By Benedikt von Thüngen, CEO of Speechmatics
In recent months we have seen the introduction of a host of new regulations in the financial services sector in relation to the communications channels used for official trading, regulated product or services sales, and data protection and data sovereignty of personal client records. Firstly, we saw the introduction of the second instalment of Markets in Financial Instruments Directive (better known as MiFID II), at the beginning of the year. We also saw the adoption on the General Data Protection Regulation (GDPR) which is due to come into place in May, as well as the overall regulation around conduct risk.
These regulations have been introduced, in part, as a result of the financial crisis a decade ago. Initially, new measures were brought in to shore up and strengthen the foundations of the financial system. A light was then shone on the conduct of the financial services sector as a whole, with new laws introduced to heighten personal accountability in relation to risk-taking and included a revision of remuneration packages and incentive arrangements that benefited a longer term view of success.
Today, the concept of “conduct risk” has risen to the top of firms’ and regulators’ agendas. Conduct risk is broadly defined as any action from an individual or a financial institution which leads to customer detriment, or has an adverse effect on market stability or competition. In the UK, the Financial Conduct Authority (FCA) expects conduct risk management to be embedded into firms’ risk management frameworks, supported by appropriate management information. With estimates putting the total amount banks have paid in fines for non-compliance at $375 billion over the last five years, it is clear that there is still room for improvement in this area.
New regulations and their effect on the industry
Early 2018 saw the implementation of MiFID II, a European-wide financial services regulation to improve transparency in the financial services industry. One of the key mechanisms of MiFID II is around call recording of financial advisers to support regulatory compliance, protect consumers and to resolve any trading disputes cost effectively. These conversations must be kept on file for at least five years.
While many banks are already archiving landline and turret communications, they are now required to do the same for mobile, as well as capture a wide array of context for each conversation. This is notoriously difficult across telephony or voice channels like noisy trading floors, contact centres or online multi-party voice conferences commonly used by financial, legal and M&A teams. Meeting MiFID II requirements such as these presents a technical challenge that thousands of organisations are now struggling to come to terms with.
Research commissioned by our call recording partners, Red Box Recorders, provides insight into the attitudes, preparedness and concerns around the MiFID II regulation just before it was introduced. Speaking to IT decision makers and senior compliance managers across the industry in late 2017 showed that while institutions were aware of the requirements, many didn’t have solid implementation plans ready to roll out, particularly surrounding the regulatory requirements for areas such as call recording. In fact, nearly three quarters admitted they were not ready for the MiFID II regulations and only a quarter were aware of the increased financial penalties for failing to comply to the regulation, which can go as high as 5 million euros or 10% of global turnover.
Not only is a lack of knowledge an issue, but the cost of complying is vast. According to estimates by consultancy firm Opimas, MiFID II will cost the finance industry more than €2.5bn to implement, with the largest banks expected to spend more than €40m each on compliance.
GDPR, which will come into effect from 25 May, aims to modernise data law and give EU consumers the right to know much more about how their information is collected, stored, used, processed, transferred and deleted by organisations. The introduction of GDPR will mean all firms will have to implement more stringent practices, ensuring data is better stored with adequate checks and processes in place to protect it. The purpose of this is to avoid personal information being accessed during cyber attacks, an ever growing issue in today’s digital society.
Once GDPR comes into force, the financial penalties for failing to comply, especially if the organisation is hacked and found to be negligent, could potentially reach four percent of company turnover. However, a report by analysts Forrester suggests that many organisations may not be GDPR compliant by 25 May: just a quarter of organisations across Europe are thought to be in the clear already, while another 22 percent expect to become compliant in the next 12 months.
Making your compliance investment work
The importance of the new regulation to all kinds of financial businesses, and their customers, is not in doubt. Neither is the impact its implementation will have on the industry for years to come.
The question comes when we look at how companies are making their compliance investment work. Looking at where they choose to prioritise capital and the types of systems they put in place will determine how they perform in the future. Due to the nature of the new regulations, one area of focus must be that of voice call recording.
