Connect with us

TECHNOLOGY

Artificial Intelligence in Banking – Robo Advisors and beyond

Artificial Intelligence in Banking – Robo Advisors and beyond

Mohit Joshi, Vice President and Global Head – Financial Services at Infosys 

Technology has changed the very psychology of money and the way we perceive it and artificial intelligence promises to further the ease of doing business for economies across the globe. The great recession left people unsure and with a lower level of trust in banks. The need for secure systems and solid investment plans however, continues to be as great as ever and technology solutions are needed. Technology-backed advisors have now come into the picture and are expected to manage $2 trillion in Assets by 2020. The arrival of Robo-advisors…

Why the shift?

The market is ripe for disruption and FinTech firms are set to take the lead in this change to cater to the changing customer preferences. In 2015, robo-advisors managed less than $20 billion in assets in the US – this number is set to increase manifold. Robo-advisors look set to manage about 17% of total assets in next 6 years with a Compound Annual Growth Rate of 120%.

Financial Investment Advisors (FIAs) are expensive and most often beyond the reach of younger, lower net worth individuals. Millennials prefer better technologies, easy and ‘branchless’ 24/7 communication with advisors and most banks cannot provide this. It’s not just the low barriers of entry and low fees that entice millennials, but the very fact that technology is more trusted than bankers, hence  necessitating digital asset management services as a priority in banks. Compared to traditional wealth managers, robo advisors gain their competitive advantage with all mobile, all-time service options. And with over 58% of millennials in the US vouching for the DIY financial research mode, robo-advisors are quickly filling in the void.

For clients with more complex investment decisions, the hybrid robo-advsiors are gaining traction.  A go-between, hybrid robo-advisors couple computerized services with hand-holding from human advisors. But it’s not just millennials who are interested. When investment pros were quizzed by CFA institute, 70% expressed that new-age tools like robo-advisors will have a positive effect on mass affluent investors and 41% think it could even benefit high net worth people. The feature of robo-advisors that entice high net worth individuals is the 24/7 monitoring of portfolios and features like tax-loss harvesting.

Robo-advisors is not limited to DIY investment candidates – full service advisors and discount brokers can use robo-advice to push further into advice delivery and at the same time leverage their traditional direct engagement model. In the future, robo-advice capabilities are set to expand coverage across asset classes to include alternative investments such as hedge funds and real estate.

The future 

The adoption of Robo- advisory has significant implications on the way present digital systems interact with customers. The systems have to evolve significantly to ensure that the customer journeys are smooth and intuitive. The Robo-advisor needs to learn, thus adoption of artificial intelligence is essential to build scale and depth. The questions regarding security, liability and scalability are critical, so credible systems and processes need to be built to ensure trust and adoption. The algorithms need to be robust to take market contingencies into account – in the event of a severe market downturn or a flash crash, investors need to be assured that their assets are safe.

As artificial intelligence and automation takes on the centre stage in banking, taking advice on wealth management from a machine is just the beginning in the relentless march from atoms to bits.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Recent Posts