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AI IS DRIVING A NEW FRONTIER IN BANKING – BUT THIS REVOLUTION IS EXPLAINABLE

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By Hani Hargras, Chief Science Officer, Temenos

 

During the second half of the twentieth century, Artificial Intelligence (AI) was an idea that only featured in science fiction movies. Such films often depicted a future dystopia where humanity struggles at the whim of advancing technology. However, today we find ourselves living in a new frontier defined by data and automation. Central to this is AI, which is playing a major role across many sectors.

A report from Microsoft and EY analysing the outlook for AI in 2019 and beyond, stated that “65% of organisations in Europe expect AI to have a high or a very high impact on the core business.” In the banking and financial services industries, AI has already begun to vastly improve the customer experience. Important actions are being undertaken using AI on credit risk, wealth management and even financial crime risk assessments. Other applications include robo-advisory, intelligent pricing, product recommendation, investment services and debt-collection.

The latest Economist Intelligence Unit (EIU) report carried out on the behalf of Temenos, found that 77% of banking executives believe that winners and losers within the industry will be determined by how they embrace AI.

Rarely, if ever, will banks have faced the kind of immense strain than during this pandemic. They were already under pressure transitioning their operations to be compliant with social distancing guidelines and are now having to cope with record levels of demand from their customers. Online banking has seen a huge spike in activity following the closure of bank branches during lockdown and banks are also having to lend in unusual circumstances, requiring them to manage the twin pressures of increasing arrears and political pressure not to trigger defaults.

Hani Hagras

Banks must have the ability to adapt in order to deliver whatever is required to support the financial health of their customers. They need to quickly scale up operations and develop new digital products and processes in highly compressed timeframes. To cope with the huge demand for Bounce Back Loans in the UK, lenders need to provide simplified digital self-service user journeys.

To do this, they must urgently deploy technology that can support greater automation and efficiency and improve productivity. This technology not only exists but is already successfully being used to solve problems.

AI will enable banks to significantly accelerate digital onboarding, conduct eligibility checks and process loan applications. AI can centralise and enforce policy rules to ensure decisions are based on bank-specified criteria. This consistency in decision-making is hugely important in the current context as it reduces the need for manual intervention, which can slow down the processing of the huge volumes of loan applications. This technology can also play a key role in rapidly accelerating the onboarding of customers to digital banking services.

However, it must be recognised that the adoption of AI across business sectors has not come without its challenges. In a recent forecast, Forrester predicted a rising demand for transparent and easily understandable AI models, stating that “45% of AI decision makers say trusting the AI system is either challenging or very challenging.”

With the surge in AI usage will come much greater regulatory oversight. Transparency must be a key tenet of AI regulation and models that offer limited visibility and that don’t protect against bias should be regulated out.

Just as it’s important to be able to look under the hood of a car and understand how it works, so should banks be able to look at how decisions are made and understand how they are reached. Yet, transparency is not possible with traditional ‘Opaque box’ AI.

True ‘Transparent box’ explainable AI systems enable merging data based and human expert knowledge to generate models that are fair, safe, unbiased and highly accurate. XAI systems are highly transparent models, which could be easily analysed, understood and augmented by the business users. The XAI models can explain, in human language, how an AI decision has been made. Crucially, they do not solely rely on data, but can be elevated and augmented by human intelligence. This technology will be crucial in helping bank’s build trust with customers and regulators and identify issues as they arise.

The global pandemic is once in a century event and has demonstrated how indispensable agile and scalable technology is in responding to a crisis. With pressure mounting on the sector, the deployment of XAI technologies is key to enabling banks to help secure the financial wellbeing of its customers. This is a once-in-a-lifetime opportunity for banks to make the difference between a huge number of businesses staying afloat or going under

Technology

BIOMETRICS: BALANCING SECURITY WITH CONVENIENCE

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Jean Fang, Authentication Product Manager and Joël Di Manno, Authentication and Biometrics Laboratory Service Line Manager at Fime

 

From a person’s face to their iris, voice or fingerprint, biometric solutions are giving us new ways to authenticate ourselves when using a device or making a payment. Research suggests that the global facial recognition market alone will be worth up to $13.87 billion by 2028, with other modes of authentication following a similar growth pattern.

The trend towards biometric authentication has been further accelerated by the global pandemic. Hygienic touchless identification solutions have become critically important. And, with customers already familiar with using biometric solutions on their phones, the growth of this industry only looks to continue. In this blog we will evaluate this growth and discuss some of the potential opportunities and challenges that lie ahead.

 

Addressing fragmentation

Biometric authentication is an innovative and rapidly evolving technology. However, the speed with which it has developed brings with it unique challenges. The technology operates within a largely non-standardized ecosystem, meaning that it is fragmented on many fundamental issues. Little regulates how manufacturers and developers create and implement solutions.

The fragmentation that currently exists means that developers and manufacturers face three main challenges:

  • Increasing interoperability and adaptability.
  • Looking for a standardized certification process.
  • Formulating uniform benchmarking practices to allow developers to compare key performance metrics.

Addressing these three concerns will help create a simpler, more standardized biometrics ecosystem, allowing innovations to reach the market quicker and cheaper.

 

Security vs UX

The most notable emerging use cases for biometrics are payment authentication, access control and government administrative projects. All three require access to extremely personal data, and therefore it is essential for them to have very strong security.

Perhaps the major selling point of biometric solutions is their ability to provide the necessary security while enhancing the user experience (UX). However, overly-stringent security can negatively impact the UX. Therefore, there must be a trade-off between the two.

