Finance’s AI future will leave a great many of us behind

Niall Ferguson, The Ascent of Money

Technology has always changed our relationship with money, and each new innovation creates a new challenge. Coins meant you didn’t have to barter with grain, paper meant you didn’t need to lug metal around. Central banks stabilized value, and telegraphic transfers sped up payments. All of a sudden money could be used to pay someone you weren’t directly in front of, instantly. With each move forward inevitably, people get left behind. If you could balance your chequebook but couldn’t make sense of an ATM, life got a little harder when cash became king. Credit cards increased people’s spending power but came with their own problems, affecting credit ratings and making taking out loans problematic, depending on whether you did or didn’t use them.

Early financial technologies took centuries to evolve, embed and be understood. Now the innovation cycle is much shorter, and its impact far more wide-ranging.

For the last decade, the biggest threat to how people manage their money has been branch closures. Older customers that don’t access banking apps consequently receive a much-reduced service from their bank. Solving this challenge is a benefit that banks like Nationwide still think they can build their brand on, but for those who’re able to crane their neck from the rearview mirror, they’ll see that the financial world is fast evolving beyond online v offline banking.

Challenger brands flaunt their ability to create savings pots, budgets and reports for the individual banker. While these are helpful, the changes that we’re hurtling headlong towards will quickly create divisions that’ll make these heavily marketed features feel as dusty as the piggy banks they seek to replace.

Services like Albert analyse your income and spending, and can invest automatically on your behalf. Your money is still at risk, dear reader, but the people who have well-optimized algorithms (rules-based, not generative) stand to enhance both their cash flow and future savings more effectively than those who rely on their own wit and memory to manage their money. Qapital provides a similar service, marketing itself on the fact you can “set and forget” your financial goals. Looking after your hard earned money is now the province of machines not advisers.

If this all feels very much in your financial wheelhouse, how about a virtual assistant in your home that talks you through the process. Clinc is a pioneering conversational AI with 20 patents in the process; when AI moves from being rule-based to potentially generative, it’s not hard to imagine the advice people get becoming not only more personal but potentially riskier. A regulation minefield awaits. Would you let a talking head in your kitchen deploy money on your behalf? Would you risk being left poorer than those who are taking advantage of advice and action from a machine?

What happens when everything we do becomes an input to the financial decisions we all depend on?

Underwriters already employ AI to help them assess risk, issue premiums and approve claims. All basic insurance will be processed this way in the near future, but what happens if your search history influences a future loan, or your screen time affects your mortgage? We don’t own any of this data, and those that do have thin regulatory demands to keep it to themselves. The more data that is attached to you, and the more robots can access and assess, the harder it’ll become to control your financial future. It’ll be in the hands of those powered by lithium chips.

At this point, we will all be left behind. It’s no longer a case of who has the time and literacy to manage a score of personal robots to manage their money but who is seen by the machine as being of future value. And the data they use won’t just be the millions of micro actions you take, it will be the “data” that exists when your face is scanned and your fingerprint is read. What starts with the promise of security, invariably leads to misuse and discrimination.

How will banks ensure the vulnerable are financially viable? Whether a factor of your age, race, gender or class, banks need to ensure those customers who may not have regular earnings, savings or a private pension are supported and where possible strengthened by the changes ahead. Not simply identified as being subprime customers.

AI-powered financial innovations have the potential to make us significantly smarter with our money than any previous generation. But the faster change unfolds, the less we will be able to see what’s ahead, and the more of us will be left behind.

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