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EBAday: Banks exploring new strategies in AI, data, and cloud

EBAday: Banks exploring new strategies in AI, data, and cloud

The afternoon of the first day of EBAday kicked off with the panel ‘How new technologies are transforming banking’ in breakout room 2. Panelists Cal Corcoran, vice president and global head of banking at Microsoft, Simone Lofgen, managing director of payments platforms at Commerzbank, Andre Martins, head of banking innovation and open finance at NTT Data, and Simone Satan, global head of digital market management and treasury services at BNY Mellon discussed AI, cloud computing, and innovative automation technologies being used to transform the payments industry in a session moderated by Graeme Jeffrey, partner at Bain & Company.

With the rise of ChatGPT and the incoming AI race among Big Tech, AI has become a hot topic in the banking industry. Satan said the three main use cases in AI currently is risk management, fraud detection, and data analysis that can facilitate all of the above. Martins stated that AI can inspire loyalty through hyper-personalisation and enhanced customer experience. He added that by democratising data more meaningful results can be extracted and better customer understanding can be integrating within operating systems. 

Commenting on g
enerative AI solutions, Lofgen described a transformation in the AI industry and that Commerzbank has been in conversation with ChatGPT. 

She continued: “E
verything starts with data because of course an AI can only learn what you provide as input and I think that is something specifically relevant when we look in the payments space. When we are looking to statistics 90% of useful data in banks come from payments. Most of the information is in payments, and fraud is the most important use case. There will be a rise in fraud. Getting faster in our detection of fraud and really understanding that process is where AI can add speed and efficiency. I don’t want to say that AI will replace human interaction, I think profiles are changing and make all operating processes much leaner much more efficient, and then use people for more value added services instead of copying data from A to B.” 

On the ethical concerns of AI, Corcoran explained that Microsoft is intent on maintaining responsible AI standards. Corcoran emphasised that AI needs to be designed with transparency and with intention to advance society and the government. It also needs to be accessible. Money must be set aside for policing for technology, and it will take time for all of these measures to be put in place. 

Moving on to the talent in the AI field, 
Lofgen stated that training is essential to enable AI application, and Satan added that skills need to be consistently refined to get a better understanding of new technology:

“Rescaling the workforce is a key topic. To bring everyone within the organisation up to speed, it's not just only about hiring staff retain the right expertise, but it's also how you train your existing employees. For the team that I manage, I want to make sure they keep up with all the technology that's coming in. I recommend them to take time every week to educate themselves, to read whitepapers or to listen to podcasts to get a better understanding of the new technology.”

On robotic process automation (RPA), Corcoran notes that there is a demand for improved customer experience and AI chatbots, but there is an issue with how RPA is being deployed at banks. He expounds: “It is 
particularly terrible atbanks, they have a lot of the bots that run to the thousandsThey have used the word RPA tooling as essentially sticking aplaster over the complexity of how they are structured, and are not willing to go through the pain of defining the processes, optimising the processes, documenting the process,and actually cleaning up how they operate. They use RPA tooling as a coping mechanism.

On the developments that banks are seeing whilst embarking on their cloud journeys, Martins noted that the financial industry is still in its early stages of the cloud. He explained that cloud has not reached its full potential as many banks are still navigating on whether to use public or private cloud, to go hybrid or commit to one cloud provider. 

However, he was optimistic on the market for scalability: “F
rom my perspective, cloud it still doesn't reach its full potential that we want from the beginning of the journey.AI will be one of the catalysers of this experience. I think we are going to see a lot more in of it in the future.

panelists expressed that there are negative aspects to new technologies, including AI biases, ineffective automation processes, and lack of training, but there is a wealth of innovation in which the banking industry is in the process of adopting, and the kinks can be worked out to create more exciting, seamless, and efficient services. 

In the session ‘The clever use of data’, panelists explored the extensive forms in which data is being 
utilised in the financial industry to boost growth and customer experience. Speakers Paulo Barbosa, COO at Banfico, Edward Chandler, SVP and head of commercial and money movement solutions for Visa Europe, Fabian Khoshbakht, global head of client insight and innovation at BNY Mellon, and Edwin Sanders, strategy payments lead at Rabobank, were moderated by chair elect from ISO TC68 SC2, Lauren Jones. 

Data is becoming a commodity and there should be a balance between the 
commoditisation of data and security standards. Khoshbakht commented that there has been a change in the guidance on how data is protected, as in earlier eras of online presence and digital banking, it was emphasised for data to be protected and private, but now there is a demand for open data and sharing data. He expressed that he does not see data as an El Dorado or Holy Grail, but a piece of a larger puzzle. 

On Visa’s approach to customer data, Chandler stated: “W
e believe in this thesis to enable that data to be put to good use, then you need to have some really strong frameworks around them, whether they're local frameworks, consent management frameworks, or others. We will need to evolve as the data ops and be able to deliver to our clients and customers.”

From the perspective of a commercial bank, 
Khoshbakhtstated that BNY Mellon is focused on consuming data and turning it into something actionable for their clients. The specialty of such commercial banks is to consumer data and bring is back to the demands of the consumer. 

