The future of finance doesn’t involve a killer app or an entirely new vision for banking and investment management. Instead, the industry is being revamped by what firms can do with data — and how their daily work will be done by far fewer people as a result, according to financial executives.
Credit Suisse is now piloting a robot named Reggie, a virtual assistant not unlike Amazon’s Alexa. Credit Suisse’s Reggie was programmed to answer regulatory questions, according to Brian Chin, CEO of global markets for the investment bank. Chin, who spoke on a panel at the Milken Institute Global Conference in Los Angeles on Tuesday, expects that the Swiss bank will be able to ultimately cut the number of calls to its call center by 50 percent. But at this point, Reggie is better at providing information for simple questions than appropriately addressing more complex inquiries.
Chin insisted that people will be redeployed from processing jobs to technology and servicing private bank and other clients who will continue to want to talk to human beings. Reggie is one of more than 20 robots operating at Credit Suisse. Chin added that the bank has also formed a partnership with data firm Palantir. With Palantir, Credit Suisse is using data to identify rogue traders and other compliance problems. “If we can get this right, we can run a more compliant business,” says Chin.
The technology exists now to streamline labor-intensive processes such as loan underwriting. Mike Cagney, CEO and co-founder of SoFi, an online consumer lender, uses five pieces of data to provide instantaneous loan decisions. SoFi is now moving to use non-traditional information for underwriting, including data from cell phones, which it thinks will predict consumers’ future behavior. Cagney said banks could shed thousands of people if they used similar technology.
Meanwhile, the asset management industry is embracing quantitative techniques. Last month, BlackRock said it was merging some quant funds with similar actively managed funds and firing some of its portfolio management staff.
But Credit Suisse’s Chin thinks the investment management industry has a way to go when it comes to data innovation. The increase in the use of data by investors has made divergent opinions about securities and the markets scarce. That’s because many money managers and investors are using data in much the same way, leading to crowded trades. Chin compares the next stage of innovation in data in asset management to the popular Waze App. When the app detects a traffic jam on one route, it directs users to take one alternate path. But then that alternative route gets equally crowded. “Somebody needs to invent a third option,” said Chin. In money management, that means firms need to use data in more innovative ways that will lead to investors with a range of opinions again.
Not everybody sees a dire future for the labor force. WorldQuant, a quantitative hedge fund firm with more than 600 employees, is hiring. WorldQuant has 120 employees with Ph.D.’s located around the world. It wants people with diverse backgrounds who can look at data in new ways to find so-called alphas, or trading signals, as the firm defines them. Speaking on the same panel, Igor Tulchinsky, founder and CEO of WorldQuant, said, “More people make more alphas and more alphas mean more profits.”
SoFi’s Cagney agreed. He says one of the company’s experiments has been so successful that it’s become permanent. Right before SoFi sends money to approved borrowers, an employee calls the customer to ask, “Will you pay us back?” That simple phone call has significantly improved the company’s payback statistics. Clearly, humans are not endangered.
