Nordea On Your Mind
AI and digital disruption

AI technologies have entered the mainstream

AI and digital disruption

Nordea On Your Mind.
Nordea Corporate & Investment Banking,
4th september 2017

The field of Artificial Intelligence was established in the 1950s, but AI technologies have come of age in recent years, and most of us now encounter them when we use search engines to browse the internet, when we see targeted ads or online purchase recommendations, when we play video games, and when we use virtual assistants in customer service or in our smartphones. Many AI algorithms are not that new, but explosive growth in human connectivity (online interaction) has created a plethora of analysable data which AIs can learn from, and the rapid growth in computing power has made AIs more capable of doing so. Venture capital investments into AI projects grew by 750% over five years, to USD 5bn in 2016, fuelling the launch of the many new AI applications we are now seeing in our daily lives.

Digitalisation is disrupting business – Nordic banking is a case in point
Banks are feeling major cost pressures from the flood of new regulations in the wake of the global financial crisis, at the same time as customer behaviour is changing dramatically. Customers have migrated from branch offices to online banking, and are now quickly migrating to mobile. Banks are responding by shedding branches (the major Nordic banks have virtually halved the size of their branch networks since 2012) and jacking up IT spending, in order to keep pace with fintech challengers and be able to offer customers user-friendly mobile solutions for their banking needs. Nordic bank headcounts are only down moderately in the past five years, as banks have needed to add compliance and IT staff. Nordea is outspending its Nordic peers in terms of IT, being alone in building a completely new core banking platform instead of tweaking existing systems.

AI is being deployed in Nordic banks – meet our new digital colleagues
The first wave of using AI technologies is already happening in the banks: rule-based AIs (typically based on ‘if-then’ rules) boosting productivity in internal processes in areas such as compliance. The second wave of AI is now being rolled out: chat bots in customer service, dealing with routine customer queries. All the major Nordic banks now have them. So far, the banks are saying that the AIs are freeing up capacity for human staff to do more complex and valuable tasks. We believe that over time, AIs will actually start replacing many human jobs in banking.
Should we be afraid? For our jobs, or even for our lives?
While many human jobs, particularly repetitive, draining and sometimes dangerous ones, will likely be lost to AI and robots, some new jobs, typically highly qualified ones, will also be created by AI. This is no different from human technological development in the past – most of us worked in agriculture 100 years ago, where automation now gives us much greater output with a fraction of the people employed. Could a future AI become self-aware and turn hostile on humans, potentially wiping us out? Celebrities including Elon Musk, Bill Gates and Stephen Hawking have such concerns, but a Stanford University study panel of prominent global AI scholars has pointed out that no ‘general’ AI is currently even being developed, or likely to be developed in the next 15 years. The current AIs have a narrow scope and are used for very specific applications.

Shared insights: Interviews with a computer science professor and Nordea’s experts
We interview Danica Kragic Jensfelt, Vice Dean and Professor of Computer Science at the Royal Institute of Technology (KTH) in Stockholm, on where we are today in AI and robotics, and what to expect of the future. From Nordea, Ewan MacLeod, Head of Group Digital, and Mattias Fras, Head of Robotics Strategy & Innovation, tell us about Nordea’s digital strategy, use of AI, and potential future business models for banks. And from Nordea Equity Research, bank analysts Maths Liljedahl and Ermin Keric discuss how they and investors view digitalisation and AI when considering bank stocks as investments.

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Analysts
Johan Trocmé (primary) | Head of Corporate Research | +46 101 56 34 22 | Analyst info
Kristina Kruse | Senior Analyst, Corporate Research | +46 101 56 52 23 | Analyst info

Nordea Bank | Markets | Equities

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