For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
AI: The rise of the machines
Undoubtedly the biggest driver of change over the coming decades will be Artificial Intelligence (AI) – a much-publicised subject, but also one which is often poorly understood. The prospect of a world effectively run by robots and technology is an intimidating one for many people, and there is ample literature out there that will be concerning for some.
A recent study by PWC estimates that up to 30 per cent of jobs in the UK are susceptible to AI over the next 15 years, with those in transport, retail, wholesale and manufacturing particularly vulnerable. Augmenting this study was another conducted by the thinktank Reform in February, which found that up to 250,000 jobs in the public sector could be rendered obsolete over that period – particularly those within administration.
Who could begrudge workers being wary of such findings? But the truth is that the rise of AI is not only inevitable - it also has the potential to be an overwhelming force for collective good in the coming years.
A bounce for the economy
Much is made of the persistently weak levels of growth in both GDP and productivity in the UK since the financial crisis. And even with record levels of employment, wage growth remains stubbornly low – something which flies in the face of economic principle. Bottom line: we need something to kick-start a new golden age, and that is where AI – dubbed “the future of economic growth” - comes in.
Conservative estimates from the same PWC study suggest that AI alone will boost growth by up to 10 per cent by 2030, or £232bn. Some studies such as one by Accenture put that figure at more than £650bn. Either way, it’s the sort of stimulus which could nullify many current-day problems such as weak growth and soaring national debt. Additionally, history suggests that the number of jobs generated by technological advancement tend to offset those which are lost; if not exceed them.
The logic behind AI is that it will make everyday products better, more personalised and cheaper. This, in turn, should fuel increased demand and drive consumption – the engine of the UK’s growth. It will also automate the more mundane and repetitive aspects of people’s jobs, thus not only helping them to do their jobs better, but also freeing them up to innovate, deal with complex challenges, and ultimately focus on more productive, high-value activities.
For example, within the fields of legal and compliance, there are already machine algorithms which can analyse documents in a fraction of the time that an ordinary worker could. Big Four firm EY estimates that apps and robots will soon take on 30 per cent of work currently undertaken by workers, including tasks such as data entry into spreadsheets. And even in reference to the aforementioned Reform study, estimates suggest that the savings to the public sector from administrative automation alone could be around £5bn per year by 2030.
Is the UK embracing this change?
Such principles are increasingly being replicated across other sectors, and the end result will almost certainly lead to an increase in both productivity and real wages in the UK. Government is making all the right noises too, having announced earlier this year that the Engineering and Physical Sciences Research Council (EPSRC) would supply an extra £17.3m to support the development of new robotics and AI technologies in our universities. Moreover, Downing Street also launched an independent review to establish how it can better work with the AI sector in future.
But according to a report titled Growing the artificial intelligence industry in the UK, there is still much more that needs to be done to capitalise on the UK’s current competitive advantage, and there are obstacles to widespread AI implementation. Much of that centres on the prohibitive upfront costs of investing in technologies, machine learning, automation and other forms of AI. But the long-term benefits are not only increasing: they’re becoming less ‘long-term’ too, insomuch as positive ROI is occurring ever sooner. Within communications, for example, O2 has announced it will be rolling out AI technology in early 2018 which will be capable of performing the same job as customer service staff.
AI and fintech
But one of the areas where AI is arguably most prevalent already is within financial services, and specifically fintech. By having more intelligent systems, algorithms and other dedicated AI technologies, everyone associated with financial services stands to benefit – whether that be workers within the industry, seasoned investors or ordinary consumers looking for optimal ways to make payments or manage their mortgage.
Contactless and mobile payments are just on example of the convenience brought into the equation, although this level of technology is likely to evolve considerably in the coming years. Many experts believe the card itself will go the same way as cash, with wearable technologies taking over. Aside from improved convenience, it will also make transactions safer, with these wearable technologies able to incorporate biometrics such as facial or voice recognition, and even link up to your heartbeat – thus making the job of fraudsters astronomically harder.
Such system improvements will extend to data security too, and will also enable fintech firms to refine their targeting of customers, with more precise information availed to them on consumer attitudes, spending habits, lifestyles and more. In theory, this should enable more relevant and streamlined communications between company and customer.
The challenge, though, will largely be two-fold. Invariably, being bombarded with highly-targeted marketing materials can push the boundaries of privacy invasion. And secondly, as fintech firms become increasingly dependent on AI, it will be incumbent upon them to convince customers that their hard-earned money is safe in the hands of machine, rather than man.
Building trust is not an obstacle exclusive to fintech. Workers are entitled to be sceptical as to how the advance of AI, and the ensuing threat to their jobs, will be beneficial for them at an individual level. The social ramifications for our society are as yet unknown, particularly with respect to how this increased wealth will be distributed. And one of the many areas in which AI will need to be carefully regulated is its environmental impact.
Yet, those valid concerns notwithstanding, it is difficult not to be enthused by the exponential gains AI is set to bring. One of the common misconceptions of AI is that its raison d’etre is to replace human intelligence. In actual fact, it exists to make us more efficient and productive at our jobs, engender a more convenient lifestyle, and reduce the cost of living.
Implementing it well, ensuring that all parts of society reap the benefits, and dealing with the rapid rate of change it will bring to our lives, is a daunting task. But the UK, with both a proud heritage and a fertile technological landscape, is as well placed as any other country to take the lead, and enjoy a prosperous future as a result.
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As the tax year end approaches, the financial services industry readies itself for a flurry of activity. That's in large part because, with just a couple of months to go, the so-called 'ISA season' is upon us.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.