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Artificial Intelligence and Digital Banking - What about fraud prevention ?

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Artificial intelligence for banking fraud prevention.
A presentation on how it takes its root in the digitalisation ways and how it impacts customer experience.

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Artificial Intelligence and Digital Banking - What about fraud prevention ?

  1. 1. NETGUARDIANS Artificial Intelligence for banking fraud prevention - Impacts on customer experience Geneva / Jun 2017
  2. 2. © 2018 NetGuardians SA. All right reserved2 NetGuardians - TOP European FinTech Funded in 2008 50 customers 60 employees • Behavioral analysis based on risk models combining human actions relative to channels, technical layers and transactions. • Stay on top of new anti-fraud patterns using Artificial Intelligence LayersChannels Transactions Jérome kehrli (beloved CTO)
  3. 3. The banking business is under heavy transformation for 10 years
  4. 4. The era of Power …
  5. 5. We are inter-connected on different kind of medias during a continuous time for every possible need
  6. 6. © 2018 NetGuardians SA. All right reserved7 Evolution of means • Internet of everything • Consumerization • Mobile usage developments • Power of crowd • Availability/volume of data Evolution of behaviours • Digital literals / Milenials • Immediacy • Infectiousness • Individualization • Multiplication of behaviours Organization / Processes • Agile Corporation • Devops • Management 3.0 • Flat organization • Customer Centricity Corporate Culture • Lean Startup • Customer Development • Autonomous teams • Operational Efficiency Marketing approach • Digital Marketing • In- / Out- bound marketing • Mass customization / implication • Profiling / Behaviour prediction • Co-creation / Co-innovation influence / force transform Technology • Mobility • Open Source Software • Open Data • Open API • Big Data • NoSQL / NewSQL • Machine Learning • Deep Learning • Cloud • Multi-Data Centers clusters • Internet of things • Web 3.0 • Fiber last mile • 5G / SUPERFLUIDITY • Social Networks • Mobile wallets • Blockchain • New Human-Machine Interfaces • Virtual Reality • Augmented Reality Induces Enables Digital Transformation
  7. 7. Challenges Competitiveness • Fair price / clarity • Innovate / Adapt fast • Simplicity / Efficiency • Tailor-fit / personalization Marketing and Branding • Reputation (seriousness and trust) • New channels Risk Management / Mitigation • Reduce intervention delays • Continuous monitoring • Fraud detection • AML Transaction Monitoring • Compliance Operational Efficiency • Process automation • Process efficiency • Reduce intervention delays Customer centricity • Make customer autonomous • Inspire needs • Listen to demands • Meet the customer Customer Satisfaction • Availability (24/7) • Walk the talk • Give visibility Digitalization / Challenges
  8. 8. Benefits Competitiveness • Simple products • Customizable products • Co-creation / innovation • Personalized service • Efficient Service Marketing and Branding • Digital Marketing • Sandboxes (Try  Buy) • Convergence of networks (enterprise and private) Risk Management / Mitigation • KPIs / KRIs follow up, dashboards • Data Analytics (Big Data, AI) • Smarter / Deeper / Faster controls • Fraud prevention • Real time Operational Efficiency • Process dematerialization • Paperless corporation • Digital signatures • AI analytics Customer Centricity • Understand customer needs • Adapt to customer channels • In- & Out-bound marketing • Finer segmentation Customer satisfaction • 24/7 Support availability • Customer Follow-up processes automation • Open price / product comparison Digitalization / Opportunities
  9. 9. Where does AI kick-in ?
  10. 10. © 2018 NetGuardians SA. All right reserved11 Artificial Intelligence in the financial industry • Smarter banks! • Three major ways: • Customer experience revolution • AI Analytics and personalized / customized advisory • Risk Mitigation : Fraud Prevention / AML / Compliance
  11. 11. © 2018 NetGuardians SA. All right reserved12 1. Customer Experience revolution Chatbots / Voice Assisted Banking  Computer handles most customer requests - No waiting line anymore - No more visiting a branch - When I want, where I want, how I want Voice chatbot Ask device (speech-to-text) and get information needed for vital transactions (text-to- speech) Luvo Chatbot Whats’app type interactions: answer customer requests and performs simple banking tasks (FT, etc.) Erica (voice) Chatbot Answers customer requests forecasting, saving and investment recommendations, etc.
