Machine Learning Helps Financial Institutions Balance Risk


Five years ago, the bank’s digital transformation focused on a product or a business, but more recently, innovation has become an imperative. This was accelerated by the pandemic, which created an immediate need for frictionless integration with customers and the ability to support faster payments.

“We’re seeing a combination of activity aimed at rethinking current strategies to expand them, but also taking a fresh look at how they approach it,” said Todd Raque, head of financial crimes compliance and anti-money laundering at Featurespace, PYMNTS.

In the space in which it operates, the focus is on how to be more effective in using the digital experience in interacting with customers and how to be more proactive in identifying emerging risks. . With the push to digital, there has been an increase in fraud and financial crime.

“Being in a digital environment and trying to be more innovative leads to greater exposure to threats from a financial crime perspective,” Raque said.

Managing the main risks associated with digital transformation

Two of the main risks businesses face when embarking on their digital transformation are cyber risks related to unauthorized use and the risk of data loss or leakage. To manage cyber risks, organizations must maintain the integrity of their system, and to prevent data loss or leakage, they must ensure data protection across the ecosystem.

“Because the implementation approaches are intertwined and rely heavily on partnerships and third-party vendors, you need to manage these risks with respect to establishing a relationship with a third party that helps you deliver modernization efforts. “, Raque said.

Digital transformation also offers new and innovative ways to fight financial crime. For example, machine learning provides supervised and unsupervised approaches to identify and detect suspicious activity.

Machine learning broadens the view of the business in terms of identifying items of interest or potentially suspicious activity, bringing the context of previous transactions to identify outliers that may be worth investigating. It also provides operational efficiency because it focuses on the things that matter from an investigative perspective, rather than the things that give false positives.

Support frictionless customer onboarding, interaction and payments

As companies seek to modernize, they should have a coordinated and holistic framework for how to manage risk, Raque said. Different stakeholders within the organization will have different views on risk, so there should be a consolidated framework to identify, manage and manage risk.

Companies should also ensure that their support for reasonable innovation aligns with their overall risk appetite and governance structures.

“I think you have to be proactive in your relationships when you go down that road with your partners, the suppliers that you work with, but also from a regulatory perspective, where you’re engaged in the right level of conversation, that you ‘re getting everyone and everyone aligned to the same results,” Raque said.

In the coming years, there will be more progress in terms of leveraging innovation, Raque said. On the one hand, from a regulatory perspective, there will likely be new clarity and guidance, particularly with regard to anti-money laundering (AML).

“Everyone is used to a mobile experience, and that’s the channel that most customers are going to engage with you, so there’s a huge opportunity to leverage all of those things together and leverage the new capability of some of these technologies – not just in the fight against illicit finance and financial crime, but to help support a frictionless customer onboarding, interaction and payment experience,” Raque said.



On: Forty-two percent of US consumers are more likely to open accounts with financial institutions that facilitate automatic sharing of their bank details upon sign-up. The PYMNTS study Account opening and loan management in the digital environmentsurveyed 2,300 consumers to explore how FIs can leverage open banking to engage customers and create a better account opening experience.


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