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Investment industry to spend $2.8bn on AI by 2021, expected to cut quarter of a million jobs

230,000 jobs in the capital markets sector globally will be defunct because of the adoption of artificial intelligence technology

Businesses in the capital markets sector will spend $2.8bn on artificial intelligence (AI) related technologies by 2021, and hundreds of thousands of humans will be replaced by software.

Companies in the investment sector, which use massive volumes of data to offer services, could improve their services and cut costs through AI technologies.

A report from financial services management consultancy Opimas said that in 2017, discounting acquisitions of startups, finance firms in the investment sector will spend $1.5bn on AI technologies, which will increase 75% to $2.8bn in 2021.

It categorises these technologies as: robotic process automation (RPA), machine learning, deep learning and cognitive analytics.

It said these technologies will replace 230,000 jobs by 2025. The asset management sector will be hardest hit, with 90,000 people replaced, according to Opimas.

“We estimate that a third of the jobs lost to machines will be replaced by technology and data providers serving the industry’s new needs,” it said.

On the flip side, it said about 30,000 new jobs will be created for technology and data providers.

“Artificial intelligence will provide a myriad of benefits to financial institutions, including improved operational efficiency and cost reductions,” said the report. “It will also upgrade legacy IT systems, improve data and analytics, enhance client services and increase revenue generation.”

Read more about artificial intelligence in the enterprise sector

Opimas said that AI’s benefits across the board mean companies must use it where it will benefit them most.

“Prioritising the uses of AI will be critical, as these technologies will benefit every business operation in a financial institution. The key to AI is not in finding uses, but rather selecting the right area to start with based on the firm’s positioning.

“That sets it apart from other ‘trendy’ technologies in search of capital markets applications, of which Blockchain is a perfect example,” said the report. “RPA, for example, is more likely to appeal to securities players with large, back-office processing activities that can create useful, meaningful information from new, unstructured data sources for data providers, hedge funds and brokers.

The report said that due to limited availability of skills, investment industry firms will focus on startup companies that specialise in these technologies.

But Opimas also said it is too early for firms to rely fully on AI to handle processes, conduct analysis, make judgements or take actions. “Human supervision is still crucial as the machines learn,” it said.

Retail financial services firms are also investing in AI. Customer services bots are being used to cut costs and improve service levels. For example, SEB in Sweden is using IPsoft’s cognitive technology for customer services after the software robot proved successful in an internal IT service desk project.

Read more on Artificial intelligence, automation and robotics