AI & FinTech - FinTech West Webinar sponsored by EY
In our latest webinar, we looked at the impact and challenges of the use of AI in FinTech. This was the first of a series of events sponsored by EY, and we brought together a group of speakers with significant industry AI experience and knowledge to discuss the impact of AI in FinTech including the need for skills and ethics.
For those who could not join us on the day, we recorded the session and you can view it here.
Julian Wells, Director of FinTech West & Whitecap Consulting, kicked off proceedings with a brief overview of FinTech West’s role in the regional and national FinTech ecosystem. FinTech West aims to bring together the FinTech community across the South West, and is linked to other regional FinTech groups via the FinTech National Network.
We then heard three presentations, which are summarised below.
AI in FinTech/Insurance with practical use cases - Ed Bujok-Stone (UK Chief Actuarial Officer) & Matthew Parkinson (Head of Actuarial Data Science), EY (starts @ approx 03.30 mins)
This thought-provoking and informative session focused on practical back office use cases in Life Insurance. EY’s clients include large insurers but increasingly also FinTechs and other innovators. EY’s innovation hub is based in Bristol and is engaged in a wide range of AI-related activity, including front and back end processes across the insurance value chain. During the session, Matt highlighted a number of back office actuarial use cases, and highlighted key areas such as assumption setting, capital and tail risks, audit and controls, pricing and customer analytics, nested stochastic models, and ALM and hedging. During the session, a set of ‘better questions’ were presented, which highlighted some of the questions that insurers can seek to answer using AI and data tools. A number of internal and external challenges were highlighted, with the former including legacy systems, scarcity of talent/resources, and scepticism in senior roles, and the latter including regulatory pressure, competitive pressure, and the market for actuarial talent. Ed closed the session by highlighting that all of the challenges represent a significant opportunity for FinTechs who can help address them within the insurance sector.
The Bank of England and AI - Oliver Thew, Senior FinTech Specialist, FinTech Hub, Bank of England (starts @ 20.30 mins)
Oliver works within the BoE’s FinTech Hub, and originally hails from Bristol. He told attendees of the Bank’s interest in AI and Machine Learning, highlighting that the use of AI in financial services can benefit customers (via more tailored products and services), firms (due to efficiency gains), and the wider financial system and economy (through more effective markets). He also flagged that it can pose novel challenges and amplify risks, which can require a different approach to risk management and governance, and therefore has implications for the regulatory framework. The BoE’s objective is to support the safe adoption of AI in financial services. Initiatives have included the AI Public-Private Forum (AIPPF). Oliver highlighted that most of the risk from using AI in financial services are not new, but what is new is the scale at which AI is beginning to be used, and the complexity of the underlying models. the BoE, PRA and FCA will jointly publish a discussion paper on AI later this year and will be seeking industry feedback to help inform their next steps.
Links shared in the chat during this session:
Talent generation for AI in financial services - Professor Dave Cliff, Professor of Computer Science/Academic Director, University of Bristol (starts @ 37.30 mins)
25 years ago Dave invented a system for trading, and the algorithm behind the system is credited as being one of the key enablers of the automation of trading. Today, the University of Bristol has 136 researchers working in AI across a wide range of fields. It also has a long standing Data Science MSc, and has recently created a FinTech Data Science MSc. There are 30 students on the FinTech course, which will have an intake of 60 next year. There are more than 170 students on the broader Data Science MSc, which will rise to more than 200 next year. Some of these students also choose to focus on FinTech. As a result, the university has a significant pool of students looking for ideas for summer projects, as well as placements and jobs. Dave also highlighted that UWE has 61 students on its FinTech MSc programme. Consequently, there will be more than 100 FinTech graduates coming out of Bristol universities this year, which represents a great opportunity for the FinTech sector in the region. Later in the year, both universities will work with FinTech West to deliver an event to help showcase this talent. More information to come on this one!
Considering ethics - Karin Rudolph, Founder, Collective Intelligence (starts @ 47 mins)
Collective Intelligence is a hub for ethical innovation with resources and workshops for startups, SMEs and non-profits. Its mission is to incorporate ethical thinking into the design and development of technology.
Karin’s talk focused on AI ethics, a highly topical subject that has emerged from the need to address potential individual and societal harm that could be caused by AI systems. Karin explained that AI ethics is a set of values, principles, and techniques that employ widely accepted standards to guide moral conduct in the development and use of AI systems. To date, more than 160 AI ethics frameworks have been created by a combination of big tech companies, consultancies, and governments, and there is an increasing amount of research activity in this field. Used correctly in financial services, AI can help with financial inclusion and lowering costs to consumers. Used poorly, it could lead to financial exclusion due to things such as differential pricing. Karin considers that AI ethics should not be considered to be an obstacle, but rather it is an enabler and facilitator of innovation.
Panel discussion (starts @ 59.30 mins)
The 30 minute panel discussion was hosted by David Henderson, Strategic Adviser at FinTech West, and included all the previous speakers.
Topics covered in the panel were varied. There was a discussion around improving consumer outcomes, which included covering anomaly detection algorithms, forecasting, risk profiling and segregation, and ethics. Sectors used as examples included pensions, health insurance, and life insurance.
There was also a discussion around roboadvice and how this might be adopted within the investment sector in future. A hybrid model is expected to be implemented, due to the complexities of decision making.
Regulation and risk were also discussed. FinTech innovation is most commonly found in the startup community, and this provides an opportunity for incumbents to adopt these innovations via partnerships. There have been a number of changes to the regulations around outsourcing over recent months, which aim to protect consumers but have also created some challenges for partnerships.
