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May 05
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How Financial Services Firms are Bettering Their Business with AI

By Blog

“The relationship between human intelligence and artificial intelligence will necessarily be one of symbiosis. The challenge and potential of exploring this co-evolutionary future is the biggest story of the next century and one in which a closeness in development velocity is a necessity.” —Bryan Johnson

Artificial intelligence has made waves in its emergence into mainstream business.

Not only do consumers stand to benefit from personalized service and expedited assistance; financial services firms big and small have been learning the ropes and working to implement AI in a way that benefits them, too.

With so much emphasis on topics like data security and compliance, many financial professionals find themselves worrying more about back-end work and less about customers.

AI can help automate the more mundane, repetitive aspects of the job and make day-to-day work easier and more fulfilling.

Below, we’ll explore some of the more notable ways that financial services firms are leveraging AI in today’s market. From virtual personal assistants to predictive analytics, artificial intelligence is spurring massive changes in the way the financial sector operates.

1. Customer Service and Virtual Assistants

AI technology has afforded us the capability to create our own on-demand personal assistants and customer service representatives.

Financial services firms can implement chatbot services on their websites to help clients navigate site pages, answer tough questions, and set up appointments. This offers clients a more personalized, live experience and helps cut down on busy-work.

Bank of America’s company chatbot, known as Erica, offers clients financial guidance over text message and by voice. Because Erica is available 24/7, customers can get help with anything from transactions to account services around the clock.

This means that Bank of America doesn’t have to hire additional employees to answer basic questions and current staff are freed up to handle more complex problems.

Furthermore, firms like Capital One have made strides to increase diversity and inclusion by prioritizing ethical AI and working to create algorithms without the racial biases and blind spots that inadvertently come along with human-engineered technologies.

Digital personal assistants built from AI technology can also help speed up the workday and improve employee productivity.

Financial professionals are treated to unparalleled levels of convenience when they elect to rely on digital personal assistants to help get through daily minutiae, such as scheduling reminders, voice-dictating messages to clients, and more.

2. Large Datasets: Analysis to Insights

Professionals across a host of industries have always collected data, but they haven’t always been able to analyze and leverage that data usefully.

Banks and other financial services firms especially collect massive quantities of data from their customers.

Whether it’s personal information like social security numbers and credit scores or numbers-based data like account balances, there’s a lot of data.

Leveraging AI makes protecting, analyzing, and using this data infinitely easier than it’s ever been before.

What would once comprise scores of meaningless information can now be transformed, thanks to AI technology, into actionable insight. AI can be used to analyze data sets, make predictions about clients and finances, and conduct better business.

Tailored mobile banking apps, for example, can collect and analyze user data in order to improve and personalize the user experience.

AI can also handle much of the grunt work behind creating customized investment and spending plans. Tasks like budgeting and personalizing financial advice become far simpler when you have AI to perform calculations and present the necessary information.

3. Improved Risk Assessment

Risk assessment is a critical factor of any financial firm.

Firms run the risk of making choices that are detrimental when they rely solely on human instinct and questionable data to make decisions.

Firms around the world constantly contend with lost funds due to human error and slow work speeds; automation in these areas serves to keep business running and ensure a firm’s funds are protected.

A client’s ability to make payments on a loan, for example, is a summation of far more than just their credit score and basic financial history but understanding the interplay of all these factors with the human mind alone is nearly impossible.

AI can look at a wealth of factors that may influence an individual’s ability to pay back a loan or meet financial goals. Loan repayment habits, spending habits, current assets, and countless other facets of a client’s financial wellbeing can be analyzed and turned into valuable insights.

Firms around the world constantly contend with lost funds due to human error and slow work speeds; automation in these areas serves to keep business running and ensure a firm’s funds are protected.

4. Streamlined Regulatory and Compliance Humdrum

AI is poised to take over a majority of the compliance-based tasks that risk and compliance professionals have to deal with on a daily basis.

This technology has the power to free up employees for client-facing work and other important duties and ensure that your firm remains compliant with regulations.

Ascent, for example, uses AI to map a financial firm’s specific regulatory obligations and ongoing rule changes, generating the knowledge that is traditionally done manually by regulatory analysts and risk/compliance teams.

By augmenting their existing resources with Ascent, financial firms enable and empower their people to accelerate their regulatory change and end-to-end obligations management processes.

ING and Commbank recently saved thousands of hours of human effort in identifying their regulatory obligations by using Ascent.

5. Fraud Detection and Cybersecurity

Through the use of machine learning techniques, AI systems can be trained to monitor for and detect irregular financial behaviors.

Real-time analytical capabilities and immense improvement in predictive accuracy have essentially created accessible virtual security guards.

Whether these behaviors have to do with transactions and purchases, client history, or other financial acts, AI can flag potentially problematic instances so that firms know who and what to review and why.

