The Bank CEO of 2020: Disposable or Valuable in an AI Era? - InformationWeek
IoT
IoT
Data Management // AI/Machine Learning
Commentary
1/31/2019
07:00 AM
Joseph Byrum, Chief Data Scientist, Principal Financial Group
Joseph Byrum, Chief Data Scientist, Principal Financial Group
Commentary
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The Bank CEO of 2020: Disposable or Valuable in an AI Era?

Artificial intelligence can accomplish a lot in the banking sector, and the CEO who doesn't embrace AI could be looking at the end of their career.

Artificial intelligence is on its way to becoming indispensable to the financial services industry, but what if that means C-level executives, become disposable?

Banks have been at the forefront of automation, with ATMs providing customers with 24/7 access to their money while reducing the number of human interactions. However, could a machine ever fill the bank’s number one position of chief executive officer, in the year 2020 or beyond?

After all, AI systems take automation to the next level. They are designed to absorb data and make judgments. In finance, AI makes sense across a number of functions. AI’s ability to pore over trillions of records and recognize patterns makes it exceptionally useful in fraud detection, picking up suspicious signs out of a mind-numbingly repetitive series of numbers. The machine’s ability to take care of repetitive tasks can also help with critical aspects of compliance reporting.

The next generation in AI technology, the cognitive system, take it up a notch. It can absorb all available information and create a causal model to analyze economic outcomes. In finance, identifying causal connections will give cognitive AI systems a firmer foundation for effective decision making that ultimately will improve the bank’s bottom line.

But the chief executive doesn’t just make the tough management calls, decisions that a future machine might be able to replicate. This individual is carefully selected for a demonstrated ability to serve as the public face for the institution, carefully balancing the interests of the board of directors, shareholders and employees.

Perhaps an AI system that consistently makes the right call more often than not is enough to satisfy the board and shareholders, but it’s hard to imagine employees or the public would ever be motivated by a machine. Regulators, of course, would never go for the idea!

The Iron Man suit

Clearly, the bank CEO won’t actually be replaced by AI. Instead, AI could enhance the human CEO’s decision making capabilities, playing to the strengths of machine and human.

Think of it as an Iron Man suit for executives. Like the fictional, AI-powered suit that gives engineer Tony Stark the capabilities of a true superhero in the Marvel movies, a suite of AI-powered cognitive tools can supercharge a CEO’s decision making powers. Here’s how:

  • No one can keep a close eye on what’s happening in the far reaches of a global financial institution, but AI systems can absorb key data from every branch, and analyze performance in the context of the particular economic, regulatory, and financial conditions at each location
  • There is no limit on how much information such a system might process. Every individual transactions at each branch. Every loan, every letter of credit, every withdrawal and deposit could be examined in real time, and compared against past transactions. That’s a level of detail that no human CEO could possibly manage at scale
  • AI analysis could identify potential issues as soon as they arise. It could model all the likely scenarios and present a range of responses for the executive’s consideration. Most importantly, AI provides a fountain of data from which the CEO can act. Instead of instinct and gut feeling, the CEO has the option of acting on solid data unclouded by sentiment or emotion. But often the human touch is exactly what’s needed.

The CEO can pass along issues to subordinates to investigate, or have them processed in an automated fashion, as desired. Far from replacing the CEO, such a system would better leverage the CEO’s time, extracting more value out of a limited work day and increasing the value of the position.

The CEO position isn’t endangered by AI. However, financial institutions must realize that the banks of the future will rely on augmented intelligence to drive productivity in an era of close governmental scrutiny.

What should the banks and CEOs be doing to prepare to co-exist with AI effectively as we look ahead to the year 2020 -- a year heralded by predictions about how technology will dazzle and advance society -- and beyond?

  1. Invest in competitive AI solutions today, to prepare for technology breakthroughs in 2020 and beyond. AI is in its infancy, so off-the-shelf solutions are not a realistic option. Creating customized algorithms is a time and capital-intensive task. Those that wait on the sidelines will be left in the dust.
  2. Strengthen IT resources. Augmented intelligence systems rely on a sound infrastructure to work. So the CEO must rely on his operational team and the CTO, in collaboration with external partners, to build the new capabilities.
  3. Foster talent within the organization. Take the time to identify potential team leaders who will be needed to guide the process of creating AI systems. Make strategic hires when in-house expertise is not enough.

Patience is also needed, because it takes time to build and validate complex systems. The effort is worthwhile, because it’s not AI that will make the CEO obsolete, it’s the CEO without AI who will be obsolete.

Joseph Byrum is the Chief Data Scientist at Principal Financial Group. Connect with him on Twitter

@ByrumJoseph.

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