An Ode to Automation – www.waterstechnology.com

Automation is widely discussed in the financial services sector, but it isnt exactly considered sexy anymore. Emilia says it is still the technology that has changed the industry the most.

Automation is one of those subjects people love to talk about. It doesnt elicit confused faces or cautious questions, because people generally already know what it is. Yet, it still has the greatest potential to change the financial services industry, even more than it already has. Firms may have elements of automation deployed throughout their technology stack, but there is still so much room forevolution.

A report from FIS titled The Hunt for Growth, published in June, which surveyed 1,000 buy-side and sell-side firms, shows that there is strong demand for further trade automation, better data management and focus on digitization. The findings note that 59 percent of surveyed buy-side firms anticipate highly automated trade execution in the next three years, while 53 percent of sell-side firms are planning to meet that demand. This automation is not confined to transactions but the whole trade life-cycle, including middle- and back-officeprocessing.

John Avery, director, client and industry engagement, derivatives utility at FIS, says much of this demand is around regulatory compliance and the need to cut costs. The biggest challenges firms are facing are around regulation, the global political climate and of course cost-cutting which is still in place for many in the industry, Avery says. But we see that being committed to technology, those who are best prepared to meet those challenges with technology can continue to do well. He adds that demand for automation, to reduce manual input so employees can focus on more value-added tasks, reinforces thatmessage.

Its not just down to a desire to change, of course. Regulatory reform is encouraging many firms to look at market segments in different ways, and at using resources more intelligently as a result, on a firm-wide basis rather than just in response to specific issues. Part of this is through investment in technology to further cut costs. What is interesting is that there are some firms that want to take advantage of regulatory change, Avery says. They will either de-emphasize or enter certain markets, but as long as theyre invested in technology they are confident they can leverage these changes and even free capital to invest in stronginnovations.

The FIS report shows how important automation still is for financial services. How fast and widespread automation within a company will be, however, greatly depends on their innovation strategy, and while more than half of sell-side and buy-side firms believe in the importance of automation, there are still barriers that prevent them from implementing thesesystems.

In the same way, automation is the driving force behind so many of todays much-hyped technologies. What is artificial intelligence and machine learning, but a way to automate data processing and analysis? Isnt blockchain just a way of automating all the back and forth that counterparties have to do for certaintransactions?

Automation is so widely accepted in the financial services industry, but when phrased in certain ways, can inspire fear that robots will replace people. The same people who express that fear also complain that much of the grunt work in finance is manual. If that pressure is relieved and the skilled people in all areas of the financial services industry are freed up to focus on their core work, who knows where the industry willgo?

Inspiration

This ode to automation was inspired by podcast I heard a few weeks ago, focusing on the history of the humble spreadsheet. Microsoft Excel, todays most widely-used spreadsheet program, was conceived as a means to automate and replace the manually intensive task of writing down numbers on a sheet of paper. This also shows the ephemeral nature of automation. We went from celebrating the computerized spreadsheet to figuring out ways to phase it out completely, in a few shortyears.

The definition of automation is ever-changing, evolving alongside the technology and processes it augments. In the future, its likely that todays brave new frontier of automation might seem as quaint as Excel is starting to seem today. Perhaps then, there will be odes to AI appearing in the pages of this magazine by columnists who look at what were covering today with something akin tonostalgia.

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