The confidential and sensitive nature of client call records together with enterprise data protection and data sovereignty regulations prohibit the use of general-purpose cloud-based automatic speech recognition (ASR) technologies. Additionally, effective wide vocabulary ASR usage has been restricted due to limitations associated with telephony noise, multi-party accents or dialects, differing international languages, and sector-specific vocabulary constantly changing. Until now, the onus for recording voice calls has been on the call maker – to record, make notes or keep a record of what the call is about, with no requirement to include any information on the sentiment or tone of the call. But this is no longer good enough or, indeed, legal.
This is an opportunity to support firms – not only to comply with the law but to future-proof their business and protect their customers.
Businesses in the banking sector will need a specialist in multiple language ASR, who can enable businesses to convert what was recorded on a call into an accurate transcription, even in a noisy environment and across all file formats, using agile, simple to deploy, on-premise technology that sits alongside our cloud-based service.
The majority of calls in the EU banking sector are conducted in English, but the challenge is when there are several different accents on one call. Any call conducted in English can be transcribed using our innovative Global English pack, a single English language pack supporting all major English accents for use in speech-to-text transcription. Global English was trained on thousands of hours of spoken data from over 40 countries and tens of billions of words drawn from global sources, making it one of the most comprehensive and accurate accent-agnostic transcription solutions on the market.
Technological solutions already exist for automating note taking, real-time monitoring, and screening and classification of calls for conduct and ethics. With in-line indexing of the call content, discovery and investigation is simple, as is retrieving historic audio archives. If a call contains personally identifiable information (PII) like credit card details or bank account and address information, these can be live screened and tagged, or retrospectively analysed to support records preservation and security classification.
We are working with Deloitte on an initiative that includes some of the most advanced behavioural and emotional analytics and workflow in the world. Open API architecture allows clients and partners to exploit industry standard Natural Language Processing and AI technologies to configure advanced big data analytics workflow solutions.
Deloitte believes technology is the way forward in compliance. They have developed an Artificial Intelligence voice analytics machine learning platform, BEAT (Behaviour and Emotion Analytics Tool) as a smart solution to deal with the growing regulatory pressures facing their clients. BEAT combines Speechmatics’ highly accurate transcriptions of conversations with the output from their own emotion analytics engine, which provides the basis for determining the outcome of customer interactions through sentiment and behavioural analysis, topic modelling and natural language processing – just a few of the things that make BEAT a unique product in the market.
Red Box Recorders, leaders in compliance recording technology for over 28 years, has seen regulation change dramatically during that time. They work with organisations across the financial, contact centre, government and public sectors and have had to adapt to increasingly complex compliance requirements. They partnered with us to offer an innovative end-to-end transcription recording service which allows companies to dig deeper with their analysis. By using accurate transcriptions of audio conversations, the data becomes easily searchable for auditing and compliance purposes and to yield valuable business insight.
This is a time of crucial change, and there is no question that firms in the financial sector must comply with the new regulations. But there is an opportunity for these businesses to improve their performance output and reduce their overall cost footprint by using innovative technology that is already available and in use today.
The bigger organisations in the financial services sector are in the best position as they tend to have large regulatory teams. For smaller companies the next few months will be crunch time. There is still a lot of work to be done by the financial services industry to not only comply with the MiFID II regulations already in place but to ensure that they are ready for the GDPR regulation in May.
As leaders in speech recognition and having worked with a variety of firms, large and small, we are confident that technology is the smartest, most efficient way to ensure your firm is compliant with all regulations. The key is to make sure that whichever supplier you choose, they understand your needs and are able to tailor their solutions accordingly.
The rise of AI in compliance management
By Martin Ellingham, director, product management compliance at Aptean, looks at the increasing role of AI in compliance management and just what we can expect for the future
Artificial Intelligence (or AI as it’s now more commonly known) has been around in some shape or form since the 1960s. Although now into its eighth decade, as a technology, it’s still in its relative infancy, with the nirvana of general AI still just the stuff of Hollywood. That’s not to say that AI hasn’t developed over the decades, of course it has, and it now presents itself not as a standalone technology but as a distinct and effective set of tools that, although not a panacea for all business ills, certainly brings with it a whole host of benefits for the business world.
