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2018 Outlook | Cloud, AI and innovations on the financial crime front

According to a report from PWC, more than one in three organizations report being victimized by economic crime. As the threats continue to evolve, financial institutions need to find new ways to combat them. Marlene Meli, Head of Compliance Practice at Temenos, shares her top five predictions for financial crime mitigation trends we'll see in 2018.

1. Cloud computing will revolutionize our lives

  • Companies use increasingly cloud solutions to reduce their day-to-day operating costs but also reduce costs for necessary infrastructure upgrades
  • Ease of access to information, documents and data as well as availability to cloud-stored data from almost anywhere allows to work from everywhere as working nomad. Need for office space will decrease and at the same time need for shared office space for working nomads will increase.
  • Immediate access to information and data as well as execution of orders and transactions in real-time are the new normal
  • Owner of customer experience controls distribution of products and not the manufacturer which is processing the product, e.g. Apple Store. Manufacturers become hyper-scaled or hyper-focused
  • From an FCM perspective this will lead to more collaboration and cooperation where AML, KYC-CDD-EDD, Sanctions Screening and Fraud Detection will be provided as shared utilities from specialized firms

2. AI will revolutionize our lives

  • Customer and behavioural data is the fuel of future businesses, access to customer data is the new treasure trove
  • Owner of customer experience controls distribution of products and not the manufacturer which is processing the product, e.g. Apple Store. Manufacturers become hyper-scaled or hyper-focused
  • AI with machine learning and analytical capabilities combine static data with dynamic data to be used in real-time by partnerships and platforms, e.g. bank with retailers / static data with consumer data
  • New dream teams, i.e. humans and learning machines, are the new work force in financial institutions and as such multiply output than the one from humans or learning machines alone
  • From an FCM perspective this allows for better fraud detection, e.g. by collecting location data using customers phones on an ongoing basis and not only as a snapshot through a transaction.
  • And it allows for more accuracy in alert detection and reduced false positives

3. GAFA are the biggest contenders for banks

  • Google, Apple, Facebook and Amazon provide user experience that goes far beyond what customers normally receive from their banks.
  • Financial Institutions are increasingly dependent on GAFA tech firms for critical infrastructure and differentiating technologies
  • Amazon Web Services (AWS) provide data storage and processing as well as AI analytics to large companies incl. banks
  • Facebook collects data from its users to continually improve its offerings which in return increase user activities with the effect of more data points for Facebook. As such Facebook creates far better user experience than banks do
  • From an FCM perspective solutions focusing on GAFA firms

4. Africa will overtake western countries in the use of new technologies

  • Historically Africa lacked land-based infrastructure to catch-up with western countries and more developed regions.
  • This turns out to be an advantage as African countries "jumped" directly on the train to mobile devices asking for services to be provided through mobile devices
  • Majority of payments conducted now through mobile payments than through banks' payment systems
  • Blockchain technology used in land registries in African countries, e.g. Ghana, to secure land rights. As such property owners gain access to loans as banks now accept property as collateral because secured land rights
  • Innovative start-up in Kenya developed solar panels as small as a tablet that give enough power to charge mobiles, tablets and TV in rural areas
  • Western countries are stuck with legacy systems making it very costly to upgrade to new technologies
  • From an FCM perspective cloud based solutions with new dream teams (humans and learning machines) are in the focus for Africa

5. Back to local production

  • Globalization was the imperative in the past promising to be beneficial for all economies. Experiences though are less encouraging as transformation is much slower than anticipated.
  • Customers tend to go for local or regional production, supporting local businesses. An effect seen as a result to the financial crisis in Greece where communities created their own economies and markets with own currency because access to global markets were cut-off.
  • Differing regulatory priorities like PSD2 and GDPR in Europe or local lack of mature payments systems in China are examples where financial globalization isn't the right answer to the challenges. As such they give way to regional models of financial services that suit local conditions, e.g. Alipay mobile payments app in China.
  • From an FCM perspective more regionally adapted solutions will support this regionalization

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