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Fintech automation and AI may face trust issues

Fintech automation is gaining the ability to negotiate and execute contracts. But users will first have to learn to trust financial automation before turning on this capability.

The next phase of fintech automation may need a new level of trust. These systems are gaining the ability to negotiate terms and execute contracts. But users are going to have to be confident in the advanced capabilities of these systems before they trust them.

Relying on fintech automation to complete repetitive tasks is one thing. Trusting it to replace human decision-making is another.

"I'm still in the trust but verify [stage] when it comes to AI," said Jason Gabauer, comptroller of Halstatt, a real estate investment firm.

Gabauer said he has benefited from fintech automation. He uses the Sage Intacct cloud accounting platform, which generates reports and notices automatically. Without it, he said, he would need to hire one or two more people in his department.

Gabauer sees a clear benefit to even more intelligent tools that could, for instance, build investment models based on mining the firm's prior data. Automated model generation will save effort, "as opposed to building the entire [model] every time."

But will Gabauer go a step further and trust fintech automation to make a decision? Not yet, he said.

Training users to trust AI

Oracle also sees user trust as a problem in advanced ERP and fintech automation.

To counter distrust, Oracle is training users to trust the AI capabilities. Its ERP and fintech applications make recommendations to users. Those recommendations will address increasingly complex transactions and problems.

I'm still in the trust but verify [stage] when it comes to AI.
Jason GabauerComptroller, Halstatt

Once financial application users are comfortable with an app's recommendation capabilities, they may be willing to relinquish some control and "go straight into machine-to-machine capabilities," said Jack Berkowitz, vice president of products and data science for Oracle Adaptive Intelligence.

"That's where we are starting -- with recommendations," Berkowitz said.

The applications could take over some negotiations -- if users allow it. For instance, the system could look at payment terms and adjust them for someone who is paying earlier. The machine can do it without someone having to negotiate the terms each time, Berkowitz said.

AI-enabled technologies are still in the early adoption phase. But, by 2020, embedded enterprise AI "will become a key differentiating factor in finance system evaluations," said Gartner analysts Nigel Rayner and Christopher Iervolino in a recent report.

For some, automation is helpful

For some people, advanced capabilities in fintech automation will be helpful. Users are benefiting from fintech automation. They are reporting significant cost and time savings. Repetitive and routine tasks are now automated.

This sophistication of financial applications will increase. Algorithms capable of automating some types of decisions are on the way. Blockchain technology is also on the horizon. Blockchain's secure, self-verifying technology can know if a contract's terms have been met. Once that happens, blockchain's smart contract capability can then self-execute an agreement.

Kelly DeWispelaere, finance director of ADAC Automotive, a global, tier-one automotive supplier, is familiar with blockchain's potential and believes it would be useful.

The technology could get the approvals upfront and avoid the problem of looking for the purchase order later on, she said.

"I would love to see that built into our financial systems," DeWispelaere said.

ADAC is improving its automation capabilities. The auto parts maker moved from a Microsoft Excel-based system used by 40 different budget managers to Vena Solutions' financial application software. The cloud-based system has allowed ADAC to speed up processing time. Annual budget preparation, which took from August to September, is now being completed in about a month. As soon as financial data is uploaded, published statements are delivered.

The automation in Vena's system "has allowed us to get away from the manual data entry and become more of a business partner with the operations," DeWispelaere said.

Blockchain may have impact

Blockchain's impact on financial applications may be significant, said Aaron Harris, senior vice president and head of engineering and tech at Sage Intacct.

But Harris believes blockchain's adoption is three to five years away.

"The adoption will come with a natural transition," Harris said. If a large retailer, such as Walmart, believes that blockchain will improve order processing or settling of payments, "they're going to push all of their suppliers onto a blockchain network."

Steve Amrein, director of operations at ISlide, a shoemaker, moved from QuickBooks to SAP Business One software to improve and automate more of its accounting systems.

Amrein said the SAP software has added a significant amount of automation to his operation, but he would like more. He wants more one-click operations that tie some processes together and believes fintech applications are lagging compared to some other business apps.

"I feel like the tech world kind of ignores accountants," Amrein said.

This was last published in March 2018

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