How Hsbc Uses Ai to Boost Its Digital Banking Immune System
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HOW HSBC USES AI TO BOOST ITS DIGITAL BANKING IMMUNE SYSTEM FEATURE STORY NEWS & TRENDS SCORECARD HSBC’s head of innovation on Reserve Bank of India reports a 50 The top movers and shakers in why the human touch makes AI percent increase in cyber fraud the digital banking space more effective06 10 20 JANUARY 2019 © 2019 PYMNTS.com All Rights Reserved 1 DIGITAL BANKINGTRACKER™ TABLE OF CONTENTS What’s Inside A look at how fraudsters are becoming more brazen with their criminal efforts and how banks and 03 FinTechs are banding together to thwart them, along with a breakdown of the latest news from Feedzai, Citi, Spring Labs and others Feature Story HSBC pairs humans with AI to fight fraud 06 Jeremy Balkin, head of innovation for HSBC, explains how the bank combines AI and ML solutions with human insights to crack down on fraudulent activity News and Trends 10 The latest digital banking landscape headlines, from company expansions and new partnerships to the unveiling of mobile banking apps Methodology: 18 How PYMNTS evaluates the various capabilities offered by B2C and B2B providers Top Ten Rankings 20 The highest-ranking B2B and B2C digital banking providers Watch List 21 Three additions to the Digital Banking Tracker™ provider directory Scorecard 22 See this month’s top scorers and a directory featuring more than 260 digital banking players About 151 Information about PYMNTS.com and Feedzai ACKNOWLEDGEMENT The Digital Banking Tracker™ is done in collaboration with Feedzai, and PYMNTS is grateful for the company’s support and insight. PYMNTS.com retains full editorial control over the report’s methodology and content. © 2019 PYMNTS.com All Rights Reserved 2 What's Inside Banks and financial institutions (FIs) have been project's method for decoding fraud resembles locked in an ongoing fight against fraudsters as how DNA sequences are mapped, and it finds they seek to keep their customers and operations connections in illegal activities and money safe. Bad actors are becoming more brazen in laundering. Doing so allows it to map relationships their efforts, though, and many financial services and patterns that might otherwise be impossible organizations are realizing they need a deeper to connect. The solution can effectively visualize understanding of fraud — right down to its genetics. connections between different data sources — such as transactions, identities and locations — and The first step in understanding fraud is realizing compare them with other types, including know-your- just how complex it is. The ecosystem surrounding customer (KYC), third-party provider (TPP) and dark it includes computer services, connected devices, web sources. The Genome will continuously learn payment cards, personal data, locations and more. about fraudulent patterns and automatically detect These components come together to form a broader new and emerging ones, including layering activities, system that regularly utilizes stolen personal data account takeovers, bot attacks and more. to perpetuate a range of illegal activities, including account takeovers and identity thefts. Of course, Feedzai is not the only firm attempting to rid the financial services sector of bad actors. FIs are increasingly embracing artificial intelligence (AI) and machine learning (ML) technologies, which allow them to quickly scan transactions for suspicious activities and raise flags when behaviors start to change. These tools must be used to map the fraud ecosystem and dismantle it. Human beings, too, will play an important role in determining the best ways to prevent fraud, rather than just reacting to it. The recently released Feedzai Genome, which is powered by AI, maps the fraud ecosystem to wage a more effective fight against cybercriminals. The © 2019 PYMNTS.com All Rights Reserved 3 WHAT'S INSIDE News from the digital banking space Deep Dive: Banks need to understand fraud to The Genome aside, Feedzai has a new partner in fight it its fight against fraud — it recentlyannounced it Alerting the public to fraud is only one part of will work with Citi’s Treasury and Trade Solutions. combatting it. FIs must also learn more about how The two companies will collaborate on integrating to fight effectively. Banks are often put in a position a transaction monitoring platform into Feedzai’s where they must try to fight bad actors without services and solutions. The offering uses ML to harming trustworthy customers' experiences. These automatically respond to changes in customers’ institutions need to clearly understand fraud, right behaviors and highlight potential problems with down to its DNA, to effectively battle against it. This payments before they are cleared. month’s Digital Banking Tracker™ includes a Deep Dive (p. 15) on how banks can use a genetic mapping A group of banks in the United Arab Emirates banded model as a