By Dr Vinod Vasudevan, CEO, Flytxt
Artificial intelligence was once the sole domain of sci-fi novels and movies, where supercomputers took over the world and conscious robots interacted on a daily basis with humans – just think of the 1927 classic ‘Metropolis’.
Today, though, we live in an AI-enabled era, where artificial intelligence has the potential to impact every facet of our lives, from driverless vehicles to virtual assistants such as Alexa and Siri. But what about banking? How far has an industry once averse to technological change embraced the AI revolution?
For many of us, we associate technological advances in financial services with security, such as facial recognition to log in to your banking app. But what if it could do much more than that. What if, for example, AI-driven software was deciding the right interest rate for you or advising you whether or not to buy a new car or make an investment?
In fact, artificial intelligence is making a significant impact on financial services in just such areas, and many more, from product selection to investment advice and fraud or market tampering. Financial institutions, like other sectors such as telecoms and retail, are using AI to increase the value of customer interactions, building deeper relationships and, ultimately, increasing revenue and profitability.
AI can even give customers contextual financial advice, empowering them to take up relevant services, such as insurance, credit card or a mortgage, based on their stated goals and life events, such as marriage or changing career. This is achieved through a combination of machine learning and predictive analytics combined in human-like interactions.
Like most industries, the AI-conscious firms can be split into two categories – those already reaping the benefits of artificial intelligence and those still figuring out what to do with it. The former can see that AI enables the automation of previously manual tasks, completing them in a fraction of the time and on a scale that humans simply can’t match. The result, personnel are freed up to do what AI can’t, such as developing new products and services.
Rather than a costly team of people wading through stacks of papers to decide which ‘band’ of customers should be targeted for a particular product or service, for how much, and at what rate, AI can do this for millions of people and taking into account all kinds of available data – creating the exact offer that matches the bank’s risk and reward and the customer’s expectation. In theory, no one would slip through the gap and no information would be ignored. This is a huge competitive advantage in an industry where margins are tight, and competition is fierce, since it allows them to lend in greater volume and at lower risk. And, it is better for the consumer as well since theyare receiving the financial services they need, and, of course, do not have to wait for a human underwriter to make the decision.
It seems like a win-win situation for banks – cut costs and churn, thereby increasing net revenue. But there are considerations to take in to account as well, especially when it comes to the legalities of financial institutions deploying AI.For example, companies need to ensure that AI processes are not violating data privacy laws, particularly with the playing field shifting thanks to the introduction last month of GDPR. Most large financial institutions operate across multiple regulatory jurisdictions, so it is vital that they understand how laws such as GDPR will affect their ability to gather, store, and use data.
Equally, if institutions are using AI to automate decision making, such as approving loans or investment advice, then they need to make sure they do not breach fair lending laws or market rules.
And, of course, there is the prickly issue of jobs. There has been much debate about the impact of AI taking over jobs currently performed by humans, as we are seeing to some extent in the banking industry.
An often-quoted 2013 paper by Oxford University academics Carl Frey and Michael Osborne predicted nearly half (47 percent) of jobs in the US were at high risk of being automated. But more recently, this view is being challenged. For example, analysis by OECD, an inter-governmental group of high-income countries, found that only 14 percent of jobs in OECD countries – which includes the US, UK, Canada, and Japan – are “highly automatable”, i.e. their probability of automation is 70 percent or higher. Indeed, analysts Gartner expects artificial intelligence to become a positive job motivator by 2020.
And, finally, there’s uncertainty. AI is, after all, still at a relatively early stage, so what happens if an algorithm is flawed or malfunctions. What might the potential impact be?
Despite these concerns, one thing is sure – AI is going to be an integral part of the future of the financial services industry. In fact, in a survey of 424 senior executives in financial services by Baker McKenzie just 18 months ago, 70% of respondents named either big data and advanced analytics or artificial intelligence/machine learning as the technologies most important to their organisation over the next three years.
What’s clear is that the financial services industry is all set to cash in on AI – so, look out for that loan product you didn’t know you needed.
