Artificial intelligence (AI) technology will have a greater impact on the finance sector than the sweeping changes made in 1986, known as the Big Bang.
According to KPMG’s UK Financial Services Sentiment Survey, 87% of UK financial sector leaders believe this to be the case.
Deregulation and reforms to the finance sector in 1986 included the introduction of electronic trading. The events boosted London to the extent that it arguably became the most important finance centre in the world. Paper-based practices disappeared and finance firms and trading rooms became unrecognisable.
According to KPMG, about nine out of 10 finance leaders think technology changes driven by AI will have an even greater impact on the industry.
Commenting on the findings, Fiona Fry, an independent non-executive director and former KPMG partner, who began her financial services career during the Big Bang, said that when she started working in the City, technology was minimal.
“Memos were handwritten and delivered, communications between organisations were by letter, and most computer programs were very basic, requiring mostly manual inputs. The days of being ‘always on’ had not arrived, as technology did not follow you home,” she said.
Fry added that there have been many changes over the following decades, but AI will “dwarf” them all.
“From the advent of the BlackBerry, to being connected globally, to instant information and analysis on our smartphones and via the cloud, the financial sector has seen a transformation in how it uses data, leading to a constant evolution of business models,” she said.
AI will dwarf the technological developments I have seen over four decades. It will enable firms to understand their competitive performance in a way not previously imagined Fiona Fry, KPMG
“[But] AI will dwarf the technological developments I have seen over four decades. It will enable firms to understand their competitive performance in a way not previously imagined, providing far more in-depth analysis of product performance and customer behaviour, thus enabling those who embrace it to thrive and grow. Customers will benefit too, being provided with financial products more targeted towards their specific needs.”
AI will spread finance
Another key difference between the Big Bang’s impact and that of AI, according to the KPMG survey, is that it will not just strengthen the London-centric sector, but spread the benefits.
The survey also found that 88% of financial services leaders believe AI’s benefits will be felt more widely across the UK. Just over half of respondents believe the balance between London’s financial districts and the rest of the UK should shift towards regional financial centres over the next decade. Just 21% think it should become more concentrated in the capital.
“The [finance] Big Bang generated significant growth and transformed the UK’s financial markets, but its benefits were not felt equally across the country. AI offers a different path, with financial services leaders seeing it as the next Big Bang to drive innovation and stronger long-term growth more widely across regional centres,” said Karim Haji, global and UK head of financial services at KPMG.
While the regional impact of AI will differ from that of the Big Bang, there will be a similar change to human roles across the finance sector, as the technology increasingly reduces human workloads.Fry said: “In the 1990s, some feared technology would diminish human skills; today, many worry about AI’s impact on jobs.”
These fears have been stoked by recent announcements by major UK banks Barclays and HSBC, which have seen thousands of jobs cut and replaced by AI technology.
But Fry said people adapted to the changes brought by the Big Bang in 1986, and the same will be the case with AI. “In my view, just as computers brought an end to the office postie, AI will mean fewer highly repetitive jobs, while human judgement in assurance, risk identification and oversight will become more important, not less.”
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