Automation, artificially intelligent algorithms, and even human-like interfaces are starting to become the new normal. For applications where we're already used to digitization and those with low stakes, this doesn't seem that important; for example, nobody freaked out when Google used RankBrain to provide better search results.
But what happens when robots start controlling our money?
Automated Tellers--No, Really
In some ways, they already are. Automated teller machines (ATMs) have been around since 1967, but they never really replaced the traditional "teller" job. For large transactions, complex deals, or circumstances that require conversation (such as questions and answers), human tellers have been the standby. Now, banking jobs are starting to be replaced by automated alternatives--in fact, Citigroup estimates that 30 percent of banking jobs could disappear within the next decade.
What's replacing them? Part of the equation here is intuitive payment and money management apps like Venmo, or even PayPal. These apps make it easy to manage all your financial transactions with a handful of simple taps, and thanks to mobile devices, this management can be done anywhere--including on the go. The only big holdup here is waiting for the rest of the world to catch up; not all physical retailers are on board with these payment methods yet.
Financial Advisors and Stock Effects
Though the automation of banking jobs is significant and could negatively affect the economy with an increase in unemployment (with some estimates projecting an overall rate of 50 percent unemployment in 30 years), the real economic stakes exist as automation begins to take hold in the realm of financial advisory.
Services like Wealthfront and Betterment are collectively managing tens of billions of dollars in consumer assets, using automated algorithms--in many cases unsupervised--to trade and monitor the statuses of items like stocks, bonds, and mutual funds.
On the surface, the big effect here is displacing financial advisor jobs, but the introduction of trading algorithms can significantly affect fluctuations in the market, causing "flash crashes" as automated selloff points cause a cascade of selling behavior.
Modern algorithms are being refined to avoid such catastrophic consequences, but as new automated solutions enter the market regularly, it could become more difficult to mitigate the risks of leaving our economic health in the hands of machines.
Financial Technology Investment
It's worth noting that investments in the financial technology sector, specifically, have risen dramatically in the past few years. Collectively, the industry attracted $2.4 billion in 2012, growing to more than $19 billion in 2015. That's because while some effects of financial automation are intimidating and risky, it's also a source of enormous potential value.
If you can replace 30 percent of your staff with machines, your profitability skyrockets. If you have an algorithm that learns how to make good investments, you can easily outstrip your financial advisor's return. This rate of increase will likely accelerate, especially as the diversity of services and functions begins to climb.
Big Banks Holding On
Big banks like JP Morgan and Wells Fargo haven't had much trouble staying alive as smaller, nimbler app-based companies begin to rise up and threaten them. They have far more brand recognition, consumer trust, and experience, and therefore stand to remain alive and well for many years to come.
However, they may need to cut costs soon to keep up with the changing landscape of financial services, and they've already made massive cuts in response to the 2008 financial crisis. They're a representation of traditional banking, and their longevity could help to stabilize the potential impact of these new financial service options.
Risks and Possibilities
The possibility of an economic doomsday arising from the full automation of our economy is a real one, but not an especially threatening one. Programmers are well aware of the risks of automation, and are fighting actively against it, and we have enough of a financial backbone in place to protect us against rapid or sudden changes to how our economy works.
If anything, cheaper, easier banking is liable to drive more wealth creation, putting investment opportunities in more hands and potentially weeding out predatory banking practices. As investments in financial technology continue to increase, this will be one of the most important sectors to watch as robots begin to take over the world.