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Three Ways AI is Changing Financial Services

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Three Ways AI is Changing Financial Services 1

By Ritu Dubey, Head of  Europe, Digitate

The popularity of digital banking has soared this year due to the pandemic, and banks are under the gun to adopt new technologies that can help them adapt to new market forces. Seventy-seven percent of global bankers surveyed in an Economist Intelligence Unit report said that unlocking value from AI is what will make the difference between success and failure. But it can be hard to know where to start, and banks have to resist the urge to just apply AI for its own sake. Three key areas where the banking industry should focus when it comes to how to use AI most effectively are Customer Experience, Operations & Processes, and Risk & Compliance.

AI’s application in customer experience

There was a 200% jump in new mobile banking registrations in April, according to Fidelity National Information Services, which works with 50 of the world’s largest banks. And mobile banking traffic rose 85%. Driven largely by the pandemic, demand for mobile banking is at an all-time high.

Mobile banking apps incorporate AI into services like chatbots and digital assistants.

UBS, a Swiss multinational investment banking and financial services company, partnered with  Digital Humans to create a virtual financial assistant for its customers. Others are using AI even for in-person activity – like the robot hosts at Santander’s Visitor Centre outside Madrid, Spain. The Santander Interactive Guest Assistants escort visitors to their destination while playing music.

Banks are also incorporating AI into biometric authentication, authorizations and other processes that improve the customer experience. For instance, it is now possible – and recommended – to automate hundreds of system health checks to make sure all customer-facing systems are up and running each day. This will reduce customer-impacted minutes.

In this digital age, the customer experience is about creating personalized channels for conversation. Banks are sitting on so much data that, with the help of AI, they truly are in the position to cater to the “segment of one.” This will allow banks to focus more deeply on their customers, which builds loyalty and creates differentiation. Going forward, banks will not be able to maintain competitive advantage if they are not using AI.

Using AI to increase efficiency of banking processes

While customer experience is often the most visible application of AI and where many organizations focus their efforts, they shouldn’t ignore internal operations – the “back of house,” so to speak. Beyond a certain point, you cannot dramatically improve the customer experience if there is no investment being made in the mid-office or the back office of a bank, from an AI perspective.

AI holds a lot of potential for increasing stability, resiliency and efficiency of operations and processes like reducing the time it takes to fulfil service requests, eliminating the need to spend human employees’ time on repetitive, manual processes or AI-driven automation for sophisticated tasks like predictive maintenance, KYC (know your customer) document processing, credit scoring and more.

In the world of investment banking, hundreds of thousands of batch processes run to calculate a day’s trade, to calculate Net Asset Value, to complete the settlement process, etc. AI-based automation more efficiently organizes the batch jobs that are responsible for your back-office operations. From creating a deep visibility and understanding of your batch landscape to working across different schedulers, AI baselines performance, predicts business SLA in real time and responds to failures in a complex web of batch dependencies across thousands of jobs. It helps you stay ahead of the curve with “What if?” capabilities that analyse the impact of schedule and technology changes to minimize downstream impact.

AI’s role in addressing Risk and Compliance

Ritu Dubey

Ritu Dubey

In an already highly regulated industry, financial institutions in the EU face some of the most stringent regulations in the world. These include a number of requirements centred on AML (anti-money laundering) and KYC, including pre-screening of customers before opening accounts or fulfilling substantial transactions. There’s also GDPR, armed with the potential to levy multi-million-dollar fines for non-compliance.

Financial institutions are also perennially one of the biggest targets of cybersecurity attacks, and that’s only increased during the pandemic. In fact, according to the Modern Bank Heists 3.0 report, cyber-attacks against this sector increased by 238% from February to April 2020.

Automation and AI are extremely useful here, as well. Use AI-driven automation to schedule start and end-of-day checks, as well as to detect how many different versions of the same technology you are running within the same IT enterprise. The automation then pushes patches wherever it detects older and vulnerable versions of technologies. Set up intelligent automation for compliance monitoring, anomaly detection and cyber risk prevention.

In terms of fraud and money laundering, there are many AI-based tools available that conduct checks and perform fraud detection. They detect and flag connections between certain entities that would likely go unnoticed if only humans were doing these checks.

Realized potential

The need to accelerate digital transformation is immediate and critical. Though there has been a focus on customer-facing improvements, the long-term gains of mid- and back office improvements must not be ignored because that is where the scale game can be played. AI-driven automation creates differentiation in customer service and improves processes and risk/compliance needs.

What’s more, AI increases productivity and improves efficiency. It is being used to eliminate problems from happening – not just predicting them but preventing them. Implemented properly, AI also has a role to play in restoring banks’ profitability by helping to digitize legacy systems and mine vast stores of data that reveal areas of weakness and of potential growth. With all the benefits AI has demonstrated, banks that fail to adopt AI-based technologies run the risk of failing overall as competitors reap the benefits and customers flock to them.

