One of the primary concerns for banks and financial services companies has always been around building and maintaining consumer trust. However, as the macro-economic and technological landscape rapidly shifts around us, fostering and navigating these trusted relationships has become increasingly challenging – leading financial services businesses to something of a crunch point.
Financial fraud has never been more prevalent in our lives, with emerging technologies and rapid technological advancement combined to ensure criminals are better equipped than ever before. Fraud is now the most prevalent crime in the UK, with research revealing over half of consumers describe themselves directly as a victim of financial crime.
The immediate implications of this for financial services businesses are significant. Accessible Generative AI tools allow scammers to instantly generate text, images, or other media formats to a high quality that are increasingly difficult to spot. Deepfake images are now being used regularly by criminals to create highly realistic imagery specifically designed to trick consumers into transferring assets or sharing sensitive information. With the lines progressively blurring between what’s real and what’s fake, consumers are in the firing line and at an increased risk of becoming victims of financial crime.
However, there are two sides to every coin. Just as some criminals may be using AI as a tool to commit financial crimes, so too can it enable counter and preventative measures to ensure consumers stay protected. AI is a critical weapon that financial services companies must have in their arsenal to ensure that they can stay ahead of fraudsters and maintain that trusted relationship with their customers. After all, as a customer of a bank, wouldn’t you want to know that the latest and most sophisticated technology was being used to keep you safe?
Implementing beneficial AI practices
Given the sheer volume of fraud and the huge payouts and fines that face companies that don’t adequately protect their customers, it’s no surprise that fighting financial crime is a topic that dominates boardrooms. No longer a sub-point within a CTO’s remit, effective deployment of preventative AI is now front and centre of many businesses’ strategies.
One of the primary issues that financial services businesses have traditionally faced is that different parts of the customer journey are siloed. So, for example, you may have one internal team and process that takes a customer through the signup and KYC stages, while another handles outbound payments or setting up new payees. Customer data often doesn’t flow smoothly between these different teams and processes, meaning banks can find it hard to build a complete picture of a customer. What are their habits? How do they typically use a bank’s services? What are the early warning signs that they may not be who they say they are? AI tools are now being implemented to allow banks to join these dots together, analysing huge databases with immense accuracy in nanoseconds, enabling them to spot and flag suspicious behaviour as early as possible.
These large connected databases, only made possible with AI advances, mean that a connected anti-fraud ecosystem has been created. This ecosystem utilises billions of data points to protect consumers around the world behind the scenes, spotting issues before they arise and shielding them from potential harm.
The trick here is balancing protection for customers and a smooth customer experience. In theory, a business could question every payment and decision a customer makes and prevent close to 100% of all fraud. However, customers would soon get tired of manually verifying every payment and would soon switch to another provider out of frustration.
The journey to better trust and relationships
Research revealed that while over half (56%) of all respondents in both the UK and US have been a victim of a financial scam, many still lack the knowledge to detect and distinguish between the various types of financial crime. It’s clear there is a duty of care, and most of all – a need to educate and inform customers on financial fraud risks. This is something that has to come largely from financial services businesses. As always, transparency and demonstrations are key to ensuring that consumers are aware of the risks out there, and are able to protect themselves.
Our research also found that over half (53%) of US and UK respondents feel safer knowing their bank uses AI to protect them. This is an important statistic that provides further incentive for financial services businesses to use AI – helping them get closer to their customers, and maintaining their trust.
Financial institutions will always be in a position of power – but as fraud increases and technology advances, businesses that don’t use AI to protect themselves face getting left behind, with customers leaving for those that they feel more secure with.
The regulatory roadmap
It’s no secret that regulation is coming to the AI space. Rapid sector growth has meant that AI has been pushed to the top of the agenda for regulators globally, with fraud and financial protection front and center. Indeed, regulators are already taking a pro-innovation approach to ensure that we can integrate AI into a safeguarded, competitive global financial services market that protects consumers.
We are at a critical inflection point when it comes to AI in the financial services space. As fraudulent practices accelerate globally and regulation starts to form, the next year will see seismic sector shifts. Technology will continue to advance at pace, and financial services companies, whether they like it or not, will have AI impact their business for good or bad. Those that stand still will get left behind, with customer trust bonds waning and fraud cases spiking. Those that continue to invest in the fight against fraud will benefit, both financially but also when it comes to maintaining and building customer trust.
