5 reasons that AI technology drives value for Compliance
Artificial intelligence is a system of technologies that aims to improve the way we identify different patterns, foresee upcoming happenings, design rules, make decisions and finally interact with others thanks to its adaptable prognostic ability and autonomous learning (to some degree).
The reflection of these developments in the financial services was inevitable and it is already altering the understanding of what makes a financial institution/service a successful one.
Some of the regulations that came to force recently like the General Data Protection Regulation (GDPR) and the Second Payment Services Directive (PSD2) are extremely comprehensive and large while at the same time they require some human reasoning to make sure that they are understood and applied properly. Therefore, in order to be able to achieve the most practical and effective application of these regulations, the RegTech industry applied to the help of AI for a reduced workload and improved accuracy.
- Hybrid Efficiency
In the traditional system of finance, one of the popular terms was “mass”; however, in the new world where technology and personalization are the hot topics, customized experiences are what’s sought. As speed, price and access were used to be among the most important features to be presented by the financial institutions to attract customers in the past, with digitalization coming into the stage, these assets are now easily accessible to customers. So, financial institutions have to keep up with the latest technological developments to improve their process efficiency and achieve a smoother digital transformation to fully satisfy their customers.
Thanks to the AI, common belief of “better service requires more budget” is becoming to fade away. AI also offers a more hybrid approach by combining human sense and machine automation. This increases the efficiency of operational services in such a way that for example money laundering or fraud activities can be detected more correctly in comparison to solely human control or totally automated systems, which according to a study not always bring accurate results all the time due to false positives. As a result, compliance-related problems are minimized thanks to the better validation rates of such activities.
- Digital Banking
As the digitization in financial services increases everyday with the aim to offer advanced and seamless experiences to tech-savvy customers, it has its own risks too. Virtual services like e-banking, digital wallets and online money transfers can be vulnerable to cyber-attacks and fraud. Such problems can cause serious damage to the banks both financially affecting their profit and emotionally harming their relationship with the customers.
One of the most natural results of increasing online security threats is the stricter and more challenging regulations. Although these regulatory requirements aim to create a more safe and reliable online banking environment, they also bring more pressure on the banks as they have to keep the balance in between compliance and the digital transformation. Artificial intelligence (AI) plays an important role at this point with advanced data analytics to mitigate risks and and better compliance experience with online profiling.
- Virtual Payment Processing Tools
As the number of digital, no-cash and no-card transactions increase and the new virtual payment methods emerge, the struggle of financial institutions to provide a safe experience by preventing fraudulent activity grows simultaneously. To keep up with the ever-evolving payment processing tools, AI can offer a solution again thanks to its adaptive and living nature that can detect a fraud or sanctions in a shorter time and more accuse way than manual intervention.
One of the great advantages of using AI for sanctions or fraud detection is that it works on the back end. So, the total payment experience goes smoothly, effectively and most importantly securely for the customers.
- Governmental requirements
To ensure a better customer due diligence and prevent money laundering activities, the regulators are strictly concentrating on the Know Your Customer (KYC) processes more than ever urging financial institutions to use digital identity.
As the requirements of KYC and AML compliances are constantly changing and evolving, it is highly challenging for institutions to keep up with them unless they attain help from AI-driven system. Natural Language Processing (NLP), a subfield of Artificial Intelligence, can read and extract meaningful details from a text which in turn assists businesses in quickly and effectively adapting to the evolving regulatory compliances. AI also offers a useful identity verification system that plays an instrumental role in combating cybercrimes and remains compliant with the regulatory requirements at the same time.
- Adding value to businesses
The machine learning and AI system constantly learns from new transactions, improves itself and increases its effectiveness. So, in addition to the necessity-driven aspects of AI, it also brings value and efficiency to the financial institutions by ensuring faster, more frictionless and more transparent transactions. The data roaming around the financial world is immense and thanks to AI, it has become easier to analyze higher volumes of data in a more innovative, accurate, faster and easier way.
The ever-learning nature of AI enhances customer experience too by understanding their behavior and offering a more customized experience. Features like chatbots are able to analyze the context of a conversation and create a response accordingly. This enables banks to save an enormous amount of time and money while at the same time increasing efficiency.
AI as “the solution”
AI technology lights the way of better compliance, customer experience and efficiency for the financial institutions as a powerful solution to the current challenges of the digitalized financial environment. To ensure the most effective and smooth integration of the new RegTech solutions and compliance requirements, most financial institutions are choosing to incorporate an AI system.
PayGate Inspector and PayGate Analyzer are the two products of Fineksus that implement AI on AML services. PayGate Inspector offers a new generation of solutions for banks to recognize their customers and secure transactions by blacklist filtering, while PayGate Analyzer automatically detects anomalies by using advanced AI algorithms. For more detailed information, you can check our solutions or just contact us and we would be delighted to share our expertise and answer any of your further concerns.
Ahmet Vefik Dincer, CEO