The best way to understand this balance is by comparing the False Acceptance Rate (FAR) with the False Rejection Rate (FRR). A low FAR gives a good indication that a solution is secure, as it only accepts the right user. Meanwhile, a high FRR provides a very high level of security, but creates friction – and potentially damages the UX – as it prevents genuine individuals from authenticating. Striking the right balance between these two is crucial to maintaining high security standards without creating a poor UX.

 

Multiple modalities for multiple solutions

The adaptability of biometric solutions means that original equipment manufacturers (OEMs) must constantly evaluate the available solutions and determine which is the best for their device. OEMs must develop a clear strategy to determine which biometric modality is best suited, factoring in cost, UX, speed and security.

However, there are also situations where device manufacturers may want to utilize multiple modalities. This can benefit both the UX and security of their solution, as it can address numerous concerns:

  • It can account for environmental concerns. For example, if a user is wearing gloves due to cold weather, making fingerprint scanning impossible, authentication can be achieved another way.
  • For high-risk authentications, multiple modalities can be utilized at once to achieve heightened security.
  • It also allows for adaptability regarding any future changes to the industry or regulatory requirements.

Determining which modalities will best serve a device and its deployment is one of the major challenges OEMs and developers face. The current lack of standardization only further complicates this. However, as the field grows and becomes less fragmented, the multimodality of biometric solutions will facilitate innovation and security for years to come.

 

Just the beginning

Biometrics have become a fixture of consumers’ everyday lives, but the huge successes seen in mobile technologies have not yet translated to other sectors. Innovations continue to push the boundaries of how we use biometrics, as they are rolled out in workplaces, homes and transportation. To reach widespread adoption, companies need to provide customers with assurance that their products are secure. Standardized testing and certification lay the foundations for this.

Biometric technologies continue to evolve daily, which means that the regulations and requirements that govern them need to do likewise. Standardizing the entire ecosystem would allow developers and OEMs to regularly test their products against uniform benchmarks, ensuring they are secure while keeping costs down and launching quicker.

 

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HOW CAN THE PAYMENTS INDUSTRY PREPARE FOR SCA WITH BIOMETRICS?

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By Vince Graziani, CEO, IDEX Biometrics ASA

 

Significant developments are afoot in the retail and payments industry, with vendors needing to prepare for Strong Customer Authentication (SCA). It’s set to be the most significant change to how people pay for things, not only online but also for card-present retailers across Europe. The deadline for compliance with the regulation has recently been extended again, this time to March 2022.

This is now the third time the deadline for retailer compliance has been pushed back, with the Financial Conduct Authority (FCA) worried vendors are not prepared for the new payment security approach. Which raises the question, will SCA every really take off?  Well, for retailers the extended deadline can be viewed in a positive light. The fact that there are now a further ten months to pilot and then launch their response gives retailers more time to adapt their authentication and verification tools. But it’s also a benefit for banks and payment providers too.

The ongoing delay to the SCA will give the payments industry extra time to prepare for the rollout of the directive so they can deliver a secure SCA payment option to consumers. If the payment ecosystem fails to use this time to prepare or implement the right technology to comply with this new ruling, it will open consumers up to a significant threat of card fraud.

 

Vince Graziani

The challenges faced within the retail space

There has been a large amount of focus on the implications of SCA when shopping online; however, face to face purchases will also need to be revisited. Even when using a card physically, SCA will require two-factor authentication for every purchase made over the contactless limit. This additional layer of protection provides a more stringent authentication process that will help to keep millions of accounts safe from both traditional fraudsters and cybercriminals.

Two-factor authentication means that not only will the user need to provide their details when making a purchase, they’ll also have to confirm their identity with:

  • something they know (a PIN or password),
  • something they have (such as a smartphone),
  • or something they are (biometric face or voice features or a fingerprint).

Once implemented, this will be beneficial in protecting consumers, however, getting to this stage will be a challenge. The requirements are set to cause widespread disruption to the retail space. The introduction of SCA will require in person merchants and card issuers as well as online Payment Service Providers (PSPs), such as PayPal and WorldPay, to have in place the technical enhancements and testing needed by the deadline.

 

Educating the shopping public on SCA

This presents a significant logistical challenge; maintaining effective fraud prevention while keeping an optimised customer experience is not easy. But perhaps the biggest challenge of all is that consumers themselves still aren’t entirely aware of SCA or what will be expected of them come March.

The introduction of SCA demands collaboration within the industry to educate consumers, but ultimately it is up to payment providers to provide a reliable, secure and SCA-approved method of payment to consumers. Providers must also ensure that the method they choose is not only up to standard but is affordable and accessible to all.

 

Preparing for the future of secure payments with biometrics

Biometric payment cards offer the answer for payment providers to help prepare for SCA. Not only will these cards – with inbuilt fingerprint sensors to verify ownership – provide strong customer authentication, but they also come with the added benefit of convenience. Validating your payment with a fingerprint speeds up the transaction process and removes the requirement of PINs or the use of a smartphone.

Biometric fingerprint payment cards offer banks and payment providers, an opportunity to embrace payment innovation that will help them meet these new secure forms of authentication with confidence and ease.

It is worth noting that some payment card manufacturers, such as IDEMIA, are already preparing biometric payment card solutions. These will be ready for banks and card issuers to adopt so they have the time they need to pilot and roll out the new payment method before the new SCA deadline is imposed.

The FCA has also outlined previously that long-term authentication through biometrics and mobile app-based solutions is the future of secure payments. The use of biometric payment cards to authenticate online payments will offer an important way for retailers to balance security measures that comply with the SCA regulation whilst also delivering ease of use for the consumer.

 

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