As with all new and emerging technologies, wider understanding takes time to take hold and this is proving especially true of AI where a lack of understanding has led to a cautious, hesitant approach. Nowhere is this more evident that when it comes to compliance, particularly within the financial services sector. Very much playing catch-up with the industry it regulates, up until very recently the UK’s Financial Conduct Authority (FCA) had hunkered down with their policy of demanding maximum transparency from banks in their use of AI and machine learning algorithms, mandating that banks justify the use of all kinds of automated decision making, almost but not quite shutting down the use of AI in any kind of front-line customer interactions.
But, as regulators are learning and understanding more about the potential benefits of AI, seeing first-hand how businesses are implementing AI tools to not only increase business efficiencies but to add a further layer of customer protection to their processes, so they are gradually peeling back the tight regulations to make more room for AI. The FCA’s recent announcement of the Financial Services AI Public Private Forum (AIPPF), in conjunction with the Bank of England, is testament to this increasing acceptance of the use of AI. The AIPFF is set to explore the safe adoption of AI technologies within financial services, and while not pulling back on its demands that AI technology be applied intelligently, it signals a clear move forward in its approach to AI, recognising how financial services already are making good use of certain AI tools to tighten up compliance.
Complexity and bias
So what are the issues that are standing in the way of wider adoption of AI? Well, to start with is the inherently complex nature of AI. If firms are to deploy AI, in any guise, they need to ensure they not only have a solid understanding of the technology itself but of the governance surrounding it. The main problem here is the shortage of programmers worldwide. With the list of businesses wanting to recruit programmers no longer limited to software businesses, now including any type of organisation who recognises the potential competitive advantage to be gained by developing their own AI systems, the shortage is getting more acute. And, even if businesses are able to recruit AI programmers, if it takes an experienced programmer to understand AI, what hope does a compliance expert have?
For the moment, there is still a nervousness among regulators about how they can possibly implement robust regulation when there is still so much to learn about AI, particularly when there is currently no standard way of using AI in compliance. With time this will obviously change, as AI becomes more commonplace and general understanding increases, and instead of the digital natives that are spoken about today, businesses and regulators will be led by AI-natives, well-versed in all things AI and capable of implementing AI solutions and the accompanying regulatory frameworks.
As well as a lack of understanding, there is also the issue of bias. While businesses have checks and balances in place to prevent human bias coming into play for lending decisions for example, they might be mistaken in thinking that implementing AI technologies will eradicate any risk of bias emerging. AI technologies are programmed by humans and are therefore fallible, with unintended bias a well-documented outcome of many AI trials leading certain academics to argue that bias-free machine learning doesn’t exist. This presents a double quandary for regulators. Should they be encouraging the use of a technology where bias is seemingly inherent and if they do pave the way for the wider use of AI, do they understand enough about the technology to pinpoint where any bias has occurred, should the need arise? With questions such as this, it’s not difficult to see why regulators are taking their time to understand how AI fits with compliance.
So, bearing all this in mind, where are we seeing real benefits from AI with regards to compliance, if not right now but in the near future? AI is very good at dealing with tasks on a large scale and in super-quick time. It’s not that AI is more intelligent than the human brain, it’s just that it can work at much faster speeds and on a much bigger scale, making it the perfect fit for the data-heavy world in which we all live and work. For compliance purposes, this makes it an ideal solution for double-checking work and an accurate detector of systemic faults, one of the major challenges that regulators in the financial sector in particular have faced in recent years.
In this respect, rather than a replacement for humans in the compliance arena, AI is adding another layer of protection for businesses and consumers alike. When it comes to double-checking work, AI can pinpoint patterns or trends in employee activity and customer interactions much quicker than any human, enabling remedial action to be taken to ensure adherence to regulations. Similarly, by analysing the data from case management solutions across multiple users, departments and locations, AI can readily identify systemic issues before they take hold, enabling the business to take the necessary steps to rectify practices to guarantee compliance before they adversely affect customers and before the business itself contravenes regulatory compliance.
