New technology makes further strides, as Goldman Sachs welcomes automation

Innovative financial technology keeps making further strides and artificial intelligence (AI) systems increasingly threaten to assume more and more positions in the industry.

In January this year, FinanceFeeds reported of IBM’s Watson replacing 34 employees at Japan’s Fukoku Mutual Life Insurance. Just a couple of weeks later, there was the news of Russia’s Sberbank planning to let go 3,000 employees at its legal department because they would be replaced by a robot.

This trend is underlined by a recent report by the MIT Technology Review, referring to the latest steps made by Goldman Sachs with regards to using automated systems instead of human workforce.

Marty Chavez, Goldman Sachs’s deputy chief financial officer and former chief information officer, explains that automated trading programs have assumed the bulk of the work performed by human traders at the company’s US cash equities trading desk in New York. Now there are only 2 equity traders working at this desk, compared to 600 traders in 2000.

Mr Chavez says currency trading and certain parts of investment banking will follow suit.

Goldman Sachs has already started automating currency trading. The findings are dismal for traders – it turns out that four traders can be replaced by one computer engineer, according to Mr Chavez. Currently, approximately a third of Goldman Sachs’s staff are computer engineers.

Mr Chavez forecasts that automation will affect investment banking tasks afterwards. He stresses that cutting the number of investment bankers would result in significant cost savings for the company. The MIT Technology Review refers to data from Coalition showing that investment bankers working on corporate mergers and acquisitions at large banks make on average $700,000 a year, with the sum being higher in a good year.

Earlier this month, FinanceFeeds interviewed the team behind Albert, an artificial intelligence marketing platform developed by Adgorithms. Albert’s CTO Tomer Naveh explained that the AI platform does indeed reduce expenses related to a bloated marketing workforce, that is, it leads to human capital efficiencies. “Instead of having an army of campaign managers, you take the smartest people and convert them into AI supervisors”, he said.

Mr Naveh noted that “in most cases our customers increase their media buying as it becomes more efficient, rather than focus on cutting costs. Now that there’s a direct correlation between ROI and buying, they want to spend more and aren’t as focused on cutting budget”.

Goldman Sachs has a new AI system for consumer lending – it is called (he is called?) Marcus and, according to the MIT Technology Review, is completely run by software, requiring no human intervention.