Dr Vinod Vasudevan,CEO of leading intelligent customer engagement technology firm Flytxt,has more than 20 years’ experience in neural networks and artificial intelligence. The company produces artificial intelligence-driven marketing automation product NEON-dX and has offices in United Arab Emirates, The Netherlands, and India.
Bank fraud prevention in a post-COVID-19 world
By Pierre-Antoine Dusoulier, Founder and CEO, iBanFirst
Fraud on the rise
According to recent research from a leading UK retail bank, there was a 66 per cent increase in reported scams in the first six months of 2020 compared with the last six months of 2019 – due to the COVID-19 pandemic.
Across the summer months, Action Fraud UK reported a total financial loss of £11,316,266 by 2,866 victims of coronavirus-related scams.
The rise in fraud rates is a warning that banks, building societies and other financial providers need to be as alert as ever in identifying fraud.
So, what do banks need to do to ensure their customers are protected from fraud in a post-COVID-19 world?
Educate your customers to safeguard against fraud
On the customer level, banks need to be informing their customers on the types of common fraud to ensure that they are protected for all eventualities.
Authorised push payment scams are one of the fastest growing types of fraud. According to the FT, £354 million pounds was stolen this way last year. It is where a company or individual is tricked into paying money into a criminal’s account. Emails come from a genuine email address but are then intercepted by a criminal, so it’s imperative that businesses have end-to-end email encryption, and the customer double-checks the account details with the supplier on the phone prior to making a payment.
At the same time, scammers can also exploit the company’s invoicing process, where criminals create a bogus invoice for a small amount and send it to a company’s accounting department. If the finance team does not identify this as fraudulent, it can result in the business losing a considerable amount of revenue over a long period of time.
Supplier fraud is also a widespread scam. This involves the fraudster taking on the appearance of a supplier that has changed their bank details. The fraudster will have collected information on the suppliers of the targeted company, in order to pose as an official supplier. This can be prevented by ensuring that the supplier is contacted to confirm the legitimacy of the communication. It’s important not to call or email the supplier using the details provided on the suspected fraudulent correspondence. Instead they must check the original details of the supplier and speak to them on their official telephone number or email on file.
Banking malware is the least commonly cited type of fraud but has a greater financial risk attached to it. Malware is sent by email redirecting the recipients of the message to a fake banking interface, as a way of transferring funds to offshore accounts.
Remodel processes post-COVID-19 to keep customer data safe
To fight cyber fraud and scams, banks must also play their part. In a world where entire workforces are working from home banks must remain vigilant with customer data. COVID-19 has created a change in working habits and banks need to carry out the right level of training for its employees to protect customer data. Virtual team meetings and remote data sharing poses a threat to exposing sensitive information to malicious actors, and banks need to put the necessary safeguards in place.
All virtual meetings should use the banks’ private company network, and file sharing should be carried out through secure, encrypted company drives. Meanwhile, banks need to provision for all employees to receive regular software updates that will keep customer data safe, and ensure that they are aligned with new and existing data processing regulations.
Monitoring suspicious payments
A vital element to fraud detection is through monitoring customer transactions in real time, and harnessing emerging technologies such as artificial intelligence and machine learning to spot the signs of a scam or fraud before it is too late.
One way that banks protect businesses from fraud is through keeping a log and examining regular transactional history. Any transactions which appear suspicious based on location, amount, the beneficiary, and the method will be alerted to the business customer, to mitigate the immediate and future financial risk to the business.
Know your transaction
To understand financial flows better, every bank has a Know Your Customer (KYC) engine. This is a payment infrastructure that supports onboarding processes and risk-based transaction monitoring. This system is already well known and we don’t need to elaborate on this further, as it is the fundamental building block to ensure the highest level of traceability across all transactions – including remittances and receipts of funds and foreign exchange transactions internationally.
However, KYC is limited and doesn’t include real-time analysis. What can be overlooked is a KYT engine – Know your Transaction. The aim of KYT (Know Your Transactions) is to identify potentially risky transactions and their underlying unusual behaviour for detecting money laundering, fraud or corruption. An automated concentration of transactions with accurate and relevant information directly from the original data sources is essential.
