DIGITAL BANKINGTRACKER™ TURNING TO AI TO REDUCE DIGITAL BANKING RISKS AUGUST 2018 U.S. Bank invests in AI and ML to Four Australian FIs come together The top movers and shakers protect customers and reduce risk for a new joint offering in the digital banking space – Page 6 (Feature Story) – Page 10 (News and Trends) – Page 19 (Scorecard) © 2018 PYMNTS.com All Rights Reserved 1 DIGITAL BANKINGTRACKER™ TABLE OF CONTENTS What’s Inside An overview of the latest digital banking news, trends and headlines, including newly debuted 03 products and features from around the space Feature Story Turning To AI To Reduce Digital Banking Risks 06 David Berglund, senior vice president and artificial intelligence leader at U.S. Bank, discusses how the financial institution is using AI and machine learning to reduce risk and fight fraud. News and Trends 10 The latest digital banking landscape headlines, from company expansions and new partnerships to the unveiling of new mobile banking apps Methodology: 15 How PYMNTS evaluates various capabilities offered by B2C and B2B providers Top Ten Rankings 17 The highest-ranking B2B and B2C digital banking providers Watch List 18 Four additions to the Digital Banking Tracker™ provider directory Scorecard 19 The results are in. See this month’s top scorers and a directory featuring more than 230 digital banking players. About 146 Information about PYMNTS.com and Feedzai ACKNOWLEDGEMENT The Digital Banking Tracker™ is powered by 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. © 2018 PYMNTS.com All Rights Reserved 2 What’s Inside AS AN INCREASING NUMBER OF CONSUMERS EXECUTIVE INSIGHT ESCHEW TRADITIONAL BANKING SERVICES AND OPT TO USE MOBILE BANKING OPTIONS, FINANCIAL SERVICES COMPANIES ARE RISING TO What are some emerging AI use cases THE OCCASION WITH NEW PARTNERSHIPS, APP that could help banks reduce risk? UPGRADES, AND FUNDRAISING AND EXPANSION EFFORTS. As customers, we love the ability to have our lives at our fingertips. That includes According to Citi research released earlier this our banking lives. We’re doing more and year, financial management apps have become one more on our phones – opening accounts, of American consumers’ three most popular app depositing checks, and even applying for categories. All told, North American mobile banking app mortgages. The rise of mobile is playing usage jumped by 25 percent over the past year, with 31 out against the broader context of digital percent of those surveyed saying they use such apps transformation, with banks leveraging more than any other category. changing customer expectations in order to expand into new use cases and new More consumers are embracing mobile banking, business lines. But new risks attend every meaning players in the mobile financial management new innovation, and managing new risks space are hustling to bolster their offerings. is daunting, because banks are up against South African financial institution (FI) Nedbank, for one, determined criminals who are constantly recently added several new capabilities to its NedBank improving. It takes artificial intelligence – Money app, including debit order reversal, ATM and which constantly improves too – to stop payment limit increases and decreases, card freezing them. At Feedzai we haven’t wavered from and unfreezing options and card blocking features, our earliest vision: speed up machine among others. Scan To Pay functionality is also available learning and make it fit for an enterprise through the app for users paying with Masterpass, scale, so we can out-maneuver financial SnapScan, Pay@ or Zapper QR codes. criminals, and let banks move at the speed of digital innovation – seamlessly yet safely. In other advancements, U.K.-based digital challenger bank Tandem recently debuted a new notification feature — Phong Rock, for its mobile app. The solution uses artificial intelligence Feedzai SVP (AI) and machine learning (ML) to alert users if their bills have increased since their last payment was made. © 2018 PYMNTS.com All Rights Reserved 3 What’s Inside younger banking customers who prefer to make mobile transactions rather than visit bank branches. Finn is designed as a “supplement to offering standard branch- based accounts,” rather than a full-scale replacement, according to JPMorgan. In Australia, a quartet of FIs is collaborating with IT service management provider Cuscal on a digital bank set to launch in Q1 2019. The bank, 86 400 — named after the number of seconds in a day — will give customers an alternative to legacy players in the country. It will “ultimately have a lower cost ratio than a traditional bank,” but will not offer physical branch services. More experienced mobile players weren’t the only ones To find more on these stories, and the rest of the latest debuting new features and offerings, however. Several digital banking headlines, check out the Tracker’s News banks and FIs from around the space recently rolled out and Trends section (p. 10). their