AI applications can scan through enormous amounts of data and access a deeper knowledge of historical trends than even the most seasoned financial pro — and that gives AI the upper hand when it comes to pinpointing fraud.

AI also plays a critical role in protecting data concerning both a firm and its clients.

With cyber-crimes on the rise, having the added layer of protection that artificial intelligence offers can be a significant weight off of any firm’s shoulders.

Real-time analytical capabilities and immense improvement in predictive accuracy have essentially created accessible virtual security guards.

Citibank is already leveraging AI and machine learning technology to help put a stop to criminal activities and keep a close eye on potential threats to customers. They’ve invested more than $11 million in the launch of a new personal finance app and adopted new anti-money laundering structures to keep their customers safe.

 

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Mar 11
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Digital Disruption: Two Big Shocks to the Industry and What They Mean for Compliance

By Blog

Managing regulatory risk may be business as usual, but the stakes continue to rise.

Few things ramp up pressure on compliance officers more than industry “shocks” — high-volume, high-impact dislocations in the marketplace that render existing regulation inadequate (at best) and cause both regulators and businesses to scramble to put new controls in place.

In this article, we discuss two emerging shocks to the financial industry and how they impact compliance.

Shock #1: The Tech-Fueled Great Acceleration

Technology is at the root of virtually every recent shock to the financial industry affecting compliance.

For awhile, incumbents saw tech as a band-aid for legacy problems and inefficiencies. Now, however, technology is viewed as the necessary bedrock of the industry.

This mindset drives the financial industry toward a Great Acceleration: faster, more efficient interactions with clients and counterparties, faster flow of capital between institutions and across borders, and faster execution of trades and strategies.

Regulators and Firms Struggle to Keep Pace

For compliance departments, the Great Acceleration poses a huge risk.

The fact that regulators (and even many market participants) are still coming to grips with new technologies and products – e.g., AI, blockchain, cryptocurrencies, data privacy, and cybersecurity – will not slow the pace of innovation.

Existing regulations will increasingly fail to respond to market conditions, making compliance difficult by virtue of a frequent disconnect between market rules and practices.

What’s more, as markets continue to innovate much faster than regulators can respond, new regulations will grow obsolete faster and faster.

One area in which the Great Acceleration has caused particular pain for compliance officers is the realm of “know your customer” (KYC) and other anti-money laundering (AML) compliance obligations. Investigative and reporting obligations have turned compliance departments into what amount to private law enforcement operations.

Already, firms face substantial fines for working in embargoed or sanctioned jurisdictions. As the volume and speed of trades and capital flows increase, these compliance and investigative obligations will continue to trend toward greater complexity and risk.

RegTech Boosts Compliance Speed and Efficiency

RegTech solutions can help relieve the shock of the Great Acceleration by doing in minutes what would take humans hundreds of hours.

For example, AI-driven technology can help regulators understand their impact across regions more quickly, making rule-making potentially more efficient and effective.

Similarly, RegTech has a massive role to play in helping financial firms pick through  increasingly detailed and onerous regulations that often (albeit unintentionally) suppress value-creation to a far greater extent than they deter wrongdoing.

Emerging solutions will help firms automate KYC data collection, monitor capital flows and trading patterns, and report suspicious behavior to regulators and prosecutors.

Shock #2: The Shift to an All-Digital Environment

Another significant shock we’re experiencing in the financial world involves the tidal-wave shift in consumer demand toward a “digitally native” investing and financial management experience.

The FinTech boom has begun to transform entire business models by catering to that demand. Businesses have a choice to either stagnate or adapt to meet the needs and changing expectations of new customers.

No Market Niche Left Untouched

It’s difficult to overstate the breadth of change the demand for a fully-digital experience will continue to bring to the marketplace.

As it has in so many other industries affected by the digital revolution, the shift to an entirely digital mode of accessing and consuming financial products and services will require firms to innovate and re-create physical goods and services in the digital realm.

The shift has already spurred entirely new business sectors in banking (e.g., challenger “virtual” banks), money (crytpo, obviously), and payments (which grew so large, so fast, it already feels like a mature business model by today’s standards).

With the exception of the early “e-banks,” none of these businesses existed at the turn of the century, and many weren’t even around at the beginning of the 2010s.

RegTech Leverages AI to Reshape Compliance Roles

For every market sector and asset class affected, the rate and pace of regulatory changes and downstream compliance efforts will also increase, putting pressure on compliance departments to keep up.

That won’t be easy.

Firms will face difficulty following, tracking, and complying with all the new rules and regulations that emerge. The sort of over-regulation typical of an industry in transition seems inevitable, as does the risk of harsh penalties for non-compliance.

The only way to stay ahead of the frequency and growing complexity of regulatory change, and to protect firms from feeling the wrath of regulators, will be to shift much of the work traditionally done by humans onto machines.

The function of human compliance staff must change from rote collection and manual sifting of data to higher-level review and analysis of machine-generated reports.

