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REVOLUTIONISING GLOBAL BANKING THROUGH THE POWER OF AI

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Richard Shearer, CEO of Tintra PLC

 

Let’s imagine a scenario in which an individual living in Kenya wants to send money to London. If the person were living in the UK, this would be a very simple matter: two taps on their smartphone phone would result in a near-instantaneous transaction with no questions asked.

As a cross-border payment, however, this transaction looks very different: The individual’s money will have multiple arduous hurdles to clear as it’s passed from a local bank to a local electronic money institution [EMI] to a UK EMI, then on to a UK bank, before – if they are lucky – arriving in the hands of the beneficiary. This is a long-winded process riddled with red tape that could last as long as three months.

In addition, this already lengthy process is compounded by a further impediment: because the person is from an emerging country, they will – in the eyes of KYC/AML compliance teams – be considered high risk, despite the fact their earnings and transactions are entirely above board.

In essence, these challenges boil down to two key and interrelated issues: compliance processes are full of friction [often in the form of sluggish, manual, complex, and time-consuming KYC checks from multiple banks and EMIs], and Western KYC/AML teams are subject to bias, meaning they can’t [or possibly won’t] discern ‘good’ clients from ‘bad.’

Therefore, in order to truly achieve global banking, we need to develop a solution that will allow financial institutions to deal with both challenges quickly, efficiently and automatically – which is where technology, and more specifically, artificial intelligence, has the answer.

 

Leveraging technology to eliminate barriers and address bias

The banking industry hardly needs persuading of the benefits of AI in broad terms, as demonstrated by a recent report from McKinsey,which signposted several advantages of its integration, including boosted revenues, lower costs, and the discovery of unrealised opportunities through insights generated by powerful, data-hungry technology.

Perhaps more importantly, however, AI has the potential to significantly improve AML processes. For example, in predictive analytics, machine learning methods can be used alongside customer data to predict possible criminal behaviour – at lightning speeds and at an unprecedented scale – which simply cannot be matched by the people who remain at the heart of legacy banks’ compliance teams.

Not only can AI speed up the cumbersome processes that create the kinds of barriers faced by the likes of the individual from Kenya, but – crucially – the adoption of AI can also help to overcome the significant barriers represented by KYC/AML bias.

For example, using cutting edge AI tools to streamline onboarding and compliance procedures and automate all processes that currently involve manual invention, will effectively replace subjective human decision making with intelligent machines that have learned from years of data and experience. As a result, by reducing human involvement to a minimum, these tasks become fast, fair, transparent, scalable, and flexible enough to be applicable to customers and transactions across the globe.

Of course, AI isn’t always entirely free from bias – it’s made by people, and its insights are interpreted by people too. This reinforced by the last Nordics Anti-Financial Crime Symposium, which highlighted the need to watch out for bias at the programming stage.

In the context of KYC/AML classifiers, an unfair bias could occur if the machine is trained to mimic the human decision-making process, where the ‘right decision’ is fed into the AI solution. This can be overcome by providing evidentiary data instead, where the machine can learn from examples of transactions that resulted in complications as opposed to modelling outcomes on potential human prejudice.

Another key challenge for AI is generalisation caused by ‘narrow’ training data, such as when certain demographics and/or ethnic groups aren’t represented sufficiently in the training set. A similar phenomenon can occur in the context of KYC / AML where criteria for accepting a customer or transaction can vary across geographic area, meaning those in emerging markets may suffer as a result.

That said, it doesn’t mean AI can’t help in eliminating prejudice in AML procedures – far from it – it simply means we need to ensure the next generation of fintechs and challenger banks utilising this technology are feeding their AI models good data that provide explainable results – and that these entities are sincere in their desires to level the global banking playing field.

 

Revolutionising the global finance industry

Taking this kind of technology seriously would be nothing short of revolutionary for the global finance industry.

After all, as the Centre for Global Development has recently noted, KYC/AML discrimination can have serious ramifications in emerging markets, with those most likely to be impacted including “the families of migrant workers, small businesses that need to access working capital or trade finance, and recipients of life-saving aid in active-conflict, post-conflict, or post-disaster situations.”

In looking beyond the benefits that this new breed of global banking will have on individuals, there are also huge implications for the global economy.

McKinsey’s report on the future of cross-border payments points out that international payments revenues already amount to around $200bn globally – but a closer look at the figures reveals that while Western Europe sees 5.5 annual cross-border transactions per capita, Latin America only sees 0.7.

If compliance barriers were lowered through the leveraging of new technology, it seems perfectly plausible to suggest that places like Latin America would see cross-border transactions increase, with all the economic benefits associated with this increased flow of money on an international scale.

And, with AI and machine learning leading the charge towards revolutionised banking, it’s worth remembering that decreased prejudice needn’t come at the cost of increased risk: in fact, a recent Deloitte survey found that 41 per cent of respondents believed too many false positive AML alerts were the biggest AML compliance challenge faced by banks today.

