The introduction of artificial intelligence systems at large firms in the financial services industry is starting, with one Japanese giant laying off 34 staff and replacing them with IBM’s Watson Explorer which possesses human-like abilities and can translate to paying withdrawals and calculating IB payments, as well as compliance functionality
It has not yet reached the customer services centers of FX brokerages or their institutional partners, however Artificial Intelligence (AI) is beginning to replace human resources within certain aspects of the financial services industry.
It has, however, become a development focus for firms providing technology solutions to brokerages, hence its foray into the FX industry has already commenced.
With regard to personnel being replaced by robots, that may appear to be the stuff of science fiction despite the breakthroughs in automation that are now ready to empower the financial markets industry, however Japanese insurance company Fukoku Mutual Life is about to make 34 members of staff redundant in order to replace them with IBM’ss Watson Explorer Artificial Intelligence system.
The initial role of the Artificial Intelligence system will be to calculate payouts to policyholders, which in our industry, translates to back office personnel calculating and scheduling withdrawal payments to holders of FX trading accounts, or calculating and paying partners and introducing brokers (IBs) in the retail sector, or conducting the administration of omnibus accounts between prime brokerage and retail FX company, or platform volume capitalization on the institutional and B2B side.
Fukoku Mutual Life Insurance believes it will increase productivity by 30% and see a return on its investment in less than two years. The firm said it would save about 140 million yen (£1m) a year after the 200 million yen (£1.4 million) AI system is installed this month. Maintaining it will cost about 15 million yen (£100,000) a year.
This particular system is based on IBM’s Watson Explorer which has been designed to feature “cognitive technology that can think like a human”, enabling it to “analyse and interpret all of your data, including unstructured text, images, audio and video” according to IBM.
The technology will be able to read tens of thousands of medical certificates and factor in the length of hospital stays, medical histories and any surgical procedures before calculating payouts, according to the Mainichi Shimbun.
While the use of AI will drastically reduce the time needed to calculate Fukoku Mutual’s payouts – which reportedly totalled 132,000 during the current financial year – the sums will not be paid until they have been approved by a member of staff, the newspaper said.
This can easily be translated to perform compliance, anti-money laundering and know your client (KYC) procedures within FX brokerages by reading the documents and checking for validity of identification when onboarding clients, as well as creating efficient processes for withdrawals at minimal cost, as the system would only require very slight modification from its application and purpose at Fukoku Mutual Life in order to do so.
According to a 2015 report by the Nomura Research Institute, nearly half of all jobs in Japan could be performed by robots by 2035.
Compatriot Japanese company Dai-Ichi Life Insurance has already introduced a Watson-based system to assess payments without currently reducing its human resource headcount, and Japan Post Insurance is interested in introducing a similar setup according to a recent report by Japanese news source Mainachi Shimbum.
In operational capacities within banks and FX firms, automation is a priority. Blockchain’s distributed ledger technology is being widely developed and adopted by major institutions and has been the subject of hundreds of millions of dollars in investment so that automation of standard banking practices can take place.
Additionally, industry executives in the technology development sector of FX are keen to look closely at AI.
Andrew Lane, CEO of news sentiment-based technology company Acuity Trading, met with FinanceFeeds at the prestigious Londa Hotel in Limassol, in May this year, looking at a hot topic that was discussed relating to a panel at the iFXEXPO International FX industry conference that had taken place that week. “We had three areas to talk about with regards to automation during the conference. These were marketing – how automation could be used to help manage clients across the client journey, risk management, provided by automated retention firms like cPattern, and research.”
“At Acuity Trading, we have focussed heavily on the latter so that brokers not only gain from investment in new tools but help to increase their ROI from existing products, ones that their clients are familiar with but don’t utilise as much as they could do” said Mr. Lane.
Mr. Lane continued by describing how “A lot of the comments from a number of panelists focused on the automation within call centers which is by no means the only application for automation in this sector. Automation can and should be a much wider consideration for a broker if they are to prosper in today’s highly competitive environment. From reading the news, which is obviously where Acuity Trading is specialising, to advertising, automation has far reaching benefits for brokers.
When reflecting on that particular panel, Mr. Lane said: “I felt there was solid support for the role that automation can play in a broker’s operation but the general consensus was that the entire process shouldn’t be all automated, and there should remain some human resource element. However, one of the most successful brokers to date has been one where digitialization has replaced a physical sales team and I believe that automation will have even greater application in the future for brokers.”
FinanceFeeds discussed this at length with Mikael Breinholst, CEO of Tradeworks, which is an FX algo trading and automation technology company earlier this month.
We were also joined by George Agathangelou, Business Development EMEA at Tradeworks and began to discuss the main points during Mr. Breinholst and Mr. Agathangelou’s several years in the FX industry – Mr. Breinholst is a senior Saxo Bank alumnus and Mr. Agathangelou has substantial experience in both proprietary trading and retail FX among some of Cyprus’ largest firms.
This combination of experience led these executives to look for the tool that truly democratizes algo trading.
Mr. Agathangelou said “I have grown frustrated with the “big boy’s toys” and have been looking for a place where we can combine our business development skills and interests with a true purpose of helping traders realize their goals through powerful – yet easy enough to actually use by those without programming skills. Myself, along with many others at the company actually trade real money as proprietary traders to profit, however it is vital to uses these skills to stay sharp on the markets and recognize the needs of retail traders.”
FinanceFeeds then engaged in a very interesting conversation and interview with Tradeworks’ senior management, Mssrs. Breinholst and Agathangelou detailing the method by which algo and automated trading will be conducted in the future, and what Tradeworks’ part in this will be.
With regard to algorithmic trading and the technology that facilitates it, we asked if these two astute executives consider artificial intelligence (AI), automated bots in high frequency environments to increase in use alongside human analysts in the FX world, just as they are in futures and exchange listed derivatives at the moment.
“Yes, I do believe that algorithmic trading will have an exponential growth especially among retail traders as cloud computing now allows the opportunity for everyday people to have similar tools to those used by institutional traders” said Mr. Agathangelou.
Mr. Breinholst added “Technology has become better, cheaper and more efficient than any human, as it is impossible to match the high frequency execution or decision making speed of algorithmic trading robots. Instead of simply crunching numbers, the machines are now deciding and executing trades for us in the same way they are intended to be driving us home and cook or clean for us.”
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