Tech

Increasing number of financial crime: How to curb them?

Financial crime, in the recent years has been so rife nor so sophisticated. Let us consider an example: the government’s pandemic support loans have been a high-profile victim of financial crime in recent months with over £1.1 billion of suspected fraud prevented so far in the ‘Bounce Back’ scheme alone. Governments and large banks are dealing with large-scale financial crime and have technology help them fit their broad needs, but what about smaller institutions that are under the same pressures as their larger counterparts?

Money laundering is one of the main problems the industry is currently tackling with fines topping £36 million in the first six months of 2020. Small and Medium-sized banks are especially at risk of suffering breaches and with far fewer resources to work with compared to larger institutions, they need more support. Existing anti-money laundering applications are often not flexible and are incomplete for smaller financial institutions to maximise efficiency.

The most vulnerable are the hardest hit:

Smaller banks are forced to pay high even in the worst times. They need systems that can scale and improve and go ahead with acquisitions, as they expand and grow in the market, and that will protect them as the risk of money laundering and other illegal activities have seen an upsurge during this unprecedented time. In short, they need access to high end technology that big banks employ, but tailored for them in an easy to manage, cost-effective way.

Smaller financial institutions, just like larger financial institutions find their anti-money laundering programmes plagued by low detection rates and high false positives. Larger financial institutions can afford effective solution for tackling this problem. These include building new machine learning models in-house, new scenarios while working with niche vendors to tackle specific issues, or purchasing a best-in-class, end-to-end solution. Subsequently, smaller financial institutions have fewer resources to build these capabilities. In the same way, their core anti-money laundering system should look at elevating its detection effectiveness and accuracy on its own.

A new generation of anti-money laundering technology

In light of these special needs and threats directed at smaller banks, a new kind of protection is required. The new software it employs needs to offer the same quality of protection enjoyed by larger banks without the time and expense required to implement and maintain an on-premise solution. Managing a good cloud service will prove as the key to tackle this issue. Solutions based in the cloud and integrated end-to-end offer key advantages and are much better than traditional programmes. For smaller banks, every passing minute and hour is crucial and cannot afford to be squandered on managing time-consuming deployments and upgrades. These innovative solutions are largely self-sufficient. They are equipped with a strong base of industry-approved watch lists and sanctions lists along with inbuilt tools for analysis, threshold simulation, custom scenario design, and tuning. This is the input the software needs to detect and prevent money laundering attempts at accelerating speed and efficiency with less and less oversight. This reduced need for human intervention helps save crucial hours for already overstretched IT and anti-money laundering teams to deal with more complicated issues that require their experience and personal touch.

Another major advantage of cloud-based programming is the ease of scaling and reconfiguring to each bank’s specific needs. Banks can purchase the services relevant to the specific needs and vulnerabilities of their customer, rather than having to invest in systems that will rarely create value for the group. Subsequently, the banks may start investing more in this infrastructure as they grow, adding new services or expanding their existing capabilities as they need them. The cloud is also far more cost-effective and productive way than any traditional equivalent. Not only does this eliminate the need for additional hardware and middleware, it also removes the installation costs, and implementation costs are reduced.

A new future for banking

Financial crime will not be disappearing any time soon. Mid-sized and small-sized banks are particularly vulnerable, as they are failing to enjoy the same modern crime detection afforded by bigger banks. But newly designed tools to fit their unique needs and requirements can help them survive this environment, particularly when it comes to anti-money laundering applications. Cloud-based protection provides the much needed flexibility and capability that smaller financial institutions need in an easy to manage and cost-effective way. By focusing on optimal cost without compromising on efficiency and effectiveness, cloud solutions can help mid-sized financial institutions stay safe, compliant, and ready for business growth.

Related Topics:Financial Crime Laundering

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Tech

AI role in customer experience in banking

The concept of banking first sprung up around 8000 BC. Then, there came various drastic changes to expand their services and innovate their business models. Artificial Intelligence (AI) and Machine Learning (ML) are applied to help banks and financial institutions nowadays. A survey by the Economist Intelligence Unit (EIU) showed that 77% of banking executives believe that the use of AI will ultimately differentiate between winning and losing banks.

