With More AI Comes Refinement, Not Revolution, in Banking
This has nagged me for some time: if it is so easy to build a financial model today, why am I not inundated with model-driven financial services? No company is offering me a “smart” payment card that automatically switches between debit and credit depending on money costs. No company is offering to provide me with a “smart” automated mortgage that crunches massive amounts of data to provide me with the best credit facility, bypassing mortgage brokers. No company is budgeting my life without my significant input.
In other words, no company is truly providing smart financial advice, and this is both on the commercial and the retail sides of banking. Oh, the promise is there. But it is just a promise today.
Which is why it was gratifying to hear Brett King’s presentation this morning at Next Bank New York, during which he declared that any aspect of financial services that includes advice will be disintermediated “first.” He didn’t get into why this hasn’t happened yet.
King is right, sort of. There is one variable in his futurevision: regulation. Someone is going to have to convince regulators that a fully automated mortgage is better than the variable, “the borrower really doesn’t know what’s going on” mortgage brokering that goes on today. Any easy argument, you say? Nothing is easy when it comes to convincing regulators that change is good.
Rather, the artificial intelligence-driven innovation King talked about today in New York will come at the periphery, but it will be nearly as profound. Let me explain what I mean by periphery. Perhaps the entire mortgage process won’t be digitized and disintermediated, but aspects of it will, and I am talking about a more immediate time frame of, say, within 10 years, rather than the 20 or 25 years King cites. Nearly each of the obscenely complex US mortgage disclosures are digitally delivered today. That’s a plus. There will be only more mortgage data available to consumers so that the negotiation abilities of brokers will eventually boil down to single basis points. That’s AI in practical use.
American Express just pinged me this week for “fraudulent activity” on my credit card. I know the card companies want to help, but the fraudulent checks are just wildly annoying. There is clearly enough data available for the card companies to verify charges with data, not human interaction. Amex is getting there. The fraud check today pushed a text message to my phone that require a click of a “yes” button, with the call into the Amex IVR immediately recognizing my text confirmation. This fraud check is new to me, and shows that Amex is thinking about ways to make fraud checks — at the periphery of financial services — less obtrusive, but still effectively.
(Interestingly, the fraud check technology no doubt came from Accertify, an American Express company. In other words, Amex is trying to monetize its fraud prevention technology with an internal venture.)
And that’s really how it will be: refinements, not revolutions, to the financial services process. Taken in aggregate, these refinements add up to the kind of comprehensive AI-driven revolution King forecasts. That is, until the next revolution alters financial services yet again.