He explained: “
I think the key is more about using data to understand what your clients are doing and why and how, and leveraging that to take it back to them. We talked about mining data. You combine as much data as you like, but it's really pulling out what we see, whether it's trends, analysis, or common patterns. For me, it's more about how can I create value for our clients using their own data.”

Sanders noted that there is a significant difference between Big Tech and banks in the description of data as a pot-of-gold commodity, he explains: “T
here is a difference in what financial institutions can do with data and for example, Big Tech like Google. There are two differences: we believe that it's the customer's data instead of our data, and there is a social contract between financial institutions and society that we use data, but responsiblyI think when it comes to the El Dorado effect, it's about monetising. I do believe that some kind of ElDorado where we can help customers much more in their daily life by using the data we already have. We did quite well as banks in general to digitise but we didn't digitise the emotional layer, and we can use digitise that with the data we see.

Open banking opened up a space for 
fintechs to innovate and it persuades legacy banks to catch up, and it opened up the industry for data democratisation. However, with the wave of data coming into banks and fintechs, security and regulation becomes more important and needs to keep up with the sector and place checks on industry leaders. 

Barbosa commented on how open banking has 
revolutionisingthe data democratisation process and regulation:

“It a revolution in the sense that it forced banks to keep people away. I think the regulators were quite ambitious. At the beginning, the banks were not so happy with this initiative, but that was in a way a small revolution. We are not at the stage yet where we see fintechs and even banks do everything.We need to include also GDPR and other regulatory initiatives that we saw run into that they gave this notion to the consumer that is, I'm the owner of this thing and I give access to someone else. We are seeing that other countries are continuing with regulatory initiatives and turning in new open finance, open data, and the pool of data is only getting bigger.”

Data is rapidly becoming a key aspect of the financial industry and all players are greedy for more data to create better offerings and services for consumers. However, not all data is put to good use and the industry needs to come together with regulators and policymakers to ensure that customers are protected and that data is used responsibly.

In the panel ‘Bridging the cloud migration gap’, speakers discussed how cloud is driving digital transformation and in what ways banks are leveraging the cloud to enhance their operations. Panelists include head of product in Europe and new markets at Form3, Erik 
Alstromer, head of sales and marketing at IntercopeDaragh Kirby, senior director of global solution consulting payments at Finastra, Amelia Ruiz Heras, and solution architect at Engine by Starling Bank, Paul Williams, moderated by chief information officer at Payments Canada, Shawn Van Raay

There are 
organisational challenges that prevent larger institutions to embrace the cloud, particularly a struggle with adapting the mindset and designing a new architecture.Alstromer advised that major institutions should focus on adapting the mindset within the company first before moving to adopting cloud migration technologies

The larger, more mature companies who can dip a toe in the cloud but doesn't really run much on discovered moments. Well, those ones I'd say the challenges are mainly organisational, rather technical. Organisational in a sense that there are inherent features of the company's processes which prevent them from moving to the cloud. The way they design architect deploy cases are not always compatible with unplanned offerings. There needs to be a mindset shift in process around how they do all these steps from top to bottom.

explained that fintechs are keen to go to the cloud, but more traditional, tier one banks are more hesitant. “The regulator needs to help with the push towards the cloud so that the pioneers don't end up in the cloud and somebody says they aren't risking their transaction banking career. There are lots of challenges, but I think the buzz has gone out and maturity starting to come into it.

Heras stated that she sees the cloud as an opportunity to experiment and play with new innovative offerings without disrupting business as usual. The cloud allows banks and companies to create their own 
fintechs to test the paradigm shift involved with migrating to the cloud and how they can operate under their technical term in a new space. 

Heras highlighted her point: “
I see it as a very exciting opportunity to play with it to create with a reduced risk and reduce costs, new propositions for customers. At the end of the day, there is a disconnection between the traditional banking and creating products and offerings focus on very traditional values of banking and now, the new means, open finance, open banking, an ecosystem that has different layers connecting to data and services of banks. You can only play into that ecosystem through the cloud.

Williams added to Heras’ point in that the cloud opens up a space for engineers to play with new technologies and 
visualise if what they are making can become something of value. 

Remarking on the possibility of legacy banks using their traditional infrastructure while migrating partly onto the cloud, Williams said: “C
an you run a hybrid system with legacy and cloud? I think my suspicion is a lot of organisations once they start to go down that road, and they look at the relative productivity that people want. You have got a very agile productive team working on the cloud side of things, and then you have a team on the legacy side and theyare struggling with change, whereas the agile team is racing ahead. Why not put in the effort to get the advantage of the cloud? Once you dipped your toes, why would you not go to all in?”

There is risk involved in the transition to the cloud and institutions with legacy infrastructure are struggling to initiate the push to migrate due to being stuck in their current mindset. However, the benefits of the cloud are evident in the possibilities to scale up at a rapid pace, innovate real-time services, and save costs on data. The panelists concluded that institutions do not need to use an ‘all-or-nothing’ strategy when it comes to the cloud, but it is essential for larger banks to keep up with born-on-the-cloud 
neobanks and fintechs that are leveraging the cloud to get ahead.

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