Technology

Technology: the saving grace of the month-end headache in financial reporting

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Technology: the saving grace of the month-end headache in financial reporting 2

By Tiffany Newkirk, Financial Solutions Manager at SplashBI 

The end of the month is a challenging time for many accountants and financial analysts as they race to close their books and complete their reporting on time. Whether they are using Oracle Cloud or on premise solutions, the final hurdle has its highs and lows. With accounts to reconcile and financial statements to analyse, accountants and financial analysts are left with little time before the crucial deadlines are in front of them. As a result, time needs to be maximised so that they have all the answers at their fingertips when presenting to the business, board members and executives. These are the aspects of the role that financial analysts adore – and manual intervention shouldn’t be the blocking stone of success.

Preparation for month-end reporting involves financial analysts spending long periods of time focused on analysing spreadsheet after spreadsheet. Tiffany Newkirk, Financial Solutions Manager at SplashBI, explains that month-end reporting shouldn’t be as problematic and frustrating as it is. To move forward, financial analysts need to incorporate technology to provide a visual representation of the data so their role becomes as efficient and sustainable as possible.

A new beginning

Overtime and stress are two common issues that accountants and financial analysts experience when completing month-end close reporting. As many as one in four financial analysts describe the pressure of financial reporting being overwhelming, resulting in employees leaving the job they love; a situation that no senior management team wants to occur.

According to a recent survey, as many as 73% of accountants and financial analysts are still operating in a manually intensive, spreadsheet-driven system that limits or removes any time for analysis. In the same survey, 84% said they would prefer the financial close process to take up less time, that could in turn be devoted to more strategic financial projects. From a health and wellbeing perspective, the drive to utilise technology will help improve the efficiency and accuracy, especially at this turbulent time, and allow more time to be spent exploring the results and having the answers readily available for senior-level discussions.

A long-awaited transition

Companies of all shapes and sizes have long sought ways to streamline their processes so that accountants can spend less time collecting numbers and more time analysing the impact and results with senior stakeholders. Finding the right equilibrium between speed, accuracy and employees’ needs is key, and financial experts need to embrace technology and its visual qualities in order to achieve this.

While spreadsheets are a useful tool, they can be prone to errors, especially if formulas are entered incorrectly. Management teams want to understand the implications of the data in front of them, and with the aid of financial experts, bring the data to life in a much more visual and empowering way, ready to spot the next business opportunity. Working solely in a spreadsheet rarely allows this to happen.

Instead, technology can help drive smarter decisions, by making the data come to life and presented in a variety of visual formats. By combining the numerous, disparate systems required to achieve a successful month end close, financial analysts and CMOs can view real time data at a click of a button to make informed decisions in the future.

Conclusion

In an increasingly digitised world, real time financial reporting and accurate forecasting are more vital than ever to achieve a sustainable and efficient business model. Given the circumstances faced throughout 2020, effective financial management provides businesses with a competitive advantage and greater insights to drive profitability and efficiency.

Letting go of tired and archaic practices will drive financial roles forward and open the door for a myriad of opportunities when accountants and financial analysts expand their reliance on technology and move away from traditional methods. Moving forward, organisations that don’t incorporate technology into their month end reporting will be left behind, and not reap the rewards. It’s time for the face of financial reporting and analytics to change to become a seamless, stress-free and data-driven process.

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Entersekt provides clarity on Secure Remote Commerce authentication techniques for financial institutions

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Entersekt provides clarity on Secure Remote Commerce authentication techniques for financial institutions 3

New whitepaper from Mercator available: Revisiting Authentication in the Age of SRC and EMV 3-D Secure

Is it time for a new authentication strategy in light of international mandates for Secure Remote Commerce (SRC) and EMV 3-D Secure? This is the question posed to financial institutions (FIs) in a new Mercator Advisory Group whitepaper entitled Revisiting Authentication in the Age of SRC and EMV 3-D Secure.

The paper, licensed by Entersekt for public distribution, delves into the role SRC and EMV 3-D Secure will play in the European Union’s Strong Customer Authentication (SCA) requirements under the revised Payment Services Directive (PSD2). It finds that now would be the ideal time for FIs to rethink customer authentication strategies, particularly with the deadline for full SCA compliance approaching on the 1st of January 2021.

“Consumers face an increasingly complex authentication landscape, which can vary greatly depending on the communication channels they use,” said Frans Labuschagne, UK&I country manager at Entersekt. “Multiple authentication techniques create unwanted friction and uncertainty. This paper gives actionable advice to FIs that need to keep security top of mind while also providing a good user experience.”

