inputs from humans as sources of decision making even those who are in top management.
AI in financial services: revolutionizing compliance
Machine learning and AI have focused their efforts on influencing the compliance aspect of the financial services industry. Compliance is essentially a given in the case of financial institutions for they are always guided by legislation, however for a business such as anti-money laundering and know-your-customer compliance it is an expensive and lengthy task. By and large, 50% to 70% would be spent by fintech companies on compliance activities—not on the provision of services or products in the industry.
There are significant cost advantages in the compliance management systems including external outsourcing of these activities. Processes, which include filling AML forms and KYC checks against customers, can be performed by bots, thus saving the time of human personnel who can concentrate on economic activities that create more value. However, well crafted, systems like ChatGPT do not yet have the proficiency to conduct those functions autonomously due to the shortcomings including hallucinations- distortion in which pictures predicted by AI bear no truth. Such hallucinations in the financial services sector, where facts matter a great deal, may lead to huge fines upon some convincing regulations.
The true disruption: AI for consumers, not just banks
Many financial institutions see AI as a cost-cutting and efficiency-improvement tool for their existing business models. Nevertheless, such a view lacks depth. Its core disruptive quality is not on improving managers’ decision-making, but on changing the way customers make financial decisions. With the blooming of technology companies such as Google, Apple, and Facebook that are making AI more widely accessible, it will also have a radical effect on how mass market consumers manage their money.
For example, many people do not achieve optimal or maximum returns on their savings accounts because they do not have time or knowledge or too much administrative work needs to be done to earn the best interest. These days, most consumers have been rendered passive by the force of inertia when it comes to making financial decisions and instead tend to park large amounts of money in interest-bearing accounts that do not yield very much. On the other hand, there are no limitations to AI. For example, one consumer’s personal AI could always check checking accounts while sitting in the office, and if any of them earns more interest than the other, the funds in the performing account will be moved around to maximize the profit.
This type of AI-assisted financial management changes everything in the banking industry. For example, these bots will determine everything right down to which credit card to pay making use of the maximum rewards and minimum fees including card rank and simply optimizing interest on account for the bots making use of excessive payoff of interest rate cards.
The age of robot-to-robot transactions
As financial markets open up to artificial intelligence, we cannot rule out the possibility of robot-to-robot transactions taking place. Just in the future, all banks will more likely stop advertising their services and products to people as they will be targeting the bots managing their clients’ finances instead. The use of labels or any form of persuasive selling would be a thing of the past. The data was the central focus of the Bots, the amount of fees, and the expected output were the only determinants. Therefore the products being developed will be targeted towards these measures.
The first problem would be how to distinguish if a given transaction has been initiated by a human or a robotic market participant. For these and other reasons, it will be hard to tell the measure as these machines grow in strength. New solutions would be required on the side of banks for example to prove why certain activities that they perform are genuine in the way that they do not allow the bots operating inside banks to assist fraudsters and other people to con banks.
In summary, the realm of artificial intelligence in the financial services of the future is not one of the distant castles in the air, but clusters of clouds whose outlines clearly can be seen. From ensuring bookkeeping to customer service assistance, AI is about to change the dynamics of the industry. Banks who apply AI technology in only ways of cutting down costs and achieving minor modifications of existing services are simply ignoring the reality.
