A Fintech Perspective on AI

Fintech companies are defined by the technology and innovation that help them deliver cutting-edge financial products and operations. Our survey report revealed the extent to which artificial intelligence (AI) technology is being used by UK fintech organizations as part of their compliance and anti-financial crime operations.

The survey of 18 leading UK fintech companies was carried out by the FFE (FinTech FinCrime Exchange) in collaboration with RDC and revealed that 44 percent of respondents already utilized AI as part of their anti-money laundering (AML) programmes.

Further, 61 percent said they were in the process of developing proprietary AI solutions or reviewing third-party options.

When asked about the challenges and barriers associated with implementing AI, most respondents expressed concern about cost and data deficiencies, while insufficient knowledge was also highlighted as a prominent risk.

Fintech companies that had implemented AI capabilities reported several benefits including reductions in false positives, faster onboarding and improved accuracy when evaluating risk.

Constantly evolving tactics employed by criminals accessing the global financial system coupled with limited resources to help counter this threat point to a clear need for innovation by fintech companies to become more efficient in dealing with financial crime risk.

Benefits reported by fintech companies adopting AI

The benefits observed by fintech companies currently using AI are largely linked to improved efficiencies – the ability to carry out tasks faster and with greater accuracy.

This has led to a reported reduction in false positives in some cases as well as improvements in fraud detection. Further, some respondents said AI had led to faster onboarding, which is often a key focus for fintech companies aiming to deliver a superior customer experience.   

Across all companies surveyed, there was a unanimous response when rating the potential for AI techniques to allow them to become more proactive in combating financial crime, with an average score of nine out of 10.

Challenges and barriers

In the case of machine learning, a subset of artificial intelligence, solutions are built using ‘training data’ which allows predictions or decisions to be made according to the situations or outcomes ‘learned’ from the sample data.

A barrier for several fintech companies in our survey was simply not having access to enough data in order to carry out effective statistical analysis. The power and accuracy of machine learning is entirely dependent on the data used to train and test a model.

Another challenge clearly identified through the survey was the level of risk relating to a lack of knowledge and understanding among internal teams. This included the lack of understanding by a compliance function of how AI models operate and vice versa for data scientists and tech teams who may lack knowledge of key compliance processes and methodology.

Pressed further on this topic, some survey respondents also highlighted the issue that external auditors and