7 ways gen AI is disrupting financial services jobs

December 22, 2023 6:00 AM

This is the final installment in a four-part series on disruption in the payments industry. Read part one here, part two here and part three here.

Across industries, there is rampant concern that generative artificial intelligence — the kind that powers OpenAI's ChatGPT — is powerful enough to take jobs from human workers. But to some degree, that trend was already underway before the popularization of gen AI.

"A lot of financial services companies are IT shops," said Luke Penca, head of emerging technologies at the consultancy Capco. Goldman Sachs, for example, employed 10,000 engineers, representing 25% of its total workforce, as of 2020.

"They're always hunting for an information advantage," Penca said. "They're going to process ever larger volumes of data, be more and more real-time and things like that. These are use cases that are perfect for the deployment and application of AI."

What gen AI adds to this process is its ease of working at scale. It's best at handling quantities of data that are so massive that simply throwing more people at the task won't be enough to dent it, Penca said.

The technology can also be trained to handle single tasks well enough that, if a person's job is focused on that task, that job can be handled by AI. There are still caveats; customer-facing interactions may seem like low-hanging fruit, but large language models like ChatGPT can be easily manipulated (intentionally or otherwise) into giving false information, creating more customer service issues than they resolve.

Nevertheless, some companies have already taken the plunge and committed to shifting certain tasks from humans to gen AI. Here's the current state of things throughout the financial services industry:

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Bye bye bankers?

It would be difficult to talk about AI without mentioning its potential impact on job functions and prospects. According to American Banker's Predictions 2024 survey published this month, 75% of finance industry professionals think AI will change the nature of some jobs, but won't replace human workers. Twenty-one percent say AI will replace jobs in the banking industry, while just 4% say it will have little impact on these jobs.

While most banks are still researching the technology, major banks like JPMorgan Chase, Wells Fargo and Goldman Sachs are already rolling out some AI-powered programs. JPMorgan Chase is using large language models to detect fraud by looking at patterns in emails. Goldman Sachs is using generative AI to help software engineers in code development. And Ally Bank has an AI-powered program that transcribes and summarizes customer service calls.

As interest in AI grows, financial service industry professionals are rapidly figuring out where and how to use it. According to 26% of respondents, customer service is the top use case/strategic business initiative for AI, mostly for customer support functions. Other key uses include fraud prevention and detection, analytics and marketing. In what is a somewhat surprising finding, 14% of respondents say they see no use cases for AI or that it is not applicable. It will be interesting to see how this number changes as the technology continues to evolve.

While many organizations may be interested in implementing AI, they can face obstacles with execution. A shortage of data science talent, for example, is the primary barrier (39%) to AI adoption to help address and mitigate fraud and money laundering. Another obstacle for this use case is time for implementation (35%). —Claire Williams, American Banker

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Klarna: Engineers only

The Swedish buy now/pay later company Klarna made a bold commitment to gen AI this year: It plans to stop hiring staff outside of its engineering department, now that it is using AI for more job functions.

More than half of the company's 5,000 workers already use generative AI, and while Klarna doesn't plan layoffs due to AI, it does plan to move more work to AI via attrition.

"Klarna's integration of AI across certain areas of the company is automating mundane and uninteresting tasks that are now done more efficiently and with higher quality with AI," said Martin Elwin, Klarna's engineering director, in a recent interview with American Banker. "That has led to millions of dollars in efficiency savings." — John Adams, American Banker

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Scratching a niche

Capco's Penca predicts "a mini boom for developers and testers" as gen AI becomes more widespread in financial services, but there are exceptions.

Jobs focused on skills that were already fading, such as expertise in a niche programming language, will need to be handled by a gen AI bot that can handle the translation into more common languages.

"We've written more COBOL even though we have fewer and fewer COBOL people; these are going to be some of the first skill mismatches that are exploited by AI," Penca said.

The goal is to reduce a company's dependence on a skill set that's already scarce, he said.

The technology can also handle tasks that couldn't be performed by humans due to the scope and complexity. There is no one person who knows the content of every document produced by every department in an organization, but a gen AI bot could read and distill all of that information, breaking down communication barriers throughout a company.

