It’s no secret that there’s a lot of excitement around AI, regtech and blockchain. These transformative technologies are already being used to tackle some the financial industry’s biggest problems like fraud prevention and regulatory compliance.
IBM’s Vivek Bajaj, Global Vice President, Watson Financial Services Solutions, highlighted that these technologies don’t inherently have any value on their own, unless they are being used to solve specific problems. We caught up with Vivek following his keynote address at the 2018 Payments Canada SUMMIT to dive a little deeper on how these new technologies and collaborative approaches are shaping the financial ecosystem.
What opportunity do you think access to richer data offers the financial industry?
There is a lot to consider when it comes to the use of data. As I mentioned in my keynote, there are a few horror stories, for example the situation with Facebook and Cambridge Analytica, where privacy policies were not being used effectively, resulting in the misuse of the data. Also, there are scenarios where people get obsessed with analyzing data and finding trends.
The biggest change I’ve seen over the last year is the “less is more” approach to data, meaning that you need to be more narrow and specific in what you’re trying to solve. This also means staying away from big AI lab environments. If you put 20-30 data scientists in a room with any amount of technology they can make anything happen. What’s important to keep in mind is who the end user is going to be, such as Chief Compliance Officer, Chief Risk Officer and Chief Marketing Officer. It’s these end users who need to be able to interact with the technology in a meaningful way, based on real-production data.
The other important consideration is being able to interact with legacy systems and placing focus on delivering quick value. What I mean by quick value is that maybe five to seven years ago there used to be a lot of money in enterprise data, but that’s not the case now. Today you’ll need a more agile approach, based in sprints, that deliver direct business value.
How would you suggest a financial organization approaches using of AI within their respective company?
I can share the example of IBM where we’re using two approaches. First off, we’ve created a regtech sandbox, which is narrow in focus in that it’s not a full AI sandbox. This sandbox aims to address very specific use-cases around financial crimes and regulatory compliance, where clients can use some of our pre-built solutions to immediately see value.
With use cases in hand, the next step is something we call a cogni sprint, which is basically a sprint in six to eight weeks, using actual production-level data that you apply to a specific area. At this step, you could use the Watson Regulatory Compliance to identify if the output solutions are actually helping you meet obligations. If the answer is yes, then the next step could be to extend to your next level of regulations.
In your keynote, you gave some examples of blockchain in action and the role collaboration is playing when it comes to its use in the financial industry. Can you share more on this topic?
Applying blockchain to supply chain management is a no brainer. For example, we’re actually seeing this technology being used to verify the authenticity of diamonds coming from Africa. This is a perfect storm because the process of exporting involves so many intermediaries, it’s document rich, and this industry is subject to a lot of fraud.
In the world of financial services and payments, I mentioned in my keynote the launch of IBM’s universal payments platform, which is designed to execute real-time payments leveraging a blockchain, Hyperledger-based environment. We’re beginning to see some clients already adopting this payments technology. I also shared the example of WeTrade and the example coming from Central Bank of Singapore. In Singapore, they are facilitating a shared environment for banks to exchange Know Your Customer information. For instance, they’ll say Vivek is my customer, but he wants to be a customer with one of our competitors. In the past banks would never share that information, but they’ve recognized that Singapore has a small population and most of the people living there have accounts with more than one bank. They’ve realized that if one bank has effectively gathered the Know your Customer information, it is still usable and valuable to another bank.
From my perspective, I definitely think the type of cooperation we’re seeing around the use of blockchain has finally made people understand the value of collaboration — because it’s not like you’re giving away your crown jewels or any secrets. All you’re doing is reducing operational costs and you’re improving security and efficiency by collaborating with each other. In fact, your client base will increase. In the instance of WeTrade, a Belgian bank is able to trade in Poland. They could probably still do this in the past, but it was not economically viable.
Watch Vivek Bajaj’s keynote speech, How cognitive, regtech and blockchain are transforming financial services from the 2018 Payments Canada SUMMIT.