You may have heard of IBM Watson already, but in case you haven't: it's a cognitive computing capability that is commercially available. Named after IBM's first CEO, Watson beat two champions of the game-show Jeopardy back in 2011, and more recently has spent some time watching popular films, even making the astute observation that Han Solo is among the most neurotic of characters in the Star Wars universe, suggesting that underneath the cool exterior is perhaps a more complex constellation of emotions—I don't think he's wrong. (He also had opinions on the Harry Potter series).

But of course, plenty of people have plenty of plans for the intelligent robot outside of TV and film. Blockchain enthusiasts will be happy with the news that Watson could potentially enable regulators to easily find anomalies by having Watson scan huge volumes of past transactions or even help devices that use distributed ledgers self-diagnose errors. These applications are perhaps just the beginning, with Tim Hahn, IBM's chief architect in charge of Internet of Things security, suggesting that we're starting to approach "the kind of things we see in movies."

In effect, what Watson does is analyse unstructured data, i.e. data that wasn't produced specifically to fill in one field of one form: articles, books, tweets, quotations, laws, speeches, commentary, and every word I'm writing right now. IBM's website says that 80% of all data out there is unstructured, which Watson combs through using natural language processing (NLP). NLP means that he deconstructs every word, phrase, sentence, and paragraph, runs tests to statistically determine what the intended meaning is, and then can use that meaning for whatever analysis you fancy using it for. It was, therefore, only a matter of time before somebody plopped him down in front of the original Star Wars trilogy.

But naturally we're also interested in what Watson's intelligence could do closer to home, specifically in the audit business. Since Watson can read vast amounts of a company's unstructured data, he could help auditors identify anomalies, expand their ability to test those outliers, and generate evidence that will support or contradict an audit opinion. In short, patterns will be findable that were never findable before, and quickly too. I'm picturing Neo decoding the avalanche of green symbols in The Matrix, and I think that 1999 us would be proud (uh, jealous) of what 2016 us are on the brink of.

Not to sell Watson short as merely some sort of powerful search tool, I must also emphasise his intelligence—he simulates decisions and learns in the style of a human, generating hypotheses before evaluating the supporting evidence and arriving to a judgement-based decision. (That's how I do it anyway).

I am quite pleased to say that the "Watson could" statements in the previous paragraphs are not pie-in-the-sky potentialities or theoretical verbiage. KPMG has recently expanded its relationship with IBM to start using Watson to turn ideas such as these into reality. We are secretly hoping that more Neo-like film characters will be auditors and financial professionals, but, failing that, we are keen to see the financial industry start offering the capabilities that science fiction promised us when we were kids.

What other robots have you got?

As you are probably well aware, the asset management industry is being disrupted by robo-advisors that use analytics to generate financial advice—many of them are even using NLP to do so. The opportunities in this area are nearly limitless, with the obvious ones being lowering fees around investment management, and allocating assets in a truly unbiased way when selecting funds based on defined criteria. A recent KPMG survey found that 80% of millennials and generation Y are "very likely" to rely on robo-advisors to make financial decisions. Picturing banks using social media to detect changes in their clients' lifestyles and suggesting new investments as a result is hardly sci fi... it's a reality. Indeed, some have even argued that robo-advisors have gone mainstream.

Want to chat robots with a drink in your hand and sand under your feet? Come to KPMG Luxembourg's Digital Fund series: Cabanon edition where the topic will be Robo-advisors: a no brainer for asset management? More details on the event can be found here.

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