Penca compared mega banks to "hydras," with multiple distinct heads that may not communicate well with one another, if at all. Gen AI can enable a level of coordination and communication that was not practical before, he said. — Daniel Wolfe, American Banker

Mortgages get merrier

"Anything AI can do, typically a human being is miserable doing. … The more AI takes over the dirty work and we elevate ourselves to only what humans can do, the more satisfaction people will have in their lives," Katherine Campbell, former chief marketing officer at AnnieMac Home Mortgage, told National Mortgage News in a recent interview.

By "pumping those bots full of knowledge," lenders can hand off borrower interactions to an AI tool and remove the loan officer from those tasks, Campbell said.

AI tools are designed to excel at a single task; if a job is focused on a single task, that job can be replaced. But that doesn't eliminate the need for subject-matter experts to train the bots and keep them up to date.

"We all get very concerned about how we're going to make money, but numerous new jobs will come out of AI," Campbell told NMN. "Someone has to run that bot, someone has to have the knowledge of the company to put it into the knowledge base of that bot. That is where operations teams, if they want to be useful, can say, 'I don't want to sit here and order appraisals all day, but I understand how appraisals work and I can write a lot of information about appraisals.' This will help AI run better for companies because someone still has to do all of that." — Maria Volkova, National Mortgage News

In the cards

Mastercard has added gen AI to its global customer care center. The card network will receive about 16 million inbound calls in 2023, with calls increasing at about 20% year over year, said Rohit Chauhan, head of AI at Mastercard.

The card network has developed a proof of concept to use gen AI and large language models to improve responses to inbound queries.

"Eventually this will drive down the cost of customer service down to zero, given how powerful these large language models are," Chauhan said.

Visa has increased its use of gen AI for internal practices, such as IT projects. Gen AI aids what's called pair programming, which is traditionally defined as one person writing code while another person reviews that code at the same workstation. In this case, a large language model generates different programming options that help the developer produce code.

This process helps build software faster, according to Rajat Taneja, president of technology at Visa. "This enables us to do a lot of cybersecurity work, locating and fixing bugs," he said. "It gives you more capacity and increased productivity." — John Adams, American Banker

AI in the insurance industry

Seventy-three percent of insurance executives expect that gen AI will eventually take their jobs, according to a report by FintechOS, which surveyed over 500 respondents in the U.S. and U.K. Of these respondents, 63% say that gen AI will result in job losses, with most predicting that the figure could go up to as much as 20% over the next three years.

But not everyone trusts gen AI to do the job the right way.

The top concern for insurers that view gen AI as a "foe" lies in the risks associated with the ethical implications of the technology, namely with discrimination and bias, as almost 25% expressed this fear. Respondents also share some concerns with AI's potential to lie, the lack of regulation for the technology and the possibility of inaccurate data being provided.

As for the current state of gen AI in insurance, 28% of U.S. insurance organizations believe that gen AI will improve lending automation, 26% anticipate that market research and data will improve the most and 25% said that gen AI may drastically improve employee upskilling. —Grace Crane, Digital Insurance

Compliance bot, with human oversight

When federal regulators dropped 1,089 pages of new capital rules on the U.S. banking sector, Citigroup combed through the document word by word using generative AI.

The bank's risk and compliance team used the technology to assess the impact of the plans, which will determine how much capital the lender has to set aside to guard against future losses. Generative AI organized the proposal into pieces and composed key takeaways, which the team then presented to the outgoing treasurer Mike Verdeschi.

At Citi, the advent of ChatGPT sparked a concerted push to use artificial intelligence. In response, earlier this year the bank formed two task forces to explore potential uses for the technology, according to Stuart Riley, the bank's co-chief information officer who is overseeing the effort.

"This is across every part of the bank," Riley said. "Some of them are small, helping with daily routine, and others are complex bodies of work."

Bank staffers have been increasingly worried that the technology might replace them. That's not so, according to Riley. Whether AI or employees generate a line of code, it will still need human oversight, he said.

"Humans still look at the code to make sure it's doing what they expected it to do. They are still supervising, like a co-pilot," he said. "The AI tool is given to the developer to enable them to produce code more quickly — it's not replacing them. We are using AI to amplify the power of our employees." —Katherine Doherty, Bloomberg News