Similarly, when it comes to complaint management for example, AI can play a vital role in determining the nature of an initial phone call, directing the call to the right team or department without the need for any human intervention and fast-tracking more urgent cases quickly and effectively. Again, it’s not a case of replacing humans but complementing existing processes and procedures to not only improve outcomes for customers, but to increase compliance, too.
At its most basic level, AI can minimise the time taken to complete tasks and reduce errors, which, in theory, makes it the ideal solution for businesses of all shapes, sizes and sectors. For highly regulated industries, where compliance is mandatory, it’s not so clear cut. While there are clearly benefits to be had from implementing AI solutions, for the moment, they should be regarded as complementary technologies, protecting both consumers and businesses by adding an extra guarantee of compliant processes. While knowledge and understanding of the intricacies of AI are still growing, it would be a mistake to implement AI technologies across the board, particularly when a well-considered human response to the nuances of customer behaviours and reactions play such an important role in staying compliant. That’s not to say that we should be frightened of AI, and nor should the regulators. As the technology develops, so will our wider understanding. It’s up to businesses and regulators alike to do better, being totally transparent about the uses of AI and putting in place a robust, reliable framework to monitor the ongoing behaviour of their AI systems.
Simplifying the Sector: How low code can aid digital transformation in financial services
By Nick Ford Chief Technology Evangelist, Mendix
From online banking to contactless payments and Apple Pay, it has been well demonstrated that the financial services industry is significantly ahead of many others when it comes to technology.
Traders, as well as customers, are now armed with the latest advances in technology and able to operate at super speed with more information at their fingertips than ever before.
However, the sector has not been immune from challenges created by COVID-19. The most significant challenge is maintaining the level of innovation they have been historically known for, with constrained budgets and smaller teams.
The pressure is on
The financial services sector is certainly quite complicated. There are many different regulatory bodies that monitor corporate conduct, which can make innovation a slow and arduous task. It also means that every time a new law is implemented, the sector needs to adjust to it, and that can mean anything from revising security protocols to radically changing the way information is processed, transmitted or audited.
This makes the job difficult for IT managers in the sector. Many of the systems they’re dealing with are old fashioned, dating back many decades and therefore not up to standard when it comes to performance and security. With lockdown restrictions meaning most sector staff are working remotely, this adds an extra pressure to IT teams that now have to ensure systems, data and work devices are functioning and always accessible. Digital transformation can help with this and a recent Mendix study found that 76% of IT managers in the sector believe it can improve operational efficiency.
Tech as a necessity
The sector now must be alert due to a new emerging challenge – the tech savvy customer. The modern age means customers are demanding much more from the services they are offered, with two things being highly desired; speed and transparency. As a result, many banks, hedge funds, and investment firms are investing in the appropriate technology to help meet these demands. The data that comes with upgrading ultimately allows financial institutions to better understand their customers and tailor their services more accurately to the changing trends influencing customer behaviour, Being able to have such knowledge is becoming more vital, as the pandemic continues to significantly affect the behaviour patterns of consumers and the preferences driving them.
Investing in technology can also increase efficiency within the sector at a time where teams and budgets are stretched, which can obviously have massive benefits. Digital transformation also leads to faster, better performing systems provides teams with the right tools they need to effectively get their job done. Tech is no longer a fintech privilege – it’s a currency. So much so that nine out of 10 IT leaders in financial services believe their firm will need to invest in digital projects over the next two years, just to survive in a rapidly changing market.
Powering digital transformation with low-code
To manage these different priorities, IT teams need to look beyond themselves and collaborate with different departments to create revenue-generating services that truly answer the clients’ needs – and it needs to empower all developers with the right tools to do so. This improved collaboration between IT and customer-facing staff means that services are designed to suit the needs of the customer-base, whilst reducing the pressure of an already-stretched IT team.
Low-code is one way to foster this collaboration. It requires little coding knowledge or expertise, meaning software development or the creation of business applications can include staff with non-technical backgrounds. Instead of having a back and forth between tech teams and other departments – of which miscommunication is always a risk – the development of apps can be inclusive involving a variety of teams, bringing together those that understand the business problems with those that understand the IT landscape, core systems and services to contribute to the vision of a product. IT stays in control with governance and guardrails built in to ensure compliance to the various standards required.
