Artificial Intelligence (AI) has moved beyond merely capturing our imaginations – it is now replacing jobs, it is augmenting our skill sets, it is driving new discoveries on a daily basis – AI is already here, but why? How did this happen? A nexus of forces has fortuitously converged to deliver enormous growth in AI’s ability to deliver valuable real-world application in the financial services sector (and elsewhere.) Before delving deeper into these forces – it’s beneficial to first look at what AI is, what forms it comes in and what areas are particularly interesting to the world of finance.
What Is AI?
AI is a machine based intelligence that can remember, think, decide and act without human intervention. AI can be broken up into 3 forms, namely:
- Artificial Narrow Intelligence – Machine intelligence that is developed to focus on a single task. Examples of this can be seen in search engines, Siri and Robo-Advisors.
- Artificial General Intelligence – Machine intelligence that is able to cover a broad range of functions, similar to that of human intelligence. Examples of this form have yet to come into existence with experts predicting this level of AI to be reached within a range of 30 to 60 years.
- Super AI – Sentient machine intelligence that exponentially surpasses human intelligence. Examples of this are yet to be seen (experts predict this form of AI to come into being within 2 days of Broad AI being achieved.)
Subsets of AI
The Narrow (or Weak) AI that is currently in operation today is not to be scoffed at, despite its unflattering title. The leverage it can offer the world of finance is groundbreaking and it is already providing huge ROI for those businesses that are harnessing it effectively (more on this in the next article.) Within AI there are subsets of AI that require our attention for the purposes of this article (and to gain a deeper learning on the subject.)
a.) Machine Learning (ML) – ML is a subset of AI and refers to a machine’s ability, through the use of algorithms, to independently make sense of random data, in a similar way to humans. As far as human involvement is concerned it can do this in a supervised, unsupervised and/or reinforced way. Depending on the level of human supervision, the machine will aim to sort the data into categories and ultimately that is useful for predicting future events/actions. The machine’s ability to learn about and sort this data into valuable insights far exceeds our human capabilities and opens up numerous opportunities within the financial services space (a space filled with enormous amounts of valuable data.)
b.) Deep Learning (DL) – DL is a subset of ML and refers to ML algorithms that uncover hidden layers in the data and organise this using a Deep Neural Network (DNN) – much in the same way that our human brain functions. Deep Learning falls into the sweet spot between Data Science, Big Data and AI and is an exciting area of AI that is garnering a lot of attention, for all of the right reasons.
Six Reasons Why AI is Now Relevant
- ML Breakthrough (2012) – A Cambrian explosion like moment for Deep Learning occurred in 2012, at the ImageNet Large Scale Computer Vision Competition (ILSVRC). A Toronto University based team consisting of Geoff Hinton (considered the Godfather of Deep Learning), Alex Krizhevsky and Ilya Sutskever presented a large, deep convolutional neural network that was used to win the 2012 ILSVRC. They blew the competition out of the water and interest in AI as a field of study skyrocketed from this moment onwards.
- Big Data – There would be no AI without big data. The development of AI systems relies heavily on the availability and accessibility to enormous amounts of data. Researchers have been held back for decades, by limited data sets. Accessing large amounts of data is how the machine learns. Experts predict that within the next decade there will be 150 billion networked sensors (more than 20 times the number of people on Earth). The speed at which machines learn to interact and understand in the way that we as humans do is increasing at a similar rate.
- CPU to GPU – In short, it’s about speed! Most ML algorithms are distributed. These algorithms need to process multiple parallel streams of data, simultaneously. GPUs have far more processor cores than CPUs, thus, parallel computing solutions are best suited to GPUs. Andrew Ng is credited as being the catalyst for this large-scale move from GPUs to CPUs in AI development. Nvidia, the leading manufacturer of GPUs, originally focusing on gaming, really should thank him. By having a quick look at Nvidia’s share price since 2012, it quickly becomes clear that the demand for their GPU tech has spiked in parallel to the spike in demand for AI solutions.
- Cloud Computing – Similarly to its requirement for big data, AI is hungry for processing power. Since its early inception in the 50’s, AI research has been held back by the lack of access to the vast amounts of computing power it often requires. Enter the age of cloud computing where, thanks to the likes of AWS, IBM and Google; there is processing power a plenty.
- Open Source Software – Imagine keeping AI research closed, siloed, hidden away from valuable eyes and minds. Progress would all but stop! The open source movement has allowed for incredible breakthroughs to happen within the field of AI. Research and technologies are shared as if driven by the machines themselves, aching to speed up the realisation of a sentient AI.
- MOOCs – Akin with the open source movement is the Massive Open Online Course (MOOC) movement. MOOCs provide the infrastructure for easy, free access to almost any form of education imaginable, through some of the best educational institutions around. Want to study AI through an institution like Stanford or Berkeley? There’s a MOOC for that!
Progress and Economic Realism in UK-EU Relations
The architects of the Leave vote in 2016’s Brexit referendum will no doubt have been encouraged when EU leaders agreed to move to phase two of the ongoing transitional period on December 15th. The EU 27 summit will review the conduct of UK-EU negotiations expressed satisfaction that sufficient progress has been made in each of the priority areas.
This consists of the protection of EU citizens’ rights, the divorce bill, and the Northern Irish/Ireland border issue – although the latter may still prove problematic in future phase three talks on trade. It was always assumed that phase one was the least difficult hurdle and EU Council President Donald Tusk warns that tough negotiations lie ahead.
