I see so much discussion of AI and cloud in finance, and realised the other day that we have created a whole new risk structure on top of banking and finance. The systemic risk of failure if a cloud provider goes down or an AI system goes rogue.
This is a question raised the other day by Gary Gensler, Chair of the American Securites and Exchange Commission, the SEC. Mr. Gensler thinks robots will create more work for financial watchdogs, and that an AI-driven financial crisis within a decade as “nearly unavoidable”, without regulatory intervention.
Add on top of this, and as The Financial Times reports, the “reliance on AI entrenches power in the hands of technology companies, which are increasingly making inroads into finance but are not subject to strict oversight. There are parallels with the world of cloud computing in finance. In the west, the triumvirate of Amazon, Microsoft and Google provides services to the biggest lenders. This concentration raises competition concerns, and affords at least the theoretical ability to move markets in the direction of their choice. It also generates systemic risk.”
This made me wake up and think. Is technology extending or destroying the financial system?
We can argue it both ways, and I guess it is like any discussion of technology and progress. Were the luddites right or wrong? Has electricity made our world better or worse? Did the telephone make the world a different place?
Personally, I am always an advocate of technological progress as, with every innovation, our world moves on and achieves new things. Could we ever have imagined grabbing bits of a five billion old asteroid two billion miles away without technology?
Does it matter?
Of course it does. As a human, we always want to achieve things and we continually do. But, it needs to be tempered by controls.
That’s why people like the UK Prime Minister Rishi Sunak is pushing for nations to label artificial intelligence as capable of causing “catastrophic harm”.
In a document distributed to politicians ahead of a communique taking place this week, there is a recommendation that “for the common good, AI must be designed, developed, deployed, and used in such a way as to be human-centric, safe, trustworthy and responsible.”
But, in a counter-argument, the head of Meta’s (Facebook) AI developments says that regulating leading-edge AI models today would be like regulating the jet airline industry in 1925, when such aeroplanes had not even been invented. Quoted in the FT, Yann LeCun states: “The debate on existential risk is very premature until we have a design for a system that can even rival a cat in terms of learning capabilities, which we don’t have at the moment,” he said.
And what are the risks of AI? Job losses; flash crashes; systems screw-ups; terminators?
It is easy to be frightened by progress, but maybe we should embrace it. For example, the CEO of IBM, Arvind Krishna, believes there are no worries about AI. He should know, as IBM has been developing in this space for decades – remember that Chess match or Jeopardy episode? Krishna estimates that only about six per cent of the entire global workforce is at risk from AI developments:
“Now, over five years, are you saying we can’t re-train six per cent of the working public? We need more people in healthcare, elderly care, teaching children, IT and cyber. That demand far exceeds the six per cent.”
I am in far more agreement with his view than others, so let’s embrace technological progress and stop worrying that the machine will kill the human.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...