This pandemic has triggered a sudden socioeconomic shift from physical to digital. There is a rapid switch to digital channels. Recent research by YouGov was conducted in June 2021. And that revealed that digital services have become the de facto way of conducting business and access services during the pandemic. EIU’s survey showed that enhancing the user experience through better personalisation ranked first in the most valuable uses of AI.

Customer propositions are no longer fit-for-all. It involves both banking and non-banking products and services. To identify the customers’ needs the banks must take an entirely new approach to innovation. They should adopt a customer-centric view. This starts with understanding the customer needs. AI makes it much easier to analyse customer preferences. The redesigning of customer loyalty program gives banks an accurate understanding of customer. Effective personalization offers customers not only better leads but also a more unique experience. The customer experience can be improved by applying AI. Banks must also build out their capabilities to strike new partnerships.

Businesses across all industries are working hard to retain their customers, including banks. AI can become a banking institutions’ superpower. This can take the customer experience to new heights, resulting in happier and more loyal customers. It will also reduce a bank’s operating costs and enable increased revenue per customer. To become AI First, banks must focus on streamlining their technology layer. They also require a strategy to engage customers through channels owned by them and their non-banking partners. Business and technology must work hand in hand, with cross-functional teams breaking up organisational silos.

Tech

Amazon to offer insurance to UK businesses

The technology giant’s first foray into business insurance in the country, broker Superscript said that Amazon is going to start offering insurance to small and medium-sized UK business customers. Members of Amazon’s Business Prime program will be able to buy cover from superscript such as contents insurance, cyber insurance and professional indemnity insurance. Superscript spokesperson said that those would be underwritten by major UK insurers. A discount of 20% will be offered to current rates. This is to entice the businesses over to them.

50% of customers are prepared to buy insurance from non-traditional players. A recent survey of 12,000 people globally by consultants Capgemini showed this. Cameron Shearer, co-founder and CEO of Superscript, said in a statement that the insurance industry needs to bridge the divide between insurers and customers. Amazon’s move into UK business insurance comes after U.S. insurtech Next Insurance said that it was offering cover to U.S. small businesses. And that too via Amazon Business Prime. Molly Dobson, Country Manager for Amazon Business UK & Ireland, said in the statement that as the businesses come out of the pandemic, they want customers to have the best-in-class tools to run their business.

Financial institutions are worried that tech firms will steal their business. But industry sources said that the insurers and tech firms are more likely to forge partnerships. Because of the given difficulties and expense for outsiders in entering the highly regulated finance sector. Amazon also offers warranty insurance and “buy now, pay later” services in Britain.

Tech

In NFT fantasy soccer game, SoftBank leads funding

Blockchain-based fantasy soccer game Sorare has raised $680 million. This is through a funding round, which is led by SoftBank. According to the company, it includes players such as ex-England international Rio Ferdinand and Spain’s Gerard Pique. Paris-based Sorare said that the investment valued the company at $4.3 billion. Sorare is an online game, since 2018. Here players buy officially licensed cards that represents soccer players. They can build teams and play against each other. This is based on the players’ performance in real-life games.

The cards are traded in the form of non-fungible tokens (NFTs). The market for NFTs has seen major growth in 2021. Michel Combes, president of SoftBank Group International, said that they think NFTs represent a new paradigm in the collectability, usability, and engagement with assets. This evolution from physical assets to digital assets is very powerful. This also creates a lot of exciting potential business models. NonFungible.com is a website that tracks NFT market data. According to them, Sorare is the largest sports-based NFT platform by sales volume. They are planning to open an office in the United States. So that they can expand into other games out of Sorare.

Nicolas Julia, CEO and co-founder of Sorare said that they saw the immense potential that blockchain and NFTs brought to unlock a new way for football clubs, footballers, and their fans to experience a deeper connection with each other. They believe that this is a huge opportunity to create the next sports entertainment giant. Since January 2021, there have been $150 million of sales on Sorare. The fundraising round was SoftBank’s first time investing in Sorare. SoftBank’s Latin America fund also contributed. Other investors in Sorare’s raise are such as venture capital firms Accel and Bessemer Ventures, Pique, Ferdinand, Antoine Griezmann and Spain’s Cesar Azpilicueta.