The Banking Evolution: AI, Inclusion, and Innovation

Adam Desmond

Adam Desmond, Commercial Director at IDVerse, took part in a panel called “Fighting FinCrime with AI” at the Future Identity Festival. The resulting discussion explored the way financial institutions are increasingly deploying AI-driven fraud detection and prevention tools and techniques. 

From anti-money laundering (AML) to fraudulent payments to identity theft and terrorist financing, AI has a lot of potential to improve financial crime management. But what are the key methods being deployed? How big is the gap between research and application? What role does RegTech play in detecting financial crime?

Here is Adam’s roundup of the session:

There’s no denying that the intersection of artificial intelligence (AI) and genuine inclusion is completely reshaping the banking industry. As we transition from decades-old, rules-based systems towards cutting-edge methods driven by AI, the positive impact on both large banks and smaller, more nimble fintechs is palpable. 

This shift is not just about automating processes; it’s about developing a profound understanding of the financial landscape, mitigating risks, and fostering innovation.

New insights enabled by AI

AI, particularly General AI (GenAI), is playing a pivotal role in harnessing the power of trained data to rectify existing negatives within the banking sector. Traditionally, banking systems have relied on rigid, rule-based structures that have been in place for over 30 years. 

The current wave of innovation, however, is steering the industry towards data training, modelling, and testing as banks seek to understand their environment faster and more comprehensively. This approach not only identifies new risks but also lays the foundation for innovative models that can adapt to the dynamic nature of the financial ecosystem.

Large banks are now channelling substantial investments into AI to move beyond mere process automation. They aim to delve deeper into their operational landscape, extracting more signals and insights. This innovation comes with its own set of challenges, particularly for fintechs. 

The delicate equilibrium between compliance and revenue generation poses a constant struggle, and the revocation of banking licences serves as a visible consequence of failing to strike this balance.

Playing in the sandbox

The regulatory framework is also grappling to keep pace with the rapid technological innovation within the banking sector. A notable example is the Bunq lawsuit in 2022, shedding light on the urgency for regulations to catch up with the evolving tech landscape. 

Sandboxes emerge as a potential solution, providing a controlled environment for testing new technologies and demonstrating their effectiveness to regulators. Of course, the implementation of these sandboxes requires funding, making it imperative for stakeholders to invest in the future of banking.

Taking the lead: The FCA

The Financial Conduct Authority (FCA) is taking a proactive stance by exploring the creation of synthetic datasets internally. This initiative aims to test new fraud solutions, showcasing the regulatory body’s commitment to staying ahead of emerging threats. 

This proactive approach not only demonstrates the FCA’s dedication to maintaining the integrity of the financial system but also sets a precedent for other regulatory bodies to embrace technological advancements.

A better onboarding experience

In the quest for a more inclusive banking environment, the onboarding process for individuals new to a country is undergoing transformation. Leveraging AI, banks are streamlining and enhancing the onboarding experience, making it more accessible and user-friendly. This is a positive step towards financial inclusion, ensuring that individuals from diverse backgrounds can seamlessly integrate into the banking system.

The synergy between AI and genuine inclusion is reshaping the banking landscape. From large banks seeking a deeper understanding of their operational environment to fintechs grappling with the compliance-revenue dilemma, the industry is at a crossroads.

Navigating this evolution requires a harmonious blend of innovation, regulatory adaptability, and a commitment to inclusivity, hopefully paving the way for a more robust and responsive banking sector.

About the post:
Images are generative AI-created. Prompt: An intergalactic spaceship floating in a bright starry solar system with a nebula and shooting stars. The style is The Great Wave off Kanagawa by Japanese ukiyo-e artist Hokusai. Tool: Midjourney.

About the author:

Adam Desmond is the Commercial Head at IDVerse. A seasoned cybersecurity professional with extensive commercial experience in risk management and threat mitigation, he has spent over a decade working at technology companies specialising in document verification and biometric solutions, including GBG and Mitek Systems.

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