Monthly Memo: April 2023

Monthly Memo: April 2023? ?

Welcome back to Evolution Partners' monthly newsletter, The Bottom Line. With this series, we hope to provide you with insights into the latest news this month, from finance and technology to ESG. We also provide updates on our team and company news.??

We'd love to know your thoughts - get in touch and leave a comment below. Tell us what struck a chord with you this month, and join the conversation. ?

In the News this Month

Apple’s venture into financial services?

In 2019, tech giant Apple, made a significant push into the financial sector, introducing its first credit card, the ‘Apple Card’. This month, Apple has introduced its new savings account, offering a very competitive 4.15% interest rate. Apple’s interest rate outstrips competitors such as American Express who offer 3.75%, and even its partner Goldman Sachs, whose standalone savings account operates under the Marcus brand, only offers 3.9%.?

By entering the financial services industry, Apple is leveraging its strong brand reputation and loyal customer base to provide innovative and convenient financial solutions. With its focus on user experience and data privacy, Apple, with the help of Goldman Sachs, is well-positioned to disrupt the traditional banking industry and become a major player in the financial services space.?

Biden pledged $1bn to UN Green Climate Fund

This month, not only has US President Joe Biden announced his 2024 presidential run, but on the 22nd of April, at this year’s Leaders’ Summit on Climate, Biden also pledged $1 billion towards the Green Climate Fund, an international effort to support developing countries in reducing their greenhouse gas emissions and adapting to the impacts of climate change.?

This announcement marks a significant shift in US climate policy, signalling a renewed commitment to global climate action after years of setbacks under the previous administration. The move also reflects the Biden administration's recognition that climate change is not just an environmental issue, but also a security, social and economic issue.??

While there is still a long way to go, this pledge is a step in the right direction towards a more sustainable future and will hopefully encourage other leaders to take further action.?

Elon Musk plans to create an AI start-up to rival OpenAI?

Tesla and Twitter CEO, Elon Musk, has created a new company dedicated to AI called ’X.AI’. The name reflects Musk’s ultimate vision to create an “everything app” under the brand name ‘X’, and explains why this month we saw Twitter officially merge into X Corp. ?

Musk is reportedly gathering a team of researchers, engineers and potential investors as he plans to create an AI start-up to rival OpenAI, a company which he co-founded but then resigned from in 2018.??

Musk’s decision to create an AI competitor to OpenAI may seem controversial as it was only last month that he and thousands of others signed an open letter requesting a pause on AI research and the development of any systems more powerful than GPT-4.??

AI and Job Disruption within Financial Services – by Caitlin York

The fear of ‘technological unemployment’, a term first coined by Economist John Maynard Keynes in the 1930s, is far from a new phenomenon. Ever since machines began to replace manual labour, they have been met with resistance, the Luddites Movement in 1811 being a key example. Automation anxiety was also expressed by seamstresses in the 1850s when sewing machines were first introduced, and continued into the 20th Century when computers became widely adopted in the workplace. This fear has resurfaced today due the rapid evolution and use of Artificial Intelligence (AI) and Machine Learning.??

Unlike past technologies, AI affects almost every business sector from transport and finance to art and music. AI now has the ability to write and summarise content, create unique artworks, compose music, outperform law students on the Bar exam and diagnose illness quicker and more accurately than doctors. The fear that AI will create job displacement seems understandable as PwC predicts that 30% of jobs are at risk of automation by mid to late 2020s and will increase to 44% by mid-late 2030s.??

However, although the adoption of AI seems like a daunting concept, more jobs were created with every technological shift than were lost. Sixty percent of jobs that exist today did not exist a generation ago. A recent report by the World Economic Forum has suggested that although AI may replace 85 million jobs by 2030, it is also predicted to create 97 million new ones. If used safely and ethically, AI could help improve healthcare, reduce illness, disease and poverty, help combat climate change and potentially boost global GDP by $15trillion. It could also help businesses be more efficient and reduce costs, allowing these resources to be put back into growing and building the business.?

AI is already transforming almost every industry; however, after the transportation sector, Financial Services jobs are predicted to be the most at risk of automation. ?

Financial Services’ investment in AI is well underway, with AI already mimicking employees, automating process and pre-empting risks. Its application could transform the industry and have significant benefits such as:?

Enhanced customer experience: AI is enabling financial institutions to offer personalized services and experiences to their customers. With AI-powered chatbots and virtual assistants, customers can receive immediate assistance and support. AI algorithms can also analyse customer data to provide tailored recommendations and financial advice.?