All card issuers competing for top of wallet will find useful insights in this whitepaper, which states that, “Since it is well recognised that convenience is critical to consumer adoption, it is time for financial institutions to rein in the multiplicity of authentication methods they use to identify account holders and even employees.”

Some of the key findings include:

  • The lack of an integrated solution results in an inconsistent user interface.
  • Inconsistency not only detracts from a customer’s experience but is likely to disrupt any cross-channel implementation plans an organisation might have.
  • A customer who is presented with the same authentication technique for every interaction becomes more familiar with that technique.
  • The authentication technique should be implemented on a smartphone, which 89% of UK residents between 16 and 75 already have.
  • Consumers increasingly trust smartphone-based biometrics and are growing accustomed to using smart speakers for a range of use cases.

 

To download the whitepaper in full, please visit: https://www.entersekt.com/resources/white-papers/revisiting-authentication-src-3ds

 

This is a Sponsored Feature

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Using AI to identify public sector fraud

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Using AI to identify public sector fraud 4

When it comes to audits in the public sector, both accountability and transparency are essential. Not only is the public sector under increasing scrutiny to provide assurance that finances are being managed appropriately, but it is also vital to be able to give early warnings of financial pressures or failures. Right now, given the huge value of funds flowing from the public purse into the hands of individuals and companies due to COVID measures, renewed focus on audit is essential to ensure that these funds are used for the purposes intended by parliament.

As Rachel Kirkham, former Head of Data Analytics Research at the UK National Audit Office and now Director of AI Solutions at MindBridge, discusses, introducing AI to identify and rectify potential problems before they become an issue is a key way for public sector organisations and bodies to ensure public funds are being administered efficiently, effectively and economically.

Crime Wave

The National Crime Agency has warned repeatedly that criminals are seeking to capitalise on the Covid crisis and the latest warnings suggest that coronavirus-related fraud could end up costing the taxpayer £4bn. From the rise in company registrations associated with Bounce Back loan fraud, to job retention scheme (furlough) misuse, what plans are in place for government departments to identify the scale of fraud and error and then recoup lost funds?

There is no doubt that the speed with which these schemes were deployed, when the public sector was also dealing with a fundamental shift in service delivery, created both opportunities for fraud and risk of systematic error. But six months on, while the pandemic is still creating economic challenges, the peak of the financial crisis has passed. Ongoing financial support for businesses and individuals remains important and it is now essential to learn lessons in order to both target fraudulent activity and, critically, minimise the potential loss of public funds in the future.

Timing is everything. Government has an opportunity to review the last 6 months’ performance and strengthen internal controls to ensure that further use of public funds is appropriate. Technology should play a critical role in detecting and preventing future fraud and error.

Intelligence-Led Audit

If the public sector is to move beyond the current estimates of fraudulent activity and gain real insight into both the true level of fraud and the primary areas to address, an intelligent, data-led approach will be critical. The use of Artificial Intelligence (AI) in public sector IT systems can be used to detect errors, fraud or mismanagement of funds, and enable the process changes required to prevent further issues.

HMRC is leading the way, using its extensive experience in identifying and tackling tax fraud to address the misuse of furlough – an approach that has led to many companies making use of the amnesty to repay erroneous claims. Other public sector bodies, especially smaller local authorities, are less likely to have the skills or resources in place to undertake the required analysis. If public money is to be both recouped and safeguarded in the future, it is likely that a central government initiative will be required.

Data resources are key; the government holds a vast amount of data that could be used, although this will require cross-government collaboration and co-operation. It is possible that the delivery speed of COVID-19 responses will have led to data collection gaps – an issue that will need rapid exploration and resolution. It should be a priority to take stock of existing data holdings to identify any gaps and, at the same time, use Machine Learning to identify anomalies that could reveal either fraud or systematic error.

Taking Control

In addition to identifying fraud, this insight can also feed back into claims processes providing public sector bodies with a chance to move away from retrospective review towards the use of predictive analytics to improve control. With an understanding of the key indicators of fraud, the application process can automatically raise an alert when a claim looks unusual, minimising the risk of such claims being processed.

While many public sector bodies may still feel overwhelmed, it is essential to take these steps quickly. Even at a time of crisis, good processes are important – failing to learn from the mistakes of the past few months will simply compound the problem and lead to greater misuse of public funds. The public sector, businesses, and individuals need to learn how to operate in this environment, and that requires the right people to spend time looking at the data, identifying problems and putting in place new controls. With an AI-led approach, these individuals will learn lessons about what worked and what didn’t work in this unprecedented release of public funds. And they will gain invaluable insight into the identification of fraud – something that will provide on-going benefit for all public sector bodies.

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