IBM’s Watson supercomputer, once known for winning the television quiz show Jeopardy! in 2011, is now sold to wealth management companies as an affordable way to dispense investment advice. Twitter has introduced “cashtags” to its stream of social chatter so that investors can track what is said about stocks. Hedge funds are sending up satellites to monitor crop yields before even the farmers know how they’re doing.
Dr Ledford said the technology has applications in driverless cars, which must learn how to drive in novel conditions, and identifying stars from telescope images. Indeed, he has adapted the methods used in the Zooniverse project, which asked thousands of volunteers to help teach a computer to spot supernovae, to build a new way of spotting useful trends in the City’s daily avalanche of analyst research.
“The core use is being able to extract patterns from data without specifically telling the algorithms what patterns we are looking for. Previously, you would define the shape of the model and apply it to the data,” he said.
These technologies are not just been put to work in the financial markets. Several law firms are using natural language processing to carry out some of the drudgery, including poring over repetitive contracts.
Slaughter & May has recently adopted Luminance, a due diligence programme that is backed by Mike Lynch, former boss of the computing group Autonomy.
Freshfields has spent a year teaching a customised system known as Kira to understand the nuances of contract terms that often occur in its business.
Its lawyers have fed the computer documents they are reading, highlighting the parts they think are crucial. Kira can now parse a contract and find the relevant paragraphs between 40pc and 70pc faster than a human lawyer reviewing it by hand.
“It kicks out strange things sometimes, irrelevancies that lawyers then need to clean up. We’re used to seeing perfect results, so we’ve had to teach people that you can’t just set the machine running and leave it alone,” said Isabel Parker, head of innovations at the firm.
“I don’t think it will ever be a standalone product. It’s a tool to be used to enhance our productivity, rather than replace individuals.”
The system is built to learn any Latin script, and Freshfields’ lawyers are now teaching it to work on other languages. “I think our lawyers are becoming more and more used to it as they understand its possibilities,” she added.
Insurers are also spending heavily on big data fed by new products such as telematics, which track a customer’s driving style in minute detail, to help give a fair price to each customer. “The main driver of this is the customer experience,” said Darren Price, group chief information officer at RSA.
The insurer is keeping its technology work largely in-house, unlike rival Aviva, which has made much of its partnerships with start-up companies in its “digital garage”. Allianz recently acquired the robo-adviser Moneyfarm, and Axa’s venture fund has invested in a chat-robot named Gasolead.
EY, the professional services firm, is also investing in analytics tools that can flag red flags for its clients in particular countries or businesses, enabling managers to react before an accounting problem spreads.
Even the Financial Conduct Authority is getting in on the act. Having given its blessing to the insurance sector’s use of big data, it is also experimenting with a “sandbox”, or a digital safe space where their tech experts and outside start-ups can use real-life data to play with new ideas.
The advances that catch on throughout the financial world could create a more efficient industry – and with that tends to come job cuts. The Bank of England warned a year ago that as many as 15m UK jobs were at risk from smart machines, with sales staff and accountants especially vulnerable.
“Financial services are playing catch-up compared to some of the retail-focused businesses. They are having to do so rapidly, partly due to client demand but also because there are new challengers and disruptors in the industry,” said Amanda Foster, head of financial services at the recruiter Russell Reynolds Associates.
But City firms, for all their cost pressures, are not ready to replace their fund managers with robots, she said. “There’s still the art of making an investment decision, but it’s about using analytics and data to inform those decisions.”
Source: Telegraph.co.uk, October 8, 2016