Technology has helped banks speed up processes, and it"s allowed customers to bank and trade online and make payments from their mobiles. But is it dehumanising financial services?
It"s true to say that the financial services industry has a pioneering history of adopting automation technologies. The sector moved quickly to take advantage of the earliest post-war developments in computing, which promised a new world of being able to calculate and process large numbers of transactions at speed. As customer numbers swelled, banks faced a crisis of both space and staff numbers, and computing was a welcome answer.
From the installation of Bank of America"s ERMA accounting system in 1956 - through the automation of stock exchanges in the 1980s and the birth of online banking in the 1990s, to today"s advanced high-frequency trading algorithms that enable millions of deals to be made every second, beating humans to the punch every time - automation has been at the heart of the finance sector"s boom of the past few decades.
In the early days of computerisation, the focus for the financial services industry was on back-end infrastructure, dealing with greater volumes of data and increasing the speed of transactions. Clients benefited by being able to trade more swiftly and more often but weren"t, themselves, directly able to access these systems.
This all changed with the sudden growth of the internet in the mid- to late-1990s. Although early forms of online banking had been available since the early 1980s, these systems - with the exception of Minitel in France - were trading rather than customer banking platforms. It wasn"t until the mid-1990s that customers started to get in on the action.
Whether the benefits of automation have come at the cost of jobs lost will always be a moot point because growth in the financial services industry wouldn"t have been possible without it. Neither the UK nor the Channel Islands would have such strong financial sectors if it weren"t for the automation of millions of repetitive processes.
There"s also an argument that jobs aren"t so much lost as changed. “By automating repetitive tasks, you change how you spend your time,” says Martijn Gribnau, Chief Change Officer at software firm IPSoft. “The automation of repetitive tasks enables us to spend our time on more challenging and productive tasks.”
With those tasks comes greater job satisfaction, argues Mo Baluchi, Business Development Manager at Quilter Cheviot in Jersey. “Automation provides more value from a time perspective and allows people to be more satisfied in more interesting jobs,” he says.
Cutting out the personal
When seen as the enabler of industry growth and greater job satisfaction, it"s easy to understand why automation has been so eagerly adopted by the financial services industry - but if there"s a tension, then it comes when automation moves from the back office onto the front line.
We all enjoy the convenience of online and mobile banking, and often demand more from these services. However, we also know the frustration of not being able to speak with a real person when we call the bank - or even when we walk into a branch.
“Automation takes away a lot of customer interaction,” says Rob Newby, Technical Director at security firm Dataseal. “I don"t know my bank manager, whereas I might once have done. I remember my father going to the football with his as he had a business account with him - nowadays my business manager is an automated email and a central phone number. That doesn"t create satisfaction, although it must signal good business for the bank.”
Interestingly, the type of transaction being undertaken may determine whether we"re happy to have it automated or not, says Mo Baluchi. “At Quilter Cheviot, we"re seeing that clients want their valuations and portfolios on their iPads. Clients do like automation when it"s purely information that they need.”
The client wants to control whether their interaction is automated or not, which means banks adopting a different approach to automation, says Gribnau. “In the beginning, financial services companies tried to force customers to use automated channels. Instead, you want to stimulate customer demand positively.”
According to Gribnau, today"s customers demand choice - and that means using automation in particular ways. “Banks should transform their infrastructure into an automated utility on the back end and omnichannel on the front end.”
Customer choice
An omnichannel approach may well be the answer to keeping customers happy, and doing that may mean that human interaction remains an important element of the service that firms offer. But technological development only seems to accelerate, and already there are virtual alternatives coming onto the market, including IPSoft"s virtual service agent, Amelia.
“Amelia can really read and understand. She understands what you meant and not just what you said. She can follow a process, so if you connect her to a back-end system, she can solve problems. Amelia is replacing what humans are doing, and you have to see it to believe it.”
Already in operation within a number of companies including Accenture and Shell, Amelia pushes automation towards the world of artificial intelligence, and while she can replace human interaction to some extent, Gribnau is clear that “it"s the combination of computer and human that will win.”
Looking beyond Amelia, we see elements of artificial intelligence being used in high-frequency trading to make autonomous decisions that can affect markets across the world, but there"s another area in which AI could transform financial services: big data.
“Computers analyse patterns of investment on a daily basis, and about the only thing we can say for certain about markets is that they are totally unpredictable, which doesn"t seem like a great place for computers to be. But on the other hand, big data is bringing with it new capabilities - the ability to see patterns where you weren"t looking in the first place,” says Newby. “A layer of AI over the top of a big-data store containing market changes would certainly produce new investment ideas we"re not aware of now.”
Alongside greater analysis could come greater personal control of our finances, which Newby believes may be the next big step forward in financial services automation. While we have plenty of platforms to choose from, he maintains that we currently only have the “illusion of control”.
“We don"t have the insight into our financial profiles that the banks do, we don"t know how attractive we are as customers. It would be much more impressive if I could do this sort of profiling on myself, see what my earnings are, get suggestions that might save me tax, show me if I"m in danger of missing future payments for things.”
This level of insight will become more likely the further we move away from a cash-based economy and the more we automate all processes. At IPSoft, they believe they can increase the rate of end-to-end automation from an average of 56 per cent up to 80 per cent in some companies. Add to this the changing world of payments - in which we are slowly moving towards a fully electronic payment environment, including payment by mobile or even wearable technologies - and the data we"ll all generate will one day enable us to fully track and analyse our own financial behaviours.
What comes next?
Cashless spending
Seemingly forever caught on stall, the world of mobile money will one day become an accepted reality, but it will take a real cultural change to get there - and that takes time. Whether you"ll end up swiping a card near a reader or using your mobile phone as your virtual wallet remains to be seen, but as Rob Newby, Technical Director at Dataseal, points out, the cashless society is but a generation away. “Doing away with physical money seems anathema to us, but to a new online generation it"s less tangible and more inconvenient than it ever has been to us,” he says.
Big data gets personal
Alongside the growth in virtual cash transactions will come the ability to record and analyse every financial event in our lives. The banking industry is beginning to see the benefits of big-data analysis as banks realise that profiling can help them better understand both their customers and their own businesses.
There are already apps available to help you track every single penny you spend (such as The Birdy), but combine these with a world of purely electronic transactions and soon we will all have a mine of information that, properly analysed, will help us better understand our own financial lives.
Blockchain banking
The phenomenal rise of Bitcoin"s value saw it hit the headlines worldwide, but in reality its role as a currency is unlikely to be its enduring legacy. Instead, it"s the underlying "blockchain" technology that is most likely to continue into the long term.
The blockchain is a virtually incorruptible public ledger that records Bitcoin (or other cryptocurrency) transactions, providing a time-and-date stamp that could be used to verify a range of financial transactions.
The Blockchain"s potential as a tool in banking has been acknowledged by the Bank of England and a number of financial institutions. In 2014, Oliver Bussmann, CIO of Swiss bank, UBS, said: “Blockchain technology will not only change the way we do payments but it will change the whole trading and settlements topic.”