Therefore, the right technology operated by new, forward-thinking financial entities has the real potential to simultaneously address the prejudices that underpin AML compliance processes, eliminate the sluggishness that those processes entail, unlock new streams of money to circulate in the global economy, and address the current lacklustre state of addressing financial crime.

When one really allows oneself to really absorb this new paradigm, the potential is there for AI to completely repackage the way in which the global banking industry operates. The question is who will be first to the party!

 

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How Digital Adoption Platforms can enhance digital transformation and customer experience in the insurance industry

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By Vara Kumar, CPTO & Co-founder, Whatfix

 

Like many industries, the insurance sector was prematurely hastened towards digitalisation due to the Covid-19 pandemic. Now, digital adoption continues to be a key focus of many organisations to strengthen their fully or partially remote workforce with nearly 50% of IT spend being put behind the growth of core applications and infrastructure, and an additional 25% being invested into digital solutions.

But with millions of claims processed every year, needing to provide superior customer service to drive retention, complex procedures and processes to navigate and both internal rules and external regulations to follow, digital transformation plans for insurance organisations are filled with challenges.

Increasingly digitalised workforce

With the pandemic came an overhaul of how we work. Remote and hybrid working is now the norm, and across most industries, there’s been a huge expansion in both the number and type of digital applications used to communicate, collaborate and enhance productivity across an organisation.

For the insurance industry, this has meant that every employee, from underwriters to customer service agents, has had to adapt to handling their steps of the process, from setting up coverage to filing a claim, remotely, and across multiple platforms and tools.

The challenge is ensuring this more digitalised workforce fully understands how to successfully navigate each application effectively and efficiently to ensure they can deliver on their services and customer experience (CX). But putting together a skilled, high-performing IT team can be difficult – according to an enterprise study, 54% of organisations said they’re not able to accomplish their digital transformation goals because of a lack of technically-skilled employees. This is further complicated by the fact that, in an age of labour shortages, the sector is forced to get creative and find ways of managing the workload and navigating new technologies with a smaller workforce.

Changing customer expectations

On top of the challenges that the increasingly digitalised workforce is experiencing, the tech-savvy customer of today also expects more from their insurers. Indeed, the pandemic forced customers as well as organisations to become more IT-literate, and in the customer service space in particular, customer expectations are high.

Customers today want and expect to be able to make maturity or house insurance claims in an efficient and straightforward manner, across multiple platforms, from phone to email to social media, preferably in a matter of minutes.

McKinsey observes that improving the value chain from the customer’s point of view is an important step within digital-ecosystem efforts, and HubSpot found that 90% of consumers expect an immediate response to a customer support issue, with 60% defining ‘immediate’ as under ten minutes. Even pre-pandemic 44% of customers were comfortable utilising chatbots for insurance claims, and 43% were comfortable using them when buying insurance policies.

Undergoing a digital transformation on the customer side is crucial then, as insurance providers that can meet these changing customer expectations are more likely to attract and retain customer loyalty now and in the future. However, just 30% of insurers believe that they have the capabilities to fully digitalise their customer experience.

So, what can insurers do to meet the technological demands of a digitalised workforce and a multi-channel CX for tech-savvy customers?

Using DAPs to boost digital transformations and CX

In a rapidly changing market, Digital Adoption Platforms (DAPs) can be a huge advantage to insurers looking to manage the challenges of today and come out on top. A piece of instructional no-code software that sits as an additional layer on top of other software applications, such as Claims Management or Policy Administration Systems, to help train and guide users on how to best use the software, DAPs can massively improve the agility and effectiveness of business processes across an organisation.

On the employee side, for example, DAPs can help insurers to manage challenges of a frequently changing workforce by making it easier for employees to get to grips with new digital applications. With the likes of  guided walk-throughs and task lists, which help employees through each step they need to know and just-in-time nudges to reduce policy administration, claim, or underwriting processing times, employees are more efficient and technology adoption is streamlined and accelerated. Easy to integrate into existing systems, DAPs can be used to not only train and onboard new employees but also upskill veteran workers, training the workforce as a whole on the latest technologies being used across the industry. As a result, everyone from underwriters, claims, and service representatives will better understand insurance tools that will enable them to be more productive and better deliver customer experiences leading to better business outcomes. Indeed, from the customer perspective, DAPs can enable companies in the insurance industry to keep CX positive and smooth. Firstly, by training on near real-life scenarios and secondly, by being able to more easily navigate applications, processes and systems internally, customer service representatives will be able to spend more time and focus on the customer and on resolving their queries, without being hindered by technological hurdles. For example, errors made in policy or claims processing can be reduced if employees can use self-help elements of DAPs to mitigate issues and solve queries themselves, in real-time. As a result, customers will be happier with their service, and more likely to stay loyal to that brand.

Customer-facing platforms can also be improved using DAPs. Typically, legacy apps whether on our phones or online, can make it difficult for users to complete their tasks, leaving them frustrated. With DAP user-specific content and just-in-time support, such as pop-ups, automated walk-throughs and user guides for every part of the user journey, customers can experience a smoother journey and have their queries and issues resolved more efficiently..