Improved fraud detection: AI is being used to improve fraud detection capabilities in financial services. With AI, financial institutions can analyse large amounts of data, identifying patterns and anomalies that may indicate fraudulent activity. AI-powered fraud detection systems can learn from past cases to improve their accuracy over time.?

Better risk management: AI can help financial institutions manage risk more effectively by analysing data and identifying potential risks before they occur. For example, AI algorithms can analyse market trends and identify potential economic downturns or bubbles. This information can then be used to make informed decisions about investment strategies and risk management.?

Automation of routine tasks: AI can automate routine tasks such as data entry, reconciliation, and compliance monitoring. This will allow time for financial professionals to focus on more complex strategic tasks. Automation can also improve efficiency, reduce errors, and lower operational costs.?

While these benefits are helping businesses to increase efficiency, reduce costs and improve customer experiences, they are also changing the nature of work within the Financial Services sector. For some workers, the use of chatbots, virtual assistants and AI powered tools may seem threating as they are likely to make human workers in these areas redundant. However, it is important to note that while certain jobs are at risk of being replaced by automation, others are already appearing in their place; such examples include as data scientists, machine learning engineers, and AI developers. Additionally, automation can relieve employees of tedious, routine tasks, freeing them up to focus on more complex and strategic tasks.?

As Financial Services firms increase their use of AI technology, it is essential that they prepare their workforce for this AI-driven future. Those firms which retain and upskill their employees will be better positioned to take advantage of the growth opportunities that automation provides. It will also be crucial that firms develop ethical guidelines for the use of AI to ensure that the technology is used in a responsible and ethical way. This includes developing policies to address issues such as bias, privacy, and security.?

The impact of AI on Financial Services is largely based on predictions, therefore remains a topic of debate. However, it is inevitable that AI will bring new challenges and opportunities to workers in this industry. Ultimately, the objective of AI is to support workers by automating mundane tasks?and streamlining processes, rather than eradicating jobs and entirely substituting human workers.?

AI in Health Insurance – by Alexandra Murray-Tacon ?

The increasing use of artificial intelligence (AI) and technology in health insurance is rapidly transforming the legacy landscapes. AI algorithms can assist insurance companies in making informed decisions about coverage, pricing, and risk management and even automate health insurance underwriting processes. Automated health insurance underwriting is an application of artificial intelligence (AI) that involves using algorithms and machine learning models to assess an individual's risk and determine their eligibility for health insurance coverage.?

As the economics around AI improves, the value delivered through AI solutions indicates that now is the time to invest in AI-led transformation. AI has emerged as a transformative technology and critical differentiator in the insurance industry, especially when applied in tandem with humans. COVID-19 sped up the digitization transition coupled with the customer and agent frustrations with the dated, lengthy, high-touch, manual process.???

Reluctance to cannibalize legacy systems holds strong, preventing overhaul to automated decision making the pain point here lies in smaller, less effective technology upgrades (quick fixes) – end-to-end automation is much more efficient. Modernization generally requires either using new vendors to replace current technology or implementing workarounds. In either case, employing agile approaches will help companies iteratively find ways to make progress in fast bursts. All technologies required for AI automation within insurance already exist, and many are available to consumers. With the new wave of deep learning techniques, such as convolutional neural networks, artificial intelligence (AI) has the potential to live up to its promise of mimicking the perception, reasoning, learning, and problem-solving of the human mind.?

This technology has the potential to revolutionize the health insurance industry by streamlining the underwriting process, improving accuracy, and reducing costs. However, there are also concerns about potential biases in the algorithms used and the impact on consumer privacy.?

To address these concerns, ensuring that the data used to train the algorithms is diverse and representative of the population is important. Additionally, transparency in the underwriting process and the ability for consumers to appeal decisions is important to maintain fairness.?

Not only will automated underwriting alter the way we approach insurance, but another area where AI is transformational is in predicting and preventing disease. By analysing large data points and sources, AI algorithms can identify individuals who may be at high risk for certain conditions. Insurance companies can then provide these individuals with targeted interventions, such as screening or lifestyle changes, to prevent or manage the disease. This can improve patient outcomes and reduce healthcare costs in the long run.?

AI can also be used to improve customer service and satisfaction. Chatbots powered by AI can assist customers with their queries and provide them with personalized recommendations for coverage and pricing. This can reduce the burden on customer service staff and improve the overall customer experience.?

Ultimately, the use of AI in health insurance underwriting has the potential to improve efficiency and accuracy, but it is important to ensure that it is done in a way that is ethical and equitable for all consumers. AI has the potential to significantly impact health insurance by automating underwriting, disease prediction and prevention, and customer service. While there are just concerns about where the limitations will lie, if harnessed and used fairly, AI will be a powerful tool in health insurance and in conjunction with human expertise.??

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