We live in an age where instant gratification is now the rule, not the exception. With the emergence of artificial intelligence (AI) like Siri and Alexa, we have answers and information at our fingertips instantaneously. Ankush Singla, senior product manager at DefenseStorm, explores six undeniable ways in which AI is creating transformational change in the finance sector.
Newer generations thrive on instant responses and the ability to complete tasks with the press of a button. As technology makes even the simplest of tasks easier, we want more. Unsurprisingly, the banking sector has followed this trend by providing its customers with the latest technology for easy access and flexible banking. As financial institutions (FI) revolutionize the industry with the newest technology, cybercriminals are poised to exploit new vulnerabilities due to increased use.
So, how can banks and credit unions remain competitive while also providing superior security to their clients? Utilizing AI for cybersecurity provides FIs a way to scale more effectively to find insights in data that would otherwise be impossible. By applying this technology, your financial institution can react quickly to breaches but, more importantly, get ahead of cyberattacks. The use of AI also significantly helps FIs prepare for changes in risk and compliance.
Six Benefits of AI/ML for Financial Institutions
Consider the six ways AI/ML can help your financial institution efficiently manage its own risk profile, monitor changes to internal key metrics, improve security posture and maintain compliance.
1. Detect fraud before money leaves the account
In 2021, Javelin Strategy & Research identified identity fraud scam losses of $28 billion, which victimized 27 million U.S. consumers. Financial Institutions must stop fraudsters before they transact because it prevents financial losses and maintains a trusted client relationship. FIs customarily absorb the cost of losses, but in some cases, banks are not liable. Sometimes, customers bear the loss, which weighs on the relationship of trust between FIs and their clients. By implementing AI, especially products built for banking,
FIs can close the gap in identifying and stopping breaches before they occur. Sifting through millions of cyber events for an average client (and much more for larger institutions) is virtually impossible, even for the most substantial and proficient teams, and AI creates a baseline of transaction patterns and can identify anomalies as a proactive approach.
2. Reduce false positives
As increased use of technology and the threat of cyberattacks continue in a perpetual neck-and-neck rivalry, enter another contender: false positives. When SOCs (Security Operation Centers) analyze millions of online events for threats, over half are identified as “non-threatening.” False positives wreak havoc by undermining a company’s SOC budget, time, and efficiency. By decreasing false positives with AI, we rely less on staff and then those valuable human resources can focus on investigating real and complex threats. The frequency and volume of false positives are rising steadily, but implementing smarter cybersecurity technology can assist in reducing the barrage of alerts. ML can help decipher between a real threat and one that is benign. According to Forbes, “this accuracy translates to both greater protection levels as genuine threats are prevented immediately as well as greater efficiency, as only alerts that merit action are generated.”
See More: Is Cybersecurity the Biggest Challenge for Today’s Fintech Companies?
3. Effectively address regulatory change management
Financial institutions are bombarded by continually changing regulations, so the use of a manual system for assessment and implementation has become inefficient. FIs would spend hours not only reading and comprehending the new regulations, but also making the necessary changes. ML has paved a new way for addressing the constant changes in regulation. Because financial institutions are subject to out-of-compliance fines, it is crucial to use a more expeditious approach.
Intelligent process automation (IPA) is used to assess large amounts of data quickly, accurately, and in real-time so your financial institution stays in compliance. According to Data Bricks, automating the process of regulatory change management is a key use case of AI. Financial firms’ challenges, including hefty fines for non-compliance, can be addressed with successful AI implementation. Combining this technology with the knowledge of people who understand the intricate demands of the FI industry can lead to superior outcomes.
4. Boost anomaly detection
Regularly assessing transactions for odd behavior is a grueling and time-consuming task. However, FIs must identify any deviation from the norm because even a slight one, can prove to be a malicious threat. AI can evaluate copious amounts of data to establish normal transactional patterns and then assist in detecting anomalies that may indicate the threat of a cyberattack. AI is capable of scanning through various kinds of data in large volumes to identify a breach in the learned algorithms. Then, adjustments are applied after distinguishing between normal and abnormal behavior to identify and assess for fraudulent activities consistently. AI is also efficient at finding anomalies that are missed by a one-size fits all rules-based approach to fraud detection. For example, customers who deviate from the expected “normal” banking practices suffer the frustration of having their accounts flagged or blocked. There is nothing more irritating than getting locked out of your account for paying bills at 2 am simply because it doesn’t fit the typical “times for banking.”
With AI, accounts are monitored continuously and automatically, enabling FIs to provide a higher level of protection while tailoring security to customers’ specific needs, ultimately preventing these exasperating red flags.
5. Decrease human error
Human error is an obstacle that every financial institution faces. In one of the largest studies evaluating breaches amongst over 130 clients, IBM Cyber Security Intelligence Index reported, “Human error was a major contributing cause in 95% of all breaches.” Whether the error is made within data analysis or a mistaken click on a phishing email, each infraction makes your company vulnerable to a breach. Financial institutions can utilize an AI system in conjunction with a SOC team who monitors for alerts and then analyzes threats for fraud, risk, and compliance to lessen the load of work and function more efficiently. Automated systems are the first line of defense with abilities beyond the restrictions of human capability, reducing the incidence of errors.
6. Increase competitive advantage
FIs are always in competition to provide the best and most efficient services within their industry. Fintechs are setting new standards with the use of technology to provide a higher-caliber customer experience. The Ernst and Young consumer financial research shows that more consumers today count a fintech firm than a bank as their most-trusted financial brand. Traditional banks are “keeping up with the Joneses” by implementing the latest and greatest technology to provide faster and easier daily banking. To stay competitive, FIs need to also assure their customers that they protect their data and money using a superior level of security. AI cybersecurity products that mitigate risk, fraud, and compliance which are built specifically for banking provide streamlined and industry-specific protection, catering to your FI’s unique needs.
The Future of AI in Financial Institutions
As we continue to operate businesses with more advanced technology, financial institutions are finding themselves in a war against malicious acts. The future for FI is to utilize this new technology not just to ease daily operations but to provide an elevated level of protection.
With the ever-changing world of security, risk, fraud, and compliance, the financial sector requires FIs to stay current and competitive. Artificial Intelligence is the way to revolutionize the way banks and credit unions provide security to keep their customer’s assets and data safe.
Which of the mentioned benefits of AI/ML have you been able to leverage? Share with us on Facebook, Twitter, and LinkedIn.
Original post: https://www.spiceworks.com/tech/artificial-intelligence/guest-article/ways-artificial-intelligence-is-transforming-the-financial-industry/