I recently spoke on the topic of artificial intelligence’s (AI) role in the future of banking and financial services at a conference in Singapore that attracted stakeholders from many of the major banks. Like the Singapore government, I believe passionately in an AI-driven future economy and think it’s the right technology for banks here to adopt in their pursuit of navigating risk and compliance.
Three key frontiers
Central to this issue of risk and compliance are three key areas: anti-fraud, credit scoring, and know-your-customer (KYC). Fraud, of course, is a well-known challenge for banks in this part of the world, but also globally.
In Singapore as recently as June, a former cleaner linked to a $40m SkillsFuture scam was jailed for money laundering via a Maybank bank account.
Globally, fraud was found to be costing $5.5t each year, a sum equal to the combined GDP of the UK and Italy, according to tax and advisory firm Crowe Clark Whitehill. In Southeast Asia, fraud is a particularly stubborn issue and combating it is a priority on the technological front for banks.
Singapore is increasingly using technology to combat various forms of fraud including money laundering and terrorism financing, but it faces a shortage of skilled data analysts who can help banks track down illicit cash flows.
In short, new measures that don’t rely so heavily on a human workforce are needed to keep fraud at bay in Singapore.
In April, global payment network Swift found that hackers used Southeast Asian banks to receive funds from 83% of all studied fraudulent transactions last year and this year. Now, new technologies enabled by AI are dramatically reducing the success rates of fraudsters.
AI’s role in risk and compliance.
On the KYC side, face-to-face identity verification is being replaced with AI-powered facial recognition technology.
Not only is this removing the need for human workers to carry out in-person ID verification, it is also reducing mistakes, streamlining processes, and saving costs. Computer vision and AI technologies being introduced to the KYC process are making banks more compliant while reducing overall risk exposure, even in regional markets where fraud remains rampant – markets that Singapore’s banking system must transact and interact with daily.
AI is also enabling blacklist databases to be cross checked in an instant across multiple institutions and jurisdictions. Whereas in the past fraudsters could attack multiple banks, AI-powered database are now flagging them as risks in real-time, far earlier in the application process than ever before.
Credit scoring, too, is benefiting from AI, moving beyond traditional data sets to include substantial amounts of alternative data that provide a fuller risk profile. This can include data from social media networks, smartphones, and other digital sources.
The upshot is that human error is being eradicated and fraud reduced in a region that has been hit hardest. As the region benefits, so will Singapore.
Serving the “credit invisible”
AI is making banks feel more confident in their risk assessments of individuals and institutions across the spectrum, prior to approving them for a loan or credit card. As every lending decision is ultimately about managing risk exposure of the bank, underserved individuals and small businesses are now being better served – and more accurately allocated a credit score – thanks to the introduction of AI.
Therefore, in addition to risk and compliance, AI is indirectly tackling challenges around the unbanked and underbanked, a group we sometimes refer to as the “credit invisible”.
For all of these reasons and more, I see AI as integral to the healthy development of the banking and financial services sector in Southeast Asia.
Indeed, these are just some of the themes, challenges, and opportunities on risk and compliance in banking that I will be touching on during the conference this week.
As AI continues to mature as a technology and Singapore’s economy grows with support from it, I expect to be having many more conversations on the role of AI in banking and financial services going forward.
I’m pleased to be part of Singapore’s AI story – and with an innovative and visionary government proudly supporting the technology sector, it’s an exciting time for every young entrepreneur and start-up committed to contributing to the field.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
Do you know more about this story? Contact us anonymously through this link.
Charles is a General Manager at Advance.AI based in Singapore. He has a B.E. in Materials Science and Engineering from Tsinghua University, a Ph.D. in Materials Science and Engineering/Chemical Engineering from Cornell University, and an MS in Management from Stanford University Graduate School of Business.