own mobile interfaces and enterprises, all designed to capitalize on the growing demand for mobile banking Investing in AI to reduce risk and fight fraud features. Banks’ risks increase as more consumers utilize mobile banking capabilities. As such, banks and other FIs are Around the digital banking world turning to new technologies to fight fraud and protect Citizens Financial Group is hoping that increased access their revenues. In this month’s Digital Banking Tracker™ to mobile banking services will attract new customers. feature story (p. 6), David Berglund, senior vice president The Rhode Island-based FI recently launched Citizens and artificial intelligence leader atU.S. Bank, explains Access, a direct-to-consumer bank, which enables how technologies like AI and ML can reduce risk and customers to open and fund a new account on a mobile fight fraud and other cybercrimes. device or computer in less than five minutes. The mobile offering also includes features like tools to help August Digital Banking Tracker™ updates customers learn creative saving habits, among other This edition of the Tracker features profiles of more than options. 230 players in our ever-expanding provider directory, including three new additions: Charlie, EveryDollar and JPMorgan Chase, meanwhile, seems to believe mobile Trim. banking is better served as a complement to traditional banking services. It recently unveiled Finn by Chase, a digital bank account for smartphones that targets © 2018 PYMNTS.com All Rights Reserved 4 What’s Inside 5Five Fast Facts 6.5 20% 46% million Portion of European Portion of Number of Kenyan banking customers Singaporean citizens who have who have used banking customers received loans from personal finance who have mobile lending apps apps in the past 12 experienced months 45% problems with their 54% mobile banking apps Share of banking Share of American executives without banking customers plans to expand who prefer online banking usage brick-and-mortar branches and ATMs to digital channels © 2018 PYMNTS.com All Rights Reserved 5 TURNING TO AI TO REDUCE DIGITAL BANKING RISKS © 2018 PYMNTS.com All Rights Reserved 6 What’s Inside Feature Story "A lot of people nowadays think of AI as Skynet robots that are going to replace or take over humans. But, that’s really more science fiction and a pretty extreme view. That probably isn’t going to happen anytime soon, or ever." DAVID BERGLUND, SVP and artificial intelligence leader at U.S. Bank he financial services industry is booming. It “AI is really good at finding patterns in large sets of data brought in $145 billion in 2017 alone, with and lowering the costs of making predictions [based on Trevenues projected to continue to increase in the that data],” Berglund said. “The question becomes how coming years. you use those strengths and capabilities, and that’s really up to each individual bank.” Risk looms large with rampant growth in fraud, however, and FIs must stay guarded to prevent cybercrime. Banks Reducing risk by fighting fraud of all sizes are now looking to reduce the risks they face One of the largest, still-growing risks banks face is when doing business, increasingly turning to new and increased cybercriminal attention and attacks. FIs emerging technologies like AI and ML to reduce risk and combat fraudsters. According to a survey conducted last year by the Global Association of Risk Professionals (GARP), 88 percent of bank executives believe adopting AI and ML could provide “a foundational change” for risk management. Both enable banks to dig out suspicious transactions, something many other solutions could not, according to David Berglund, senior vice president and artificial intelligence leader at U.S. Bank. In a recent interview with PYMNTS, he noted the development could help FIs find and recognize common elements in legitimate payment data. © 2018 PYMNTS.com All Rights Reserved 7 Feature Story UNDER THE HOOD We’ve got several different advanced fraud David Berglund, SVP and artificial fighting models that look for out-of-pattern spending or spending that happens in intelligence leader at U.S. Bank certain geographies and areas where fraud seems to be higher. AI and ML offer FIs a wide range of potential benefits and use cases, but developing solutions based on these technologies stopped nearly $17 billion in fraud activity in 2016 — is sometimes easier said than done. In a recent interview with PYMNTS, David the most recent year statistics were available — and Berglund, senior vice president and artificial lost $2.2 billion to it the same year. Both were notable intelligence leader at U.S. Bank, discussed increases from 2014, which saw $11 billion and $1.9 the challenges and limitations of working billion, respectively. with the technology. Banks and solution providers can use AI- and ML- based systems to identify elements of a transaction that typically indicate fraudulent activity, such as a “We talk about the upside and it’s tremendous.