Erik Mayer

Transcript

Katie Gaertner, Business Analytics Lecturer
How is AI being used in finance? Where do you see it playing out?

Erik
Yeah, another great question. I think AI, like a lot of fields, it’s touching all different areas of finance, and it’s sort of a horse race to see which areas it penetrates the most, where it makes the largest impact. So I think the most immediate or lowest hanging fruit are things like interactions with customers. Like when the customer has an inquiry about something that’s going on in banking. You can see chatbots will be very helpful here. These have been around for years, but now the sort of AI versions of them are souped up and really much more effective. This can lower the cost for financial institutions for handling some of the simpler inquiries from their customers. And, of course, those cost savings can get passed along to customers, so the customer can benefit as well. Some of us may not like interacting with the chatbot as much as with the real person, but if chatbots get better and better and they’re more effective, it’s really useful. So that’s sort of the lowest hanging fruit I would say. If you go one level up from that, you can think of something like a robo-advisor. Here you may have an individual who’s maybe investing for the first time and they’re looking for some financial advice, some basic sort of wealth management advice—how to manage your stocks, your bonds, your portfolio. Traditionally, a lot of this wealth management advice was only accessible to the highest income earners in society who could pay a financial advisor to help them with these decisions. But now we’re seeing this advent of robo-advisors. Companies like Vanguard or Fidelity or other large companies will offer these. Where you can get somewhat personalized, pretty useful advice at a very low cost if you’re willing to work with a robo-advisor, basically an AI-powered chatbot entity that’s really useful and can give good basic advice that’s somewhat tailored to your situation. So that’s really a democratization of a really useful financial service to a broader set of people that’s being powered by AI. That’s the second level. And then if you wanted to think what is sort of the cutting edge of where AI is starting to penetrate now, companies who are investing and making a lot of real-time trades and investment decisions, like you could think of a hedge fund. They’ve been incorporating some component of algorithmic trading for a while, but this is really intensifying, and you’re seeing AI being used to process in real time news and other sort of big data type information that comes in, and ultimately they use this in real-time investment decisions and trades. So that’s sort of the cutting edge of where AI is hitting in finance.

Katie
Interesting. So you see a lot of this predictive AI playing a role in finance?

Erik
Oh, definitely, yeah. Some of it will be maybe a bit more what we’d call machine learning than AI. But the definitions here are going to get blurred, and predictive AI and machine learning are going to mesh together, and eventually it’s a little bit black-boxy how all of this works, but ultimately really useful in predicting outcomes, or things like price movements in the short run that hedge funds would be incredibly interested in.