® FEATURE STORY - PAGE 6 How Scotiabank Manages Fraud Protection For A Data-Driven Future NEWS & TRENDS DEEP DIVE Barclays scraps U.S. AI, ML and the future digital bank 10plans of the fraud 15fight NOVEMBER 2019 © 2019 PYMNTS.com All Rights Reserved 1 DIGITAL BANKINGTRACKER ® TABLE OF CONTENTS What’s Inside 03 Why FIs are reevaluating cybercrime protections as most adults become smartphone users, and a look at how AI and ML tools can keep devices safe Feature Story Rania Llewellyn, executive vice president of global business payments for Scotiabank, 06 discusses why banks must reassess their AI use and how the talent gap has complicated fraud protection News and Trends® The latest digital banking headlines, including Barclays’ reasons for moving away from 10 U.S. digital banking projects and how Chime is dealing with a data breach Deep Dive A data-rich analysis of how emerging technologies and increasing AI innovation are 15 changing banks' approaches to data protection and fraud prevention Top 10 Rankings 19 The highest-ranking B2B and B2C digital banking providers Scorecard See this month’s top scorers and a directory featuring more than 250 digital banking players, 20 including two additions About 161 Information on PYMNTS.com and Feedzai ACKNOWLEDGMENT The Digital Banking Tracker® was done in collaboration with Feedzai, and PYMNTS is grateful for the company’s support and insight. PYMNTS.com retains full editorial control over the following findings, methodology and data analysis. © 2019 PYMNTS.com All Rights Reserved 2 What's Inside Quick and convenient digital banking services have The as-yet-unnamed FI will provide Israeli consum- become normal for financial institutions (FIs) seek- ers with brokerage and credit products and is headed ing to attract and retain customers, but another by entrepreneurs from the autonomous driving and group is benefiting from easy and convenient ser- cybersecurity industries. vices: cybercriminals. Not all banks are finding digital expansion so easy, One study estimates that half the world’s adults will however. London-based Barclays is backing away use smartphones, smartwatches, tablets or oth- from plans to launch a fully digital consumer bank er online devices to access their banking services in the United States due to cost concerns. It current- by 2021, and mobile malware and various forms of ly has branded card partnerships with several U.S. fraud appear to be ballooning accordingly. Account companies, including rideshare giant Uber and trav- takeover (ATO) fraud increased by 79 percent in 2018 el firm American Airlines, and would have used those alone. It is perhaps not surprising that customers are relationships as jumping-off points for the new bank. thus seeking more control over account access, with Barclays has not yet completely shuttered the proj- 86.5 percent now requesting transaction-specific au- ect, however, likely indicating a continued interest in thentication methods. the market. Banks are also tussling with fraudsters using technol- Cybercriminals always seem to be lingering just ogies like artificial intelligence (AI), machine learning behind banks evaluating how to move their digital (ML) and behavioral biometrics, and both sides are platforms forward, and the global cost of cybercrime wielding these tools to either protect or slip past dig- was estimated at $600 billion in 2018. Fraud inci- ital banking safeguards. FIs tapping into these tools dents can affect consumers’ trust in companies, have one significant advantage over fraudsters, how- which can carry over to their interactions. Forty-one ever: open access to data. Integrating more data into percent of British customers stated they would stop fraud protection solutions could help FIs better dif- spending with a business following a data breach, ferentiate between legitimate online customers or and this trend extends to banking brands that have fraudsters gathering ill-gotten gains. This is why experienced major fraud events. AI could be key to FIs are experimenting more with AI and ML as well isolating fraud events early and ensuring legitimate as developing critical interest in data usage and customers can safely transact. categorization. For more on these stories and other digital banking Around the digital banking world headlines, read the Tracker’s News and Trends sec- tion (p. 10). Stakeholders worldwide are seeing a greater push for digital banking services despite increased fraud FIs face innovation challenges as battle for concerns. The Bank of Israel recently approved talent grows competitive the country’s first fully digital bank, which plans to FIs are facing an ever-expanding fight against cy- launch its services in approximately a year and half. ACKNOWLEDGMENT bercriminals, and keeping customers satisfied and The Digital Banking Tracker® was done in collaboration with Feedzai, and PYMNTS is grateful for the company’s support and insight. PYMNTS.com retains full editorial control