AI and natural language processing will take over the heavy lifting of analyzing regulatory text, freeing up compliance officers to concentrate their efforts on relationship-building and overseeing the safety of the firm from the perspective of strategic decision-making.

Jan 06
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Stay Ahead of GDPR Compliance with Ascent

By Blog

The General Data Protection Regulation (GDPR) enforces strict requirements around Chief Data Officers (CDOs), EU citizen data management, and data permissions—including protocols for dealing with data breaches.

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GDPR, the EU’s personal data protection and privacy regulatory ruleset for companies around the world became active in May 2018. Forrester reported that just four months before the laws went into action, 11% of organizations were still figuring out what to do about it and 8% of firms had no familiarity with GDPR rules and regulations.

Overview of GDPR

GDPR regulations require all businesses which meet the satisfy the following conditions to employ a CDO:

  • Employ over 250 people
  • Process or store large amounts of EU citizen personal data
  • Process or store special personal data
  • Regularly monitor data subjects
  • Are a public authority

Beyond requiring CDO employment, GDPR regulations enforce the following restrictions on EU citizen data:

  • Right Of Erasure
  • Right Of Data Control
  • Right Of Data Portability
  • Right To Be Informed
  • Right To Access Personal Data
  • Right Of Correction
  • Right To Object
  • Rights Related To Automated Decision Making Including Profiling

Each of these rights require EU citizens’ data be kept separate and compartmentalized, ensuring the ability to remove them from a database at-will.

American consumers expressed support and would like to see some GDPR-esque laws enforced within the U.S. specifically, 38% responded with the ability to control how their data is used while 39% favored the “right to be forgotten” rule.

Consequences of Non-compliance

If businesses fail to comply with GDPR regulations, they can be fined between 1-4% of annual revenue or up to €10-20 million, whichever is higher. These fines will depend on which parts of GDPR were not followed, how many people and how much data was affected, and a slew of other factors.

The cost of GDPR compliance failure is substantial, as is the risk of attempting to ‘fly under the radar’. Anyone within the EU can file a complaint, starting the trend of unsavory consequences. 

Read More: The Not So Hidden Costs of Compliance

Stay Ahead of GDPR Compliance with Ascent

The key to staying current on GDPR is a compliance program that evolves with new regulations. A system with the right fail-safes in place will help ensure that your firm’s obligations are always up to date.

Great technology makes this easier than ever. Ascent provides you with a feed of regulatory changes (including those related to GDPR) that apply to your firm, helps you visualize how the rule text has changed, and indicates whether that change impacts your existing controls, policies and procedures. 

Ascent also serves as a central repository for all regulator documents so you can easily search for speeches, guidelines or other releases concerning GDPR, allowing for comprehensive research.

SOLUTION HIGHLIGHT: How Ascent Automates Regulatory Change Management

 

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Nov 18
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Ascent and the UK’s Financial Conduct Authority (FCA) Announce Ongoing Collaboration

By Blog

PRESS RELEASE

Ascent announced today that it has formalized an ongoing collaboration with the Financial Conduct Authority (FCA) with the purpose of componentizing the FCA Handbook. These efforts will help financial firms, and other firms subject to the FCA Handbook, more easily find and understand the FCA regulations that apply to them, thereby increasing their ability to comply.

In response to concerns from financial firms about the difficulty in parsing through voluminous regulatory text and extracting their specific obligations — a challenge faced by both businesses and regulators — the FCA sought out innovative RegTech solutions and ultimately connected with Ascent in part due to the startup’s traction in the market with global banking entities. Founded in 2015, Ascent uses natural language processing and machine learning algorithms to convert oceans of regulatory text into workable tasks. With its proprietary combination of automation and domain expertise, Ascent is a first-mover in RegulationAI™.

The volume and complexity of regulatory compliance — especially in heavily regulated industries such as financial services — makes it difficult for compliance teams to keep policies current, manage compliance programs and staff, and mitigate risk. These challenges are further exacerbated by the rise of personal liability and the possibility of massive fines, reputation damage, and even jail time. Coordination between the FCA and Ascent marks an important shift in the compliance industry, demonstrating that regulators and startups can work directly together to address these challenges and increase firms’ ability to comply.

“The reality is that 99% of firms out there are ‘good actors’ — they are making every effort to comply, but the complexity of our current regulatory landscape does not support those efforts,” said Brian Clark, Founder and CEO of Ascent. “By coordinating directly with the FCA and making regulation more accessible and easy to understand, we can increase compliance across the industry, freeing up the FCA to direct critical time and effort towards high-risk issues. This kind of collaboration is a win-win for financial firms and regulators.”

Ascent is actively looking to coordinate with regulators around the globe. Interested parties can email contact@ascentregtech.com for more information. 

About the FCA

The Financial Conduct Authority (FCA) regulates the financial services industry in the UK. Its role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers. The FCA is the conduct regulator for 58,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms. Learn more at www.fca.org.uk. 

 

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