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What do finance professionals think of AI?

What do finance professionals think of AI? | Disruptive Finance and Fintech | Scoop.it

"AI and machine learning will undoubtedly alter both the headcount and the nature of skills required in the industry. A significant minority of survey respondents fear the effects on the workforce will be negative within the next few years. But wholesale displacement of humans is for the longer term – nearly seven in ten believe AI will bring complete or substantial change to their own jobs over the next 15 years. Even in trading, where automation is already widespread, human roles will remain critical in areas such as algorithm validation and monitoring, as well as compliance. At this point, few believe machine learning models can or should drive financial-market operations completely independently of human control...."

Huy Nguyen Trieu's insight:

A while ago, I wrote that AI and machine learning was more and more used in our daily lives - but that finance had so far failed to embrace these techniques. 

Euromoney Thought Leadership just published a very interesting report, where they surveyed 400 senior managers in finance and analysed their views about AI.

I was actually slightly suprised by the results: the majority of participants thought that the main impact would be on 1) trading strategies, 2) credit scoring and 3) compliance. For trading strategies and credit scoring, we could argue that this is business as usual - these businesses already are big users of algorithms, and AI/machine learning, etc will be just another tool to improve their models (although it introduces some ethical/regulatory issues because of the vast amount of data used). So it feels that it would be more incremental than a real game changer in my opinion.

On the other hand, tools such as recommendation engines a la Amazon (rumored to be reponsible for 1/3 of Amazon sales) would be much more disruptive in my opinion - since they have rarely been used before in finance.

In a world where proprietary trading and creating alpha is much more challenging, using AI to improve sales and customer relationship might be an easier strategy than optimizing trading strategies. 

 

PS : thanks to Tom Upchurch for the document

 

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First P2P Lender to Fold in Europe: What Next?

First P2P Lender to Fold in Europe: What Next? | Disruptive Finance and Fintech | Scoop.it

"In an unsettling about face TrustBuddy, a peer to peer lending platform based in Stockholm, has shut down.  The home page has transitioned from lending platform into a public statement (republished below) in both Swedish and English explaining a series of alleged misconduct"

Huy Nguyen Trieu's insight:

A very good summary from Crowdfund Insider on what's happening with TrustBuddy

This is the first major p2p lender to fold in Europe, and there is much to learn from it. In a few words:

  • Trusbuddy was an average-size p2p lender (EUR200m deployed), but one of the few to be listed (EUR 100m market cap last year)
  • New management (ex Klarna) joined 2 months ago
  • Have now discovered that there were frauds, all some of the money was not invested

My (cynical?) view is that this kind of behaviour will happen in any new and unregulated industries. Remember that we saw the same in China with thousand of p2p platforms folding or the $400m that disappeared with Mt Gox. But the fact that will happen doesn't mean that it won't have repercussions on the p2p industry. 

  • There will some pressure for more regulation on p2p lending. I don't know the regulatory framework for p2p lending in Sweden, but there is already a decent one in the UK
  • I don't think that more regulation will help for p2p lending. For example, ban king is highly regulated, but fraud still happens. At the same time, heavy regulation for startups is certain to kill the development of that industry
  • There is much to do for the industry themselves in terms of a chart of conduct and ethics - and which shouldn't be about mere marketing, but what the industry really believes in
  • In general, it feels that p2p lenders should do much more effort in terms of education - and show the potential risks of p2p lending. There are clearly risk warnings on their websites, but more could be done IMO.
  • Perhaps also some good business models for startups to rate and do due diligence on p2p platforms? In the same way that there are rating of online retailers - in that case from consumers themselves - I'm sure someone can think of smart ways to rate the p2p lenders themselves


I think that these kinds of events are bound to happen in any new industry. Actually, it also happens in old industries, but the difference is that it could create a credibility problem for the whole p2p industry. In my opinion, it is not life-threatening, on the contrary it could be the opportunity for the good platforms to differentiate. 

Any nascent industry will go through these stages where some black sheep will compromise the credibility of the whole sector. But if the value proposition is strong enough, consumers will look past through it and go towards the most reputable companies. Remember the example of Pere-Noel.fr in France (yes it means Father Christmas!) in the early 2000. Thousands of people ordered on their site, didn't receive any goods, and it was a huge scandal. This didn't prevent however people from continuing to buy on the Internet, and there was a premium for the more reputable e-tailers. 


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