AI IN FINANCIAL SERVICES

Artificial Intelligence: The Global Landscape

• Artificial Intelligence has been at the forefront of innovation over the last few decades. However, in recent times, the technological landscape has
progressed substantially, with the advancement in machine learning techniques, state-of-the-art sensors and the inflow of data.
• Adoption of cloud, mobile technologies, apps, wearable devices, intelligent/smart networks, and Internet penetration/usage have caused an
information explosion in terms of availability of vast consumer data pools. This data, when combined with advanced analytics and machine
learning platforms is doing wonders for the financial services ecosystem.
• The buzzword today in financial services is AI-driven Cognitive Intelligent Automation, also referred to as RPA (robotic process automation). These
systems identify, replicate and produce a vast number of data, enabling organizations to automate processes and workflows with high accuracy,
and further keep learning and adapting to new parameters with time.
• The major use of AI is in the area of risk assessment, where variables from numerous financial and non-financial data points are assessed by
algorithms to assess credit worthiness of an applicant, and approve/reject the loan.
• From customer service by using chat bots to installation of physical as well as virtual robots on a bank’s premises and using robo-advisors for
asset management, financial institutions have come a long way by adapting to the use of AI.

$6.7 Trillion Key Technologies Covered under AI Estimated Global AI Market Size (In $Bn)
Global Impact of Automation 1. Cognitive computing 28.424
in Knowledge Works 2. Deep learning
3. Machine learning 14.427
4. Predictive APIs
$1.2 Billion 5. NLP (Natural language processing) 6.076
6. Image recognition 0.643 2.212
Global AI Investment in 2016 7. Speech recognition
2016 2018 2020 2022 2024

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Artificial Intelligence: Key Use Cases
• Driven by decreasing cost of competing power, availability of data and advancements in advanced analytics, AI has opened the door for various
business models across the financial services spectrum. With advancements in big data and machine learning leveraging from increasing
availability of consumer data, the industry is booming with new innovative solutions and services, centred around AI.
• Here are some of the major use cases of AI in Financial Services:
Personalisation of Financial Services: With the increase in customized automation, FS players can now offer personalized and customized
services for their customer. Some of the major areas of this are:
1. Robo-Advisors: Automated financial advisors, or robo-advisors, assist users in their financial planning by analysing their goals and portfolio.
2. Smart Wallets: Smart Wallets monitor and learn users’ spending habits and needs, analyzes it and based on these, alerts and coaches users,
when appropriate, to show restraint and to alter their personal finance spending and saving behavior.
Robotic Process Automation (RPA): RPA automates the back-end repetitive processes for any organization by means of software robots. It
utilizes the current application user interface in the deployment of software, without the need of any modification. This enables the organization to
boost up their productivity and utilize the key resources for front-end, thus freeing up FTEs and increasing focus on customer facing tasks. This
helps in the organization to reduce costs, eliminate human error quotient from back-end tasks, and also utilize their resources effectively.

Key Features of AI

Increased Efficiency 100% Accuracy Product/Service Innovation

Lower Costs Quality & Control Improvements Customer Delight

Faster ROI Enhanced Decision Making

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Artificial Intelligence: Key Use Cases (cont’d)
Smart Customer Service: Banks are using NLP algorithms to develop chatbots and automated voice systems to assist the customers in issues
related to payments and account information, without the help of a representative. Such smart bots not only provide an enhanced customer
experienced, it can be developed cognitively to capture customer data and process that to give a real insight.
• Ex: A customer paying the minimum amount due as late as possible, might be facing a cash crunch and thus can be a potential lead for personal
loan.
• These AI-based smart bots and systems can assist traditional customer service representative to resolve the queries faster, and thus enhance the
efficiency. These systems can learn on the job, and eventually evolve to handle the processes on their own, eliminating the need for a human
representative, who can be utilized in more complex tasks.

Fraud Detection: Out-of-Pattern Spending

• With the increase in volume of transactions, fraud detection is a high priority issue for banks. By use of machine learning and cognitive analytics,
banks can profile their customers based on the pattern in their transaction history. Any transaction appearing to be out of pattern, can be re
flagged and moved into a high risk pool. The transaction will be analysed for its authenticity by taking extra security measures. The customer can
be intimated about an unusual transaction and it can be verified.
• This can help banks curb transaction frauds and enhance their risk assessment.