Finally, banks and payment companies need to implement anti-fraud modules to defend against cyberattacks, based on the latest algorithms capable of analysing transactions issued in real time and detecting anomalies or suspicious behaviour upstream, strengthening the security and transparency of payments and building a network of trust between issuers and recipients of payments.
In a post-COVID-19 world it’s clear that scams will become more common place. Within this environment there is a shared responsibility when mitigating the risk of financial fraud. The bank must educate and inform customers to enable them to protect themselves, while ensuring a robust technological infrastructure and ways of working are in place that protects customer data; their finances, and fundamentally their business and livelihood.
How One Bank Successfully Responds to Sophisticated Threat Actors
By Robert Golladay, Strategic Accounts Director, Illusive Networks
Cybercriminals and hacktivists have a special fondness for financial institutions. Continuous business innovation, complex ecosystems, merger and acquisition activity, fintech, cloud adoption and a growing consumer-driven attack surface multiply the problem for financial organizations. Despite the vast resources financial institutions devote to cybersecurity, one challenge has been especially difficult to solve – that of detecting and stopping APTs before real damage is done.
Securing cloud-based banking
An active lender in the UK sought a new way to protect its customers and the valuable assets it holds. The bank needed to:
- Defend customer and employee information from compromise
- Detect and thwart sophisticated attacks
- Effectively defend cloud-based operations across accounts and instances
As a cloud-first company, the bank’s preference is to always invest in next-generation technology for operations and security infrastructure. In May 2016, with the help of Amazon Web Services (AWS), it became the first bank in the UK to be fully cloud hosted. The bank also uses AWS to deliver a financial technology service that helps lenders make informed decisions through data and automation.
Security is always a priority, which is one of the reasons the company chose AWS, conducts regular penetration testing, and performs advanced attack simulations. To maximize effectiveness of its layered security infrastructure, the company continually trains its employees and reinforces data security best practices.
In particular, the bank sought additional safeguards from sophisticated threats that evade other security measures, such as advanced persistent threats, as well as gain insight into attacker tactics and techniques. The new layer needed to be cloud-based for high scalability and flexibility, and it had to defend the company without time-wasting false positive alerts. The security team looked at deception technology and chose a solution that allowed them to gain real-time verification of anomalies and lateral movement in the network.
The deception solution enabled the bank to focus on attackers’ behaviour and perspective. The solution’s expertise in attacker methodology augmented the bank’s internal capability to detect novel attacks, while enabling rapid and adaptable coverage in its cloud-based environment.
The bank’s deception solution uses agentless, intelligence-driven technology that creates a dense web of deceptions and effortlessly scales across the infrastructure. Featherweight deceptions on every endpoint look exactly like the bank’s real data, access credentials and connections. When an attacker is confronted with deceptions, this deceptive view of reality makes it impossible to choose a real path forward. One wrong step triggers an alert to the bank’s security team.
The bank’s CISO found it invaluable to be able to deploy a solution that creates doubt and confusion in an intruder’s mind. When attackers can’t distinguish between real and deceptive assets, the security team can collect information and apply intelligence to patterns that it has observed during that time period of activity. The solution simultaneously sharpens the bank’s investigative process and constrain the attacker.
The lender easily deployed deception technology across its complex environment, scaling it across AWS instances and accounts. The IT security team now has continuous visibility and confidence that these defences enable them to thwart sophisticated threat actors.
The bank gained proactive threat response and the assurance that an alert represents a real issue. These alerts are only triggered when an attacker engages with a deceptive asset. At that point, the deception technology immediately begins capturing forensic data from the system where the attacker is operating, presenting real-time forensics and a quantifiable measure of potential business risk. It uncovered, for example, malicious processes trying to operate on an endpoint.
The deception solution enables the lender to be much more proactive. It detects and analyses attacks in real time to produce actionable alerts, directing the security team to relevant and valuable conclusions. The technology provides exceptional, innovative coverage for malicious pivoting and lateral movement. It uncovers the in-depth, sophisticated actors who evade other countermeasures and gives security analysts direct visibility into targeted attacks, which they find invaluable.
A laser-focused approach
The financial sector remains a perennial favourite of the cybercriminal crowd. As networks become more complex, their perimeters all but disappear, creating the need for stronger and more comprehensive security than ever previously imagined. Advanced persistent threats are a particular concern, as they are notoriously difficult to detect before significant damage is done. For financial institutions, the reputation damage alone may be insurmountable.