The UK is unravelling 43 years of EU membership, effectively making it ‘EU accession in reverse’. Westminster has to state what kind of relationship it wants and this remains unclear, except that Parliament wants more say in any future trade relationship. This is acting as a break on the aspirations of more ardent Brexiteers.
Eurosceptics on both sides of the political spectrum have failed to judge the impact of Brexit on future trade with the EU27, the UK’s biggest partner. There is still an amateurish belief that the outside world is itching to get into cosy trade arrangements with a new-look ‘global Britain’. Many old trading partners such as Australia and New Zealand previously felt their special trade links with the ‘mother’ country were unceremoniously ditched 43 years ago when the UK joined the European Economic Community (the forerunner of the EU), leaving them scrambling for new markets nearer home.
But having successfully opened up trade in Asia and the Americas, these nations are now in a stronger position for any future bilateral negotiations with Britain and will no doubt have a menu of tough conditions for renewing increased trade. The difficult quid-pro-quo discussions in November between Theresa May and the Indian Prime Minister, Narendra Modi, also provide a taste of what’s to come. While keen to expand commercial links, Modi used the meetings with May in New Delhi to trigger demands for more immigration visa quotas and for Britain to re-introduce the right of Indian students to work in the UK after graduation.
Other potential trading partners such as the United States have more relaxed regulations than in the UK in the sale of agricultural products. Indications are that they will raise objections to any deal with Britain if UK trade authorities boycott any American produce. The Cabinet Minister for the Environment, Michael Gove has already made it clear that Britain is not about to reduce its foods standards policy to accept US chlorinated chicken products and GM crops that are banned under EU regulations.
The UK farming sector has been the beneficiary of vast EU subsidies for many years and has deep concerns that these will not be replaced despite government promises to the contrary. This belief is compounded by fear their industry will be decimated by cheaper US and South American imports when ‘global Britain‘ takes off.
Getting a ‘bespoke’ trade deal with the EU is paramount for the UK and its success decides the future of the Tory party. The EU is toughening its stand on both transition and trade talks and is anxious not to convey any expectations of special treatment so a Canadian Comprehensive Economic and Trade Agreement (CETA) or “Canada plus” trade deal will not be a model they would likely agree for the UK.
This is unless the UK recognizes it will lose access to the Single Market for its Financial Services industries – a vital export driver contributing £71.4bn in revenue in 2016. There are some EU members, in particular, Italian Prime Minister Paolo Gentiloni, who are more disposed to granting Britain a ‘bespoke deal’.
This view, however, is not broadly not shared by other EU leaders who are waiting to see how the British government intends to move negotiations forward. This cannot be done without reference to many sectors of British industry. Manufacturers in the car industry with complex product supply lines have been prominent in voicing their anxieties about the difficulties of trading outside the Single Market. This led to some ‘private’ assurances by Theresa May that their interests will be protected. Other sectors are joining a chorus of pressure on the government to bend towards a softer Brexit – to stay under EU rules – to obtain the best possible trade deal.
As the world’s largest consumer market, the EU effectively exports its regulatory standards through its economic weight. The UK ‘Reform Bill’ will transfer EU regulations into UK statute recognising the ever-present ‘Brussels effect’, which dominates trade regulations throughout the world. How far this influences future upcoming transition and trade talks remains the subject of a separate detailed discussion.
Uber Eats to Offer Europe Couriers Insurance
Uber has announced that it will be offering a free insurance package to its food couriers in nine European countries.
The company has teamed with AXA Corporate Solutions for the insurance product, which will be introduced from January 8 next year. It will cover personal accidents, cash benefits for hospitalisation, property damage and cover for third-party liability of up to a maximum of $1m. Uber eats operates in Austria, Belgium, Poland, Italy, the Netherlands, Portugal, Spain, Sweden and the UK.
If a driver is involved in an accident, they will simply need to fill in an online claim form available on the Uber Eats app.
Previously, both Uber Eats and Deliveroo have come under scrutiny over how workers are treated. In the UK, Deliveroo riders went to court to seek employment rights, including the minimum wage. The UK government has looked at whether the employment law needs to be changed to take account of modern working practices, such as the gig economy.
Brexit Deal Gives Trade Talks the Go-ahead
The UK has reached a deal on three contentious issues which have prevented negotiations moving on to trade. The deal ensures no “hard border” between Northern Ireland and the Republic of Ireland, that the rights of EU and UK citizens be protected irrespective of whether they live in the UK or EU post-Brexit and commits the UK to a divorce bill settlement estimated to cost between £35bn and £39bn. EU Commission President Jean-Claude Juncker called the deal “the breakthrough we needed.”
— UK Prime Minister (@Number10gov) 8 December 2017
Why It’s Important
“Theresa May has achieved what she wanted – the green light to move on,” said the BBC’s Political Editor Laura Kuenssberg. Britain plans to leave the EU at the end of March 2019, yet trade has not been discussed. May will now be able to negotiate on trade and a transition deal, providing businesses with greater clarity over the regulation. However, the entire basis for UK-EU relations is still to be discussed.
“We all know that breaking up is hard but breaking up and building a new relation is much harder.”
European Council President Donald Tusk
The EU plan to offer Britain a Canada-style trade deal, which would impose new tariffs on trade, a document leaked last month revealed. Trade negotiations are expected to be tough and could take several years. The importance of reaching a clear transitionary framework will be vital for businesses, and a lack of clarity may deter businesses from investing in the UK.
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