  12. 12. Challenges Competitiveness • Fair price / clarity • Innovate / Adapt fast • Simplicity / Efficiency • Tailor-fit / personalization Marketing and Branding • Reputation (seriousness and trust) • New channels Risk Management / Mitigation • Reduce intervention delays • Continuous monitoring • Fraud detection • AML Transaction Monitoring • Compliance Operational Efficiency • Process automation • Process efficiency • Reduce intervention delays Customer centricity • Make customer autonomous • Inspire needs • Listen to demands • Meet the customer Customer Satisfaction • Availability (24/7) • Walk the talk • Give visibility Challenges 1. Customer Experience revolution
  13. 13. Benefits Competitiveness • Simple products • Customizable products • Co-creation / innovation • Personalized service • Efficient Service Marketing and Branding • Digital Marketing • Sandboxes (Try  Buy) • Convergence of networks (enterprise and private) Risk Management / Mitigation • KPIs / KRIs follow up, dashboards • Data Analytics (Big Data, AI) • Smarter / Deeper / Faster controls • Fraud prevention • Real time Operational Efficiency • Process dematerialization • Paperless corporation • Digital signatures • AI analytics Customer Centricity • Understand customer needs • Adapt to customer channels • In- & Out-bound marketing • Finer segmentation Customer satisfaction • 24/7 Support availability • Customer Follow-up processes automation • Open price / product comparison Opportunities 1. Customer Experience revolution
  14. 14. © 2018 NetGuardians SA. All right reserved15 2- AI Analytics and personalized / customized advisory Analyzing a huge volume of data and/or track transactions in real time  provide customized financial advices, forecasts and investment opportunities  Real-time profiling and risk scoring  Advanced investment research Automated lending process approve commercial real estate loans up to $2.7 million in less than 45 minutes Virtual research agents investment research to near- human levels, screen market data, SEC filings, do company valuation, etc. SmartWealth (robot-advisor) AI recommended personalized portfolio, bring fees attached to investing down to attract customers
  15. 15. © 2018 NetGuardians SA. All right reserved16 2- AI Analytics and personalized / customized advisory Challenges Competitiveness • Fair price / clarity • Innovate / Adapt fast • Simplicity / Efficiency • Tailor-fit / personalization Marketing and Branding • Reputation (seriousness and trust) • New channels Risk Management / Mitigation • Reduce intervention delays • Continuous monitoring • Fraud detection • AML Transaction Monitoring • Compliance Operational Efficiency • Process automation • Process efficiency • Reduce intervention delays Customer centricity • Make customer autonomous • Inspire needs • Listen to demands • Meet the customer Customer Satisfaction • Availability (24/7) • Walk the talk • Give visibility Challenges
  16. 16. © 2018 NetGuardians SA. All right reserved17 2- AI Analytics and personalized / customized advisory Benefits Competitiveness • Simple products • Customizable products • Co-creation / innovation • Personalized service • Efficient Service Marketing and Branding • Digital Marketing • Sandboxes (Try  Buy) • Convergence of networks (enterprise and private) Risk Management / Mitigation • KPIs / KRIs follow up, dashboards • Data Analytics (Big Data, AI) • Smarter / Deeper / Faster controls • Fraud prevention • Real time Operational Efficiency • Process dematerialization • Paperless corporation • Digital signatures • AI analytics Customer Centricity • Understand customer needs • Adapt to customer channels • In- & Out-bound marketing • Finer segmentation Customer satisfaction • 24/7 Support availability • Customer Follow-up processes automation • Open price / product comparison Opportunities
  17. 17. © 2018 NetGuardians SA. All right reserved18 3- Risk Mitigation : Fraud Prevention / AML / Compliance Monitor transactions in real-time for Fraud Prevention and / or AML  React proactively and inform the customer Behavioural analysis - users  internal fraud - customers  external fraud) Fraud detection (Big Data) ML algorithms comb through huge transactional data sets to spot unusual behaviour AML (Big Data) analyse internal, public and transactional data within a customer’s network to spot rogue behaviour Fraud prevention (Big Data) AI to analyze behavioural data and transactions to detect suspicious behaviour and transactions in real time
  18. 18. © 2018 NetGuardians SA. All right reserved19 3- Risk Mitigation : Fraud Prevention / AML / Compliance Challenges Competitiveness • Fair price / clarity • Innovate / Adapt fast • Simplicity / Efficiency • Tailor-fit / personalization Marketing and Branding • Reputation (seriousness and trust) • New channels Risk Management / Mitigation • Reduce intervention delays • Continuous monitoring • Fraud detection • AML Transaction Monitoring • Compliance Operational Efficiency • Process automation • Process efficiency • Reduce intervention delays Customer centricity • Make customer autonomous • Inspire needs • Listen to demands • Meet the customer Customer Satisfaction • Availability (24/7) • Walk the talk • Give visibility Challenges
