Bank of America Merrill Lynch released a report this week that said that annual global sales of robots has reached a record $10.7 billion in 2014. The authors valued the overall market for robotic technologies (including related software and sensors) at $32 billion for that same year. By 2020, the authors expect the robot market to be worth $83 billion. The autonomous driverless cars, developed by Google, provide one example of how manual tasks in transport and logistics may soon become automated.
The combination of AI, machine learning, deep learning, and ‘natural’ user interfaces (such as voice recognition) is making it possible to automate many knowledge-worker tasks. The pace of technological innovation is constantly increasing, with sophisticated software technologies disrupting financial services. Automated wealth investment services—or Robo-Advisors -is one such example.
Why Do We Need Robo-advisors?
Robo-advisors, or fully automated online investment platforms, are disrupting financial advisory services. Fintech startups such as Betterment and Wealthfront have managed to pull early investors, because their robo-advising platforms offer the perks of low fees and a reduced barrier of entry when it comes to minimums. Wealthfront reported $1.7 billion in customer assets last year, and 58% of its clients are under 35.
According to a study from Wells Fargo, only 16% of millennials work with a financial advisor, about half the rate that the baby boomers do. A robo-advisor could be a good match for investors who are comfortable utilizing online tools. The demographics for this kind of investor fall into generation X and Y. They are used to conducting research online and moving forward without any significant human interaction. Another reason why robo-advisors are a wonderful solution to millennials is that they have not yet accumulated enough assets to meet the account minimums required by traditional financial advisors.
Earlier this year, Schwab launched its version of a robo-advisor product, branded as the Schwab Intelligent Portfolio. Unlike other robo-advisors, such as Wealthfront and Betterment, Schwab charges no management fee. The Bank of America is now investing in this area to compete with the innovative Betterment and Wealthfront. We can expect a few more traditional banks investing in their own robot financial advisors, to meet the challenge of 21st century competitors.
What Else Can They Do?
Another area that robotics is disrupting is the process automation. Robotic Process Automation (RPA) is a catalyst for business process transformation and innovation.
Robotic process automation (the combination of artificial intelligence and automation) is starting to change the way business is done in nearly every sector of the economy. Intelligent automation systems detect and produce vast amounts of information, and can automate entire processes or workflows, learning and adapting as they go. It allows your best people to concentrate on the work that is most strategically aligned to your business goals – the work that matters.
In order to attract and retain clients, banks are focusing a lot of attention on the front-end and on improving the customer experience. Their goal is to derive a single view of the customer and their transaction history, while ensuring that customer’s interactions with the bank are satisfactory regardless of the channel. However, back-end operations still require a lot of human support, despite not being a revenue-generating function. There is obviously room for improvement through automation, as back-office tasks do not require direct interaction with customers and can be performed more efficiently off-site or by robots.
Reaping Tangible Business Benefits
Leveraging RPA often results in 40 to 70% labor-cost reductions and near-zero error rates. RPA is a non-intrusive technology, which reduces information systems security (INFOSEC) concerns, and provides for the fastest way to enhance the performance, quality and efficiency of any repeatable process. Areas where robots score better than employees are accuracy, 24x7 uninterrupted labor, flexibility, and compliance. RPA technologies can and will be used in a number of process areas, but there may remain domains where software cannot replace humans, i.e. areas where a significant amount of creativity or intelligence is required: such as deal structuring or sales.
Robots on the Branch Floor: The Future of the Financial Services Sector
Obviously, RPA will not entirely replace humans on the branch floor—or at least, not in the near future. Perhaps it is simply a question of attitudes and time: In various fields robots are already working not just as financial advisors or back office operations staff, but as customer service staff as well!
You can expect to be greeted by a robot at the bank branch of Mitsubishi UFJ in Tokyo. Bank of Tokyo-Mitsubishi UFJ took a first step toward employing ‘non-human’ staff earlier this year, with the introduction of a customer service humanoid robot, Nao, at its flagship Tokyo outlet. Mitsubishi UFJ believes Nao will be able to handle the trickiest of customers, and should be fully operational by the time Tokyo experiences an influx of overseas visitors during the 2020 Olympics.
In coming years, we are certainly going to see a lot more play for robotics in financial services.
They can supplement manual services, by performing tasks that our human workers cannot, such as 24-hour banking and multilingual communication. Mitsubishi UFJ is one of several Japanese firms that are investing in ‘non-human’ resources, in response to calls by the Prime Minister Shinzo Abe, for the country to embark on a ‘robot revolution’ to compensate for the country’s shrinking workforce, while boosting growth.