Drive efficiency and customer satisfaction

DAPs are already growing in popularity, with Gartner predicting that by 2025, “70% of organizations will use digital adoption solutions across the entire technology stack to overcome still insufficient application user experiences.”

So, now is the time for insurance providers to leverage this technology to facilitate their digital transformation plans. By ensuring their increasingly dispersed and digitalised workforce can use the latest applications to their full potential, and that their customer journey is as efficient and easy-to-use across the multiple channels customers expect, insurers will see huge benefits, from increased efficiencies to improved customer satisfaction.

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Are cyber insurance and incident response budgets the same thing?

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Dominic Trott, head of strategy – UK, Orange Cyberdefense

 

Cyberattacks on businesses increased by 13% in 2021 compared to the previous year. Yet while it’s not necessarily the case that the number of bad actors is increasing, it is the scale on which they’re operating that has broadened exponentially.

In addition, the manner in which cyberattacks are being carried out has also evolved. While some cybercriminals hack for fun, the vast majority of malicious activity is, unsurprisingly, conducted for financial gain and targets organisations on the basis of two simple principles: first, where there is the most value to be targeted; and second, where the attacks are most likely to be successful.

It’s also likely that the full extent of the cybercrime landscape is hidden. Accurate data on the impact of cyberattacks is often hard to come by because, in many cases, the breached organisations are unaware of the full extent of the attack – or even that one took place. They might genuinely not know this information if they don’t have accurate oversight of their digital estate, or keep quiet for fear of incurring legal liabilities or causing reputational damage.

The current security landscape has created the perfect storm for cybercriminals, as cyber insurers and Computer Security Incident Response Teams (CSIRT) often end up fighting over the same budget. Traditionally, it has been relatively easy for firms to obtain cyber insurance coverage at low premiums. However, the heightened cyber risks and exponential growth of ransomware attacks in recent years has led to premiums rising.

The question that businesses often ask, therefore, is ‘why do I need an incident response retainer when I already have cyber insurance? Surely, it’s a waste of money? If the worst does happen, the insurance company will pick up the bill for any damage done after the event’. I would argue that is a short sighted and potentially dangerous approach. Let’s look at the different roles of incident response and cyber insurance.

  1. Cyber Insurance: like other types of insurance, this aims to give businesses a way to ensure that if the worst happens, they can recover some of the costs. Cyber Insurance will likely cover you for some of the tangible costs associated with a breach, but it probably won’t cover all of them. By acting quickly and limiting the scale of the breach, you may be able to reduce the full impact. In addition, some insurance companies will expect you to have demonstrated a level of preparedness before accepting your claim – a bit like having a burglar alarm or dead-bolt locks on your house before a house insurance claim is accepted.
  2. Incident Response Retainer: aims to provide rapid, on-demand expertise in an emergency if the customer calls them immediately after an incident. The key to mitigating the impact of any cybersecurity incident is the reaction time between detection and response. Many companies lack the infrastructure needed to react in a quick and secure manner. Having an incident response team available 24/7 to identify, contain and eradicate threats and to get businesses back up and running as soon as possible may be crucial to their ability to continue successfully trading.

 

Cyber resilience

But isn’t incident response included in the insurance policy? In many cases, it will be. And perhaps this is where the confusion comes. Cyber insurers will often pay out, but only as long as the incident is covered by an incident response retainer. Their objective is of course to help cover the financial losses that result from cyber events and incidents and in numerous policies, the presence of a retainer agreement with an external incident response provider can help prevent severe losses. This will often bring down the premium of the insurance policy. Having a retainer also means you get to choose the CSIRT team that you are going to be working with in advance. You can assess their credentials, their experience, talk to their other customers – all before an incident occurs.

The key thing here is building cyber resilience. Of course, there is no such thing as complete security. For starters, incident response alone is insufficient to deliver cyber resilience from either a technical or procedural perspective. Good practice advocates that solutions should be in place across the full threat lifecycle. For example, the NIST framework recommends that organisations identify their threats and vulnerabilities; protect against them with security tools and operations; detect threats as they address the enterprise; respond to contain and remediate an incident as it occurs; and recover to take lessons learned from incidents and improve ‘business as usual’ appropriately.

But, leaving an end-to-end approach to threat lifecycle management to one side, having both cyber insurance and an incident response retainer working seamlessly together will at least provide organisations with a fighting chance of continuing their core business functions if and when disaster strikes.

 

Making cybersecurity a joint enterprise

There are worrying trends emerging in the cybersecurity market. While attacks are becoming more sophisticated and ransoms are rising, there are concerns that there might not be enough money in the still-emerging sector to cover everyone’s needs. So, what can companies do? They should still invest in insurance coverage, but they also need to look for other ways to cover their potential exposure, including CSIRT rapid response teams.

It cannot remain a budgetary decision for a CTO and a CFO to fight over whether to firefight OR recoup what has been lost in cyber-attacks. Both are important. An incident response team is the first port-of-call to help respond to any cyber accident or incident. Then and only then – once the breaches have been made safe – should you call in the moneymen.

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