  19. 19. © 2018 NetGuardians SA. All right reserved20 3- Risk Mitigation : Fraud Prevention / AML / Compliance Benefits Competitiveness • Simple products • Customizable products • Co-creation / innovation • Personalized service • Efficient Service Marketing and Branding • Digital Marketing • Sandboxes (Try  Buy) • Convergence of networks (enterprise and private) Risk Management / Mitigation • KPIs / KRIs follow up, dashboards • Data Analytics (Big Data, AI) • Smarter / Deeper / Faster controls • Fraud prevention • Real time Operational Efficiency • Process dematerialization • Paperless corporation • Digital signatures • AI analytics Customer Centricity • Understand customer needs • Adapt to customer channels • In- & Out-bound marketing • Finer segmentation Customer satisfaction • 24/7 Support availability • Customer Follow-up processes automation • Open price / product comparison Opportunities
  20. 20. Artificial Intelligence for Banking Fraud Prevention - NetGuardians’ approach
  21. 21. © 2018 NetGuardians SA. All right reserved22 Rising Cyber Fraud threats https://www.bankinfosecurity.com/bangladeshi-bank-hackers-steal-100m-a-8958
  22. 22. © 2018 NetGuardians SA. All right reserved23 Another Example : The Retefe saga… “This threat actor has already been around for more than four years... Their goal remains the same: committing e-banking fraud in Switzerland and Austria. In August 2017, Retefe still redirects between 10 and 90 e-banking sessions every day. “ https://www.govcert.admin.ch/blog/33/the-retefe-saga
  23. 23. © 2018 NetGuardians SA. All right reserved24 First steps : rule-based approach. • In the late 2000’s, cost of fraud and complexity of attacks increases. • Banking Institutions deploy analytics systems for fraud prevention • Rule engines (often AML) • Nobody seriously considers Artificial Intelligence and Machine Learning • NetGuardians was a rule engine 2008 2015 2016 2017 2018 IF payment destination country is risky (e.g. Russia) AND payment amount is greater than 10’000 CHF THEN flag transaction for review
  24. 24. © 2018 NetGuardians SA. All right reserved25 Every bank customer is different Hundreds of thousands of rules would be required to reflect everyone’s situation 2008 2015 2016 2017 2018
  25. 25. © 2018 NetGuardians SA. All right reserved26 Artificial Intelligence comes in help The machine can learn about habits of individuals and detect suspicious transactions • Analysis of transactions on several years  Learn about habits and behaviors of customers and employees  Build dynamic profiles  Keep profiles up-to-date in real-time • Compare transactions with customer/user profile • Compute a risk core and take a decision 2008 2015 2016 2017 2018
  26. 26. © 2018 NetGuardians SA. All right reserved27 The Machine can do better Group individuals based on their similarities and compare a transaction to the group • Analysis of transactions on several years • Broad Vision – Big Picture  Discover and learn peer groups: the customers or employees with same habits and same behavior  Build peer group profiles dynamically • Compare transactions to the customer and peer group profiles 2008 2015 2016 2017 2018
  27. 27. © 2018 NetGuardians SA. All right reserved28 Even further … 2008 2015 2016 2017 2018 For instance Internet Banking applications: Learn about non-transactional behavior paths and qualify individual interactions based on path-to-action • Analyze all interactions between individuals and the bank IS • Probabilistic learning of path-to-action • Compare every single individual interaction with model • Customer-based / group-based (as usual) • Applications : ebanking, EAM, API banking, PSD2, etc. Genuine User Login Account Balance Payment Input Payment Validation Pending Orders Logout Worm(virus) Login Payment Input Payment Validation Logout
  28. 28. © 2018 NetGuardians SA. All right reserved29 The results of the approach Traditional Static rules Profiling and machine learning on banks’ existing data NetGuardians Unknown fraud patterns Known fraud patterns Reduction in false positive rate Time saved in fraud investigation Fraud detection rate https://www.netguardians.ch/s/case-study-tzcf.pdf
  29. 29. Impacts on Customer Experience
  30. 30. © 2018 NetGuardians SA. All right reserved31 Today : digital call-back Mobile app SECURE GATEWAY FIREWALL|WAF e-banking customer Customer Transactions Monitoring F. Trn Freeing _ Trn. Blocking _ Notifi- cations Notification Push Signed Approval or Rejection Banking Information System A E B C D F G
  31. 31. © 2018 NetGuardians SA. All right reserved32 Tomorrow: yet another chatbot use case Voice Call FIREWALL|WAF e-banking customer Customer Transactions Monitoring F. Trn Freeing _ Trn. Blocking _ Banking Information System A B C H Bank Voice Chatbot Notifications Assess customer identity Assess transaction legitimacy E D F G
  32. 32. Digital Banking in the coming years
  33. 33. © 2018 NetGuardians SA. All right reserved34 The future of Digital Banking • Powered by AI, tomorrow’s world should provide a seamless banking experience • Like Uber, Amazon, Netflix • How do you get there ? • Make most of the customer data • Use AI savings to fund AI customer experience initiatives. • Form a special team to drive AI programs. FinTech provider FinTech provider FinTech provider CoreBankingProvider Digital Banking Interface FinTech provider APIBus(PSD2,etc.) DigitalChannels Customers
  34. 34. © 2018 NetGuardians SA. All right reserved35 KMA Centre , 7th floor, Mara Road Upper Hill, Nairobi, Kenya T +254 204 93 11 96 NetGuardians Africa 143 Cecil Street #09-01 GB Building 069542 Singapore T +65 6224 0987 NetGuardians Asia Koszykowa 61, 00-667 Warsaw, Poland NetGuardians Eastern Europe Y-Parc, Av. des Sciences 13 1400 Yverdon-les-Bains Switzerland T +41 24 425 97 60 F +41 24 425 97 65 NetGuardians Headquarters Rhein-Main Gebiet Germany T +49 172 3799003 NetGuardians Germany @netguardians Linkedin.com/company/netguardians Facebook.com/NetGuardians www.netguardians.ch info@netguardians.ch +41 24 425 97 60 Contact us THANK YOU!

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