Sweeping the world of investment banking, the presence of artificial intelligence (AI) is gaining status over and above being simply an industry buzzword. According to Gartner, AI is set to recuperate 6.2 billion hours of productivity and $2.9 trillion in business value by 2021. With continued research and development into how AI can be deployed in the investment banking industry, aims for increased efficiency raise questions of job security and possible redundancy of certain business functions.
By its standard definition: “AI is a set of systems that are able to perform tasks that would otherwise need human intelligence.” A major part of what drives this technology is machine learning, which utilises past data to predict future outcomes, as well as deep learning – a complex multi-layer neural network that imitates the mechanisms of the human brain and how it processes data for the purpose of accurate decision-making
These technologies are beneficial to a plethora of investment banking functions:
Investment banking is a highly competitive industry by nature, and intelligent technologies can supplement every facet from projecting returns on capital and data-processing to simulating market conditions or strengthening customer experience. Beyond this, AI can be used in an investment bank’s security divisions to accurately authenticate transactions and alert irregular behaviours. Globally recognised investment banking institutions have led by example and implemented AI in different ways.
UK investment bank Barclays has an entire subsidiary dedicated to achieving its vision of being “the most AI savvy workforce in the UK”. Trade decisions and payments for its short-term structured products are processed by its in-house AI.
JPMorgan Chase, the American investment banking monolith, uses AI to interpret loan agreements. As part of its AI plan, the now-renowned Contract Intelligence AI system has spared workers 360,000 hours of dull tasks, interpreting and recording contractual clauses, while enabling support staff to rather focus on high-value delivery.
Contrary to popular views, AI is currently adding more opportunities to the job market:
Put simply, AI is creating more jobs than it is replacing. Using AI has become the new normal for investment banks around the world. According to the professional network LinkedIn, jobs in AI increased by 190% between 2015 and 2017. More specifically, there has been a higher demand for tech-savvy investment banking professionals who incorporate AI in their daily use across different departments.
“There’s an incredibly low risk that the job done by the traditional mergers and acquisitions (M&A) analyst will be automated,” says a junior analyst from the investment banking division of Goldman Sachs. “Almost all the analysis we do is tailored to a particular company and structure of transaction. It means we usually build new models and presentations entirely from scratch. Automation is more likely in areas like risk where processes are standardised.”
This way, analysts could potentially spend more time doing interesting work while tasks like slide formatting, scheduling, data capture and writing meeting notes could move to AI-driven automated smart systems. “As a junior, you’ll spend a lot more time on high-value work,” the analyst adds. “It’s going to be much more about understanding and analysing industry trends, trying to get behind nascent subsectors with immense growth potential, or anticipating the macroeconomic and business cycle and its impact on sectors like gas and real estate.”
With the ever-present increase of technological functionality in the investment banking sector, it appears that the role of AI is only getting started. What this means in the long run for positions filled by people, only time will tell. The immediate future, however, shows no reason for concern. The focus for most investment banking institutions is to optimise machines to automate mundane tasks, freeing up employees to spend more time delivering high-value work.
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