Pedestrians pass in front of a JPMorgan Chase & Co. bank branch in New York, U.S., on Wednesday, April 11, 2018. JPMorgan Chase & Co. is scheduled to release earnings figures on April 13. Photographer: Christopher Lee/Bloomberg via Getty Images
Christopher Lee — Bloomberg via Getty Images
By Aaron Pressman and Jeff John Roberts
May 31, 2018

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(Fortune senior writer Jeff John Roberts is filling in for Adam today)

“Information about money has become almost as important as money itself,” said former Citibank CEO and fintech pioneer, Walter Wriston. The observation is notable because it’s true, and because Wriston made it decades ago—well before the arrival of today’s AI technology that can parse reams of information on a once-unimaginable scale.

While most of the fuss around AI right now centers on transportation and robotics, it’s the financial sector that is arguably doing the most to harness tools like machine learning and data analytics. Familiar examples include lenders that use AI to crunch credit scores, and so-called robo-advisers like Betterment that help consumers build wealth.

But this is just the beginning. According to a new report on AI and finance by Future Perfect Machine, the technology is now used by most hedge funds to shape trading strategies, and by banks to detect fraud and market manipulation. The report also notes that today’s financial giants are vulnerable to competition from tech companies that own large pools of data and already excel at using AI. This is not hard to imagine. It seems more likely every year that an Amazon or a Google will take a serious run at banking.

There’s also the question of who’s going to supervise AI as it spreads deeper into finance. All of us have heard how firms need a gaggle of math and data science PhDs to ride the machine learning wave, but that may not suffice. According to a J.P. Morgan executive cited in the report, the AI eggheads also need market intuition and political savvy to flourish in finance, which sounds like a tall order.

Then, as always with AI, there’s the moral question of whether applying the technology to finance will be good or bad for society. According to the report’s author, Paul Dravis, the answer is likely to be both. Dravis thinks financial firms dealings with AI will be similar to what they experience with leverage: Used in that right way, it can amplify benefits many times over. But used incorrectly, it will multiply mistakes like never before.

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Jeff John Roberts


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