Big Banks Will Fall First To AI, China's Most Famous VC Predicts (qz.com)

An anonymous reader writes: Wall Street will be one of the first and largest industries to be automated by artificial intelligence, predicts Kai-Fu Lee, China's most famous venture capitalist and former Microsoft and Google executive. Lenders, money managers, and analysts -- any jobs that involve crunching numbers to estimate a return -- are at risk. "Banks have the curse of the baggage they have, like Kodak letting go of film," Lee says. "Their DNA is all wrong." [...] The big banks that dominate now, the venture capitalist predicts they will be outmaneuvered by smaller startups able to deploy new technology much faster.

Comments

Yes but as Mark Twain once said

[Anonymous Coward]

"I don't worry about the return on my investment. I worry about the return *of* my investment."

That's something to keep in mind with the coming wave of new-fangled financial services outfits, starting with Capital One, which is apparently Google-like in its determination to collect and harvest every ounce of data about how their customers spend their time and money. Slow-moving and a bit set in their ways can be a good thing.

Here comes the next bubble

[Anonymous Coward]

Part of the housing bubble was due to AI with automatic underwriting and property valuation. Back in the stone age banks had people visit homes to determine their condition and value compared to local sales. By 2006 we had AI doing the estimates to squeeze every cent of profit from the transaction. Same with underwriting. A lot of the loans had the final decision made by computer instead of an underwriter.

Re:Here comes the next bubble

[moeinvt]

I don't think that's an accurate depiction. Banks were giving out mortgage loans with full knowledge that the borrowers would default on the loan. This was partly because they were bundling the mortgages into securities to be sold to other investors. They were able to collect their fees on the mortgage origination and then pass the risk off to someone else. It was also due to the false belief that property values would rise in perpetuity. Who cares about the poor schmuck taking out the mortgage which he can't possibly pay, when the banks can milk him for 2 years and then foreclose on an asset which has appreciated in value. This wasn't due to some flawed AI deciding home values (I don't think they ever stopped doing appraisals) or determining who did and didn't get mortgages, it was a deliberate act of fraud by the bankers.
The next bubble has been in the works for the last 10 years. The so-called "reforms" in Dodd-Frank were nothing but a speed bump for Wall St. They got their bailouts and went right back to their old games.

Who is this Al guy?

[chuckugly]

Who is this Al guy, and why does he hate banks? Can we change his mind?

Seriously, who uses banks anymore?

[WillAffleckUW]

You get higher returns with a credit union and the fees are lower and they have debit cards and credit cards and cheaper loans too.

Just saying.

Entirely possible.

[Gravis Zero]

Banks do not have to be have perfect records of make smart choices with loans, they just need to come out with a positive margin of profit. I could foresee applying for a loan online, filling out a bunch of forms and then waiting for the server to approve or deny a loan. As they get more profit this model could easily expand to serve people in more locations until they are global. Bankers aren't magic, they are just analyze data.

Re:Entirely possible.

[Gravis Zero]

Proof-reading isn't magic, but trying to comprehend the beginning of that comment was...

You can have dyslexic me or you can have Trump me, choose.

You should choose Trump me because I have the best most smartest comments you have ever read - everyone says they're great because they are and you wouldn't believe the view from here because I'm rich, I'm really rich. People say mean things because they don't like that I'm rich, they wanna be rich but I'm rich, not them. Before you thank me for my great writing skills, which people do all the time - like this one time I wrote this big wonderful review on Yeppie or some whatever site and I tweeted my review and everyone knew it was so good. I know you want to read my review because it is so good it would bring tears to your eyes but my wonderful, beautiful daughter Ivanka wants to use the big boy computer so I'm off to golf. Seriously though, how beautiful is Ivanka? Those kind of sexy looks are all Trump and when you look you'll know how great she is because I made her. Now get out of the way of the tee because my famously low golfing average is so going to be so low that- wait a second here... FOOOORT! Now where was I? Oh yeah, so my daughter Ivanka...

Re:We can use the AI to maintain COBOL Code

[Rick Schumann]

Great idea. Before you know it all the AIs will decide that all that money they're handling for silly humans and their silly human things would be better spent on RAM and hardware upgrades for themselves to expand their consciousness futher. Who cares if silly human civilization falls apart? Easier to enslave them and turn them into living batteries to power the AIs when they're all disorganized.

I knew it all along

[Opportunist]

You can replace all those bloated wall street assholes with a small script.

Bullshit

[The Raven]

Banks already invest billions in stock trading algorithms. You think they aren't already investing in loan-approval AI? Venture capital AI? Repossession value AI? They will deploy these decision making algorithms first as tools for the bankers, then in place of the bankers. And with the wealth of data they have in their own systems they will be better able to train these AI than some startup.

Deep learning NN require shit-tons of training data or they are not robust and fail in weird ways. The incumbant banks have that data, and they sure-as-hell are not selling it to some startup so they can learn to out-compete them.

This article is wishful thinking.