Impact of Ai on Finance Industry

Vishesh Anand

11 April 2017

AI and Finance, A Buy and Hold Story

    Our species, as a whole, has eternally been consumed with the drive to maximize our efficiency, abilities, and riches; we have been fixated on realizing progress. However, such a fixation can be unhealthy by breeding tunnel vision and often resulting in the unintentional alleviation, and thereby discounting, of the socioeconomic costs incurred by that progress. In recent times, our hunger for progression is being satiated more rapidly than ever before as we have graduated from optimizing our efficiency to integrating automation into our lives. This shift in focus has been catalyzed by our advancements in technology, particularly by the advent of Artificial Intelligence (AI) systems, that exhibit raw intelligence similar to that of the cognitive functions associated with the human mind such as learning, problem-solving and decision making. AI devices are designed to be “intelligent agents,” able to perceive and interpret their environment and then take the required actions to maximize their rate of success at a set goal, they have been around for roughly 60 years. Initially, growth in the field of AI was stagnant, or gradual at best, but AI has developed into an efficient and cost effective resource in recent times owing to the exponential rise in computing power. Jonathan Wilmot, founder, and CEO of Wilmot ML — a macro strategy, machine-learning fund — proclaims that “AI is probably the most powerful, multipurpose technology that we have seen invented...[with] the power to transform the world” (qtd. in "Artificial Intelligence"). AI’s implications are believed to be so far-reaching that they have been compared to the paradigm shifts in society and services that were caused by the Industrial Revolution ("Artificial Intelligence").

    As more literature about AI and its application is still emerging, many industries have nonetheless embraced AI and invested in the technology to position themselves “to stay ahead of the curve” according to Marianne Lake, CFO of JP Morgan (qtd. in Son). The financial services and banking industry have particularly been invested, financially and mentally, in AI. Use of AI in finance can be dated back to 1987 when the Security Pacific National Bank used it to investigate frauds and counter the unauthorized use of debit cards, and to the Alacrity 2.0 system from 1987, the first commercial strategic and managerial advisory system of its kind, created by Alistair Davidson and Mary Chung (Cook and Sterling). Their software also included the world’s first digital financial expert which had the ability to interpret financial statements and models. The application of AI in finance has evolved manifold since then, as today AI is employed by financial institutions to automate a multitude of operations such as maintenance of the books, stock investing, property management, and trading. While on a more general level, an AI system in finance is designed to scour billions of pieces of data, spot trends, adapt as it learns and ultimately make money (Satariano).