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Leveraging AI Capabilities Across Financial Services
Following are the major segments in financial services which gain the most from the implementation of big data, machine learning, RPA and other AI
capabilities.

Credit Marketing Risk Investment Process

Customer Customer
Scoring Acquisition Retention & Loyalty
Management Management Excellence

• Gather customer data • Customer acquisition:
from multiple sources. Focus on digital channels
• Quantify qualitative • Improvise digital touch
aspects. points to engage
customers
• Customize scoring models
iteratively. • Creating complete
customer preference
profile by going beyond
transactional data.
• Personalized contextual
offerings.
• Enhanced fraud detection • Automated advisory • Software robots acting as
and authentication solutions. virtual workforce to
solutions. automate rule- based,
• Combine multiple data
repetitive back-end
• Eradicate vulnerable points (Social media data,
processes.
access points. search data, etc.) and
provide visual insights. • Elimination of human error
• Device identification,
and freeing up critical
biometric, behavior • Identifying anomalies
resources for the front-
analysis.
end.

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Artificial Intelligence: Vendor Landscape

PHYSICAL MACHINE FRAUD COGNITIVE ENTERPRISE VIRTUAL VIRTUAL

ROBOTS LEARNING DETECTION AUTOMATION WORKFORCE ASSISTANTS

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Artificial Intelligence: Case Studies
Some of the prominent case studies of AI being used by financial services players for various business functions are as follows:

Genworth Financial uses AI to automate the underwriting process of its long term care and life insurance policies. The system comprises of an
analytical engine based on fuzzy logic rules, encoding the underwriter’s guidelines. An evolutionary algorithm optimises the engine’s performance.
A natural language parser is also used to improve the coverage of this underwriting system.

UBS group uses AI to aid its advisors while delivering personalized advice to the HNWI clients of bank. This AI system models behavioral patterns of
85 million Singaporean individuals. Based on the behavioral trends, the individual is profiled and is matched with different types of wealth
management products suiting his/her profile.

Goldman Sachs has partnered with Kensho to use its real-time statistical computing and analytics technology across the firm. Kensho’s intelligent
computer systems are capable of answering complex financial questions in plain English and in real time, achieving speed, scale and automation
of previously human intensive work.

Xchanging, a UK-based insurance claims underwriting firm, partnered with BluePrism, world’s leading AI and process automation player and
automated10 key processes within 1 year of RPA implementation, reducing processing time by up to 90%, and thus boosting productivity. This led
them to establish themselves as a leading InsurTech player in London, with a unique product offering in form of Insurers’ Market Repository (IMR).

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Artificial Intelligence: Key Players

Feedzai is a London-based data science company providing fraud prevention solutions for commerce industry. Feedzai’s fraud prevention
technology fuses big data and machine learning with human intelligence to predict and detect fraud within payment transactions globally. The
company sells its solution under a SaaS license model, charging customers on a transaction volume basis. Feedzai can detect fraud in any
commerce transaction, by analyzing historical and current data, whether the credit card is present or not, in real-time. The platform can detect
fraud by as much as 10 days earlier than other solutions and expose more fraud cases (up to 60% more), all with lower false alarms. Gartner
awarded Feedzai its Cool Vendor Award in recognition of the rapid commercial success of Feedzai’s big data solutions. Feedzai was founded in
2009, and has so far raised $26.1M from leading investors,Ex: Capital One Growth Ventures, Data Collective,EDP, etc.

Active AI, a Singapore-based company provides a SaaS platform that uses artificial intelligence technology to improve the customer engagement
solutions for banks, wealth institutions and financial companies. Clients would be provided with chatbots and virtual assistants that use cognitive
technology such as AI, NLP and machine learning. The chatbot can get balances, view transactions and make payments. With the help of automation
platform, customers can easily communicate with their concerned companies without any hassle. At the back-end, they have partnered with IBM
Watson for cognitive intelligence. And with Envestnet Yodlee for its data and API platform to deliver solutions to clients. They have built the platform
ground up and are working towards filing multiple patents. The company has raised $3.5M from IDG ventures and Kalaari capital.

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About MEDICI
MEDICI is the world’s leading FinTech Research and Global Contacts
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