Artificial Intelligence (AI) is a technology with immense potential in the banking and financial sector. There are several AI-based apps and solutions already in use in the banks with trends favoring the further expansion of AI in banking in the coming years. Estimates abound about the true potential of AI in the space. For instance, a report from research firm Researchlinker predicts that the global AI in the Fintech market is expected to reach USD 22.6 billion by 2025 with an expected CAGR of 23.37% in the period of 2020-2025.
Given that high visibility of the function, security and compliance are critical areas wherein AI can play a massive role. Before, moving to the role of AI in the security and compliance aspect for the banks, it is important to understand the major issues the banking industry is facing in this area.
No wonder banks are finding it complicated to adhere to all the new compliance rules and regulations.
Cybersecurity and Privacy: Phishing scams are becoming more common in the banking sector leading to enormous fraudulent behavior. Natural Language Processing (NLP) can assist banks to analyse the massive volumes of emails and determine the specific sections in the mails that might indicate phishing attempts. The AI-based algorithms can also be trained to flag suspicious emails for enhanced customer data security and privacy. Tessian is one such vendor offering an AI-based email monitoring system for banks and financial institutions. Expert System is another company offering AI and NLP-based automated systems to identify phishing emails and attempts.
Malware attacks, especially ransomware attacks are increasing in the banking sector. AI can identify and detect the specific behavior and patterns that malicious entities may use to give shape to such ransomware attacks. AI-powered with Machine Learning can carry out stack trace analysis to notice and prevent ransomware and other malware attacks.
AI can be integrated with Big Data and Internet of Things (IoT) technologies to develop and implement security risk reduction systems for banks too. The cybersecurity information can be continually analyzed by such a system to spot risk areas and generate alerts accordingly. Data breaches and malware attacks can also be controlled and prevented with these solutions.
Compliance and Regulatory: As per UN estimates, over USD 2 Trillion is laundered annually which makes up 5% of the global GDP. The data complexity coupled with manual involvement makes anti-money laundering a difficult task to execute. AI-powered anti-money laundering is possible through intelligent segmentation, advanced analytics, and a real-time alert system. Ayasdi is one such application already in use for this purpose. The application involves advanced transaction monitoring and utilizes machine learning to identify suspicious anomalies. Large banks like HSBC have partnered with Ayasdi to implement an AI-equipped AML solution.
Know Your Customer, KYC check is one of the key regulatory requirements to validate and verify customer identity requirements. This can be utilized alongside anti-money laundering efforts. AI and Machine learning can analyze the online, offline, and social media information of the applicant to ensure strict KYC guidelines are met and information validated. The predictive data analytics on the associated emails, IP addresses, and proxies can further strengthen the investigation process.
Datavisor based in Mountain View, California is offering AI and ML-based application that uses Big Data techniques and clustering algorithms to detect the application frauds. Socure in NYC is another vendor offering an AI-based identity verification system for banks.
The discussion and development around AI in the banking sector are at an all-time high due to the possibilities and benefits the technology has to offer. Embracing AI looks to be a fruitful investment for the banks and financial organizations for improved security and compliance. Of course, it’s not easy to choose a technology solution that addresses all the specific needs of a bank. There is a lot of innovation happening and the goalposts are shifting every day. This brings the focus onto the choice of a technology partner who can help the bank understand the gaps, evaluate the options, make the right technology choice, and implement it comprehensively. A partner like ITPeopleNetwork with the knowledge, skill, and experience to create the comprehensive solutions today’s banks need.