Digital transformation is an ongoing process in every industry. With low-code programming some of the current complexities and challenges facing the financial services sector can be tackled, allowing it to fully step into the digital age and continue being a hub of technological innovation.
Leading from the front – why decision makers must embrace automation
By Jeppe Rindom, Co-founder & CEO, Pleo
Ask any decision maker at a business about admin and you’re likely to be met with a familiar response – it’s a necessary evil that swallows time, but also helps inform strategic choices. Informed decisions are always better than uninformed ones, but many businesses still rely on outdated legacy processes to gather the data they need to make critical choices… and we’ve all seen the perils of a poorly maintained Excel spreadsheet in the news recently.
At director level, these administrative tasks can consist of signing off expenses or monitoring company spending to inform upcoming budgets. Although crucial to running a business well, these can be time-consuming and frustrating when you don’t have the right tools to make sense of it all. The solution? A simple change of approach.
A logical solution
This is where automation comes in. Over the last decade, we’ve seen how technologies including chat-bots and artificial intelligence have impacted everyday business, from customer-services and marketing to data analytics and time-management. More than ever, this is allowing employees to free up time to work more efficiently and focus on business-critical tasks. But this isn’t a quick fix. At a decision making is required. Ironically, a lot of these tasks relate to how a business can improve efficiency and productivity.
Add in the fact that many of these senior staff members have tight schedules, and can’t afford to spend several hours trawling through spreadsheets, and it’s little wonder high level admin is still an issue. In a recent customer survey, we found that 75% of senior managers spend over an hour a week on expense reports, with 14% losing nearly a whole working day (five hours or more) a week to managing them – time that could be better spent growing their business. The same study found that our platform saves people an average of 11.5 hours a month on managing company expenses. If you consider this could mean an extra day for a CFO or Finance Director to spend on more essential tasks, such as business forecasting or growth planning, the reward for investing in well designed automation at this level is clear.
But, automation isn’t just a case of saving time; it also fosters trust. Our study found that over half (51%) of users agreed that automating the laborious parts of their expenses like receipt capture, categorisation and expense reports also helped them build trust within their organisation. Automation helped them to excel at the things they’re most interested in, and were actually hired to do. I’m a huge advocate of empowering people with the tools they need to succeed. And through the empowerment automation brings, it’s only natural that employees begin to feel their worth in the business and that they are trusted.
A business-wide approach
Yet for automation to work, a company-wide understanding of its potential is vital. Adoption by senior staff should not be seen as simply a fringe benefit, as automation relies on understanding and endorsement from all levels of a business to work efficiently. A report titled ‘Automation and the future of work,’ published by the British Government in September 2019 noted that the successful implementation of automation “relies on managers and business leaders themselves being able to understand the potential of automation and the impact of technological change.” In this respect, managers will be your biggest ally when embracing automation. Any manager worth their salt understands the benefits of leading through example, and by creating automation ‘advocates’, businesses can ensure teams are comfortable with the impending change. While many busy managers often resist new processes (especially those to do with unfamiliar technology), they usually find that investing a short amount of time getting to grips with an automation platform pays off in the long term.
One of the most frequent pieces of feedback we receive is that an effectively automated platform allows staff to focus on strategy, culture and creativity, with the knock-on effect of automating mundane tasks being felt throughout an entire organisation, not just one relieved individual.
Having a smart, automated platform can also massively reduce the chance of human error at an early stage. This can be disastrous when data is relied upon to make important decisions at a later date. In this respect, having access to accurate information can be a game-changing benefit for decision-makers, particularly those working under increased pressure.
At a time when businesses are facing rapid and unpredictable changes, ensuring your business is equipped with the right tools for success is crucial. And while automation may seem an intimidating change, the huge benefits it can bring to both processes and culture will outweigh any initial concerns. By giving senior staff and their team members alike the ability to embrace smart automation, efficiency will speak for itself, and your business’ success will flourish.
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