over the following findings, methodology and data analysis. © 2019 PYMNTS.com All Rights Reserved 3 WHAT'S INSIDE fraudsters out requires banks to have cutting-edge antifraud strategies. Simply deploying AI is not enough, said Rania Llewellyn, executive vice presi- dent of global business payments for Scotiabank. EXECUTIVE INSIGHT She added that banks must reassess their fraud protection strategies and fully understand the prob- lems they are trying to solve. In this month’s Feature What are some of the ways that AI and ML can build out fraud protection Story (p. 6), Llewellyn discusses how Scotiabank has visualization models, and how can looked to revamp its fraud tractics and how a tal- such technologies benefit or challenge ent gap in the job market has created new obstacles banks and their end customers? for AI’s use. Deep Dive: How AI and ML models can help FIs see fraud “Data visualization allows analysts to ‘see’ crime patterns that are not perceptible to the human eye. One of the tools banks use to more accurately predict Looking at a spreadsheet will never come close to fraud is data visualization, which graphically displays what an AI-powered graph visualization can do. It data sets for human analysts to help them identify quickly filters through terabytes of information to find unusual trends that can indicate potential attacks. connections and relationships between transactions and events, so that anything from distributed bot at- Using AI or ML algorithms to create such models can tacks to massive data breaches to complex money give FIs a leg up on cybercriminals, but the technol- laundering schemes can be more easily detected. ogies require as much data as possible to function optimally. This month’s Deep Dive (p. 15) explores Like everything to do with machine learning, the tool how banks are applying AI to these models and their is only as good as the data it's fed. Often the data is approaches toward data needs. incomplete because of data silos, and organizations that don't deal with this problem put themselves in November Digital Banking Tracker® updates a perilous position. Data silos are often a reflection of organizational silos. Each team adopts different The November edition of the Digital Banking Tracker® tools to tackle particular issues and soon you end includes profiles of more than 250 financial players, up with multiple tools across [departments] and or- including two additions: Rollie and TymeBank. ganizations that don't naturally integrate, causing significant internal friction. What we’ve seen with our clients that have decentralized systems is a sort of 'toolchain crisis.' They don't have communication and visibility across the organization. Fraudsters and fi- nancial criminals have no problem exploiting the silos that these toolchain crises create.” SAURABH BAJAJ chief product officer at Feedzai © 2019 PYMNTS.com All Rights Reserved 4 WHAT'S INSIDE 5Five Fast Facts 86.5% 50% 47% Portion of Share of parents Share of Kenyan consumers who with children consumers would like to older than 14 who use digital add transaction- who now pay banking channels specific 24% allowances 24% authentication directly into methods to their their kids’ bank digital banking accounts experiences Share of digital Portion of U.K. bank accounts consumers who that consumers already use fully currently use digital banks as their primary accounts © 2019 PYMNTS.com All Rights Reserved 5 How Scotiabank Manages Fraud Protection For A Data-Driven Future © 2019 PYMNTS.com All Rights Reserved 6 FIs’ fight against fraudsters is growing ever more about how Scotiabank has revamped its fraud strate- complex. It is estimated that more than 4.1 billion gy in recent years. user credentials have been exposed in the first half “I think one of the key learnings is that we actually of 2019, and more than 20 breaches are reported need to take a step back before leveraging these new every day. This rampant availability of users' data technologies,” Llewellyn said. "We need to reimagine makes it easier for bad actors to wreak havoc and these processes from an end-to-end perspective be- commit fraud. fore we apply AI and ML to them. Otherwise, you are Many FIs have looked to mitigate this growing threat introducing a technology to a process that is broken by deploying advanced learning tools such as AI to begin with and just automating it, so you are not and ML, but fraudsters are quite familiar with them. getting the operational efficiencies and the pickup Cybercriminals are commonly using the same tech- that you could potentially get out of it.” nologies to design and develop nefarious attacks, such as the botnet Mirai and malware like Deep Scotiabank’s three-pronged innovation strategy Locker, which used AI and facial recognition to iden- tify targets through factors like geolocation and The increasing sophistication of fraud attacks has online behavior. led Scotiabank to reassess how it employs AI, ML and automation.