fraud-fighting strategy. together to crack down on check-related fraud. The 52-member UAE Banks Federation’s plan to combat HSBC blends AI, ML solutions with human counterfeit check activities includes enhanced insights to combat fraud encryption technology and unique QR codes on every Many banks and other FIs are turning to AI and ML newly issued check. solutions to crack down on fraudsters. But using such tools to detect fraud is just one part of an effective It’s not just banks that are partnering to fight fraud. strategy, said Jeremy Balkin, head of innovation at A group of U.K. telecommunications firms are HSBC. In this Tracker’s Feature Story (p. 6), Balkin joining forces to stem a rising tide of authorized explains how HSBC’s core system combines AI and push payments (APP) fraud — an illegal practice ML with human insights to respond to potential in which scammers pose as officials to convince problems, mimicking the way that the immune consumers to send them money. A recent report system responds to health risks. found SMS-based APP scams cost U.K. consumers approximately £145 million ($190 million) in the January Digital Banking Tracker™ updates first half of 2018. The firms have launched SMS This edition of the Tracker features profiles of more Phishguard to make consumers more aware of than 260 players in our ever-expanding provider the scams, reduce the number of incidents and directory, including three additions: Eyowo, Nubank encourage the public to report such activities. and Yandex.Money. © 2019 PYMNTS.com All Rights Reserved 4 WHAT'S INSIDE 5Five Fast Facts 57% 61% 65% Share of Share of SMBs Portion of Malaysians that are less Amazon Prime who use likely to use members who online banking digital banking would be open resources to 82% channels and 67% to trying an make recurring still consider online bank payments themselves account offered “branch by Amazon with dependent” 2 percent cash back Portion of U.K. Share of executives who millennials with said their FIs are smartphones falling behind who use mobile challenger banks banking © 2019 PYMNTS.com All Rights Reserved 5 HOW HSBC USES AI TO BOOST ITS DIGITAL BANKING IMMUNE SYSTEM © 2019 PYMNTS.com All Rights Reserved 6 What’s Inside “Technology like AI can deliver a superior customer experience and a safer customer experience by putting the power literally in the palm of customers’ hands.” JEREMY BALKIN, head of innovation at HSBC Banks must have constant insight into potentially “When you find actionable insights, how do you suspicious activities to stay ahead of fraudsters. act on them?” Balkin said. “The effectiveness of Many FIs are achieving this state of vigilance by the technology is limited if you can’t act upon the investing in AI and ML solutions as part of their anti- actionable insights that the technology articulates fraud efforts. for you.” These solutions can be implemented to review Searching for a financial fraud needle in a expansive volumes of bank transactions and data haystack points to help banks detect questionable activities While AI and ML solutions are providing banks with and broader patterns of potential fraud. But as valuable help in reviewing data to detect suspicious Jeremy Balkin, head of innovation for Swiss bank activities, FIs still need to be able to quickly react HSBC, recently told PYMNTS, even AI and ML need to the insights. HSBC recently invested in a new assistance sometimes — from humans. core banking system that readily responds to AI- driven discoveries. The goal is to make the bank’s Balkin explained how AI and ML solutions are taking core system responsive to the actions that the AI the fight against fraud to every level of a bank — solution recommends. Balkin compared this internal from the risk analysis experts on the FI's end to communication between different bank systems tellers on the front end — and how these solutions to the human body’s immune system and how it are made more effective when humans confirm and immediately responds to a problem. clarify the returned insights. © 2019 PYMNTS.com All Rights Reserved 7 FEATURE STORY “[Having] this connectivity for these various technologies [is like having] all the organs of a body UNDER THE HOOD talking to each other with an immune system that understands what is going on,” he said. Many banks, HSBC included, are also using AI to stay compliant with new regulations and anti-money How have AI and ML tools challenged laundering (AML) rules. This means FIs must review banks' perceptions of fraud? large quantities of data across their networks to ensure that those using their banking systems are trustworthy and in line with financial regulations. As such, AI and ML tools have quickly become “In the old days, you had humans looking at crucial to determining if suspicious activity is being spreadsheets, which worked when the [scale perpetuated, sparing employees from manually of transactions] was smaller. When the data reviewing troves of data.