Banks and other financial services organizations pour resources into cybersecurity, but one option that needs further exploration is deception technology. This method of security monitors for lateral movements toward critical assets and thus provides a powerful alternative or enhancement to traditional monitoring approaches. Security teams can see attackers’ proximity to those crown jewels early in the attack cycle, buying time for careful response. As the lender above learned, deception technology cuts through the noise of alerts to deliver the intel financial institutions need to act quickly and safeguard their high-value data.
Why banking and finance need to move qualifications online
By Rory McCorkle, Senior Vice President, PSI Certification and Education Services
The global banking and finance sector often presents a strange contradiction when it comes to technology. On one hand, the sector is leading the way in blockchain technology, big data and Artificial Intelligence. On the other hand, many large financial institutions are falling behind in their digital transformation efforts, with internal processes as well as the moving the customer experience online. Particularly when compared to fintech and new challenger banks.
A report last year by Accenture found that just 12% of large traditional banks surveyed have fully committed to digital transformation and 50% of banks made little progress. The remaining 38% are in the midst of their transformations, but their digital strategies lack coherence.[i]
One area of digital transformation that has been particularly slow is access to qualifications and certifications. Many exams in the banking and finance sector continue to use Paper Based Testing (PBT). However, COVID-19 has accelerated the transition from PBT to Computer Based Testing (CBT), proving irrevocably that change is possible – regardless of the size of your organisation, number of candidates or security requirements.
In a heavily regulated environment that is undergoing increased scrutiny, a high level of certification and compliance is a necessity for many working in the industry. And credentials that hold such significance need to be securely and fairly assessed. This is where CBT offers numerous benefits. For organisations there is security, integrity, flexible capacity, increased reach and a streamlined exam administration process. And for candidates, CBT provides flexibility, convenience, accessibility and increased choice.
Despite these benefits, some organisations still have reservations and have been slower to make the move to CBT. In more traditional professions, such as finance, there can be a greater reticence. This is likely to be based on the historic prestige of PBT, as well as a desire to stick to more traditional methods. However, with more learning completed online, and educational resources shifting to digital from primary education to CPD, expectations around assessments are changing.
Up-and-coming candidates in all professions, particularly those who are digital natives, are starting to question outdated methods. Organizations will need to adapt to stay current and relevant with their market. What’s more, technological advances have now combined with the coronavirus pandemic to increase the demand for remote business services. Meaning that a growing number of organisations in the banking and finance sector are moving to CBT.
Technology offers burgeoning options to increase test security with CBT. Linear-on-the-fly testing (LOFT) for example allows you to easily change items for each candidate, while maintaining the fairness of the exam – rather than the fixed forms used in PBT.
With LOFT, every candidate is given a unique set of items, making cheating a lot more difficult. And with no need to ship test papers around the country, there’s significantly less risk of physical security breaches with CBT than with PBT.
With the movement away from paper and pencil testing, advances in online proctoring have also dramatically increased the ability to deliver secure online assessments. Using a webcam and microphone, online proctoring provides test security for exams, while offering candidates additional flexibility and convenient scheduling.
Even before COVID-19, online proctoring was becoming far more commonplace. In 2018, there was a 10% increase in organisations using online proctoring with video/sound recording and identity authentication as part of the exam process compared to 2017.[ii] And COVID-19 has reinforced the fact that it is possible to effectively move to CBT side by side with online proctoring – and move quickly.
Testing has changed a lot during its history but the reasons for adopting CBT have remained the same for decades – fair and reliable testing delivered at scale. Nearly all tests that are completed with a paper and pencil can be adapted for CBT.
For organisations in the banking and finance sector, recent technological advances have provided many more options to reach candidates. At the same time, technology has significantly increased the security for important online assessments that will not only affect a candidate’s future, but might also impact the future and reputation of their profession.
As with any change, the move from PBT to CBT must be managed carefully and communicated clearly. And with best practice in place, it is possible for any organization, regardless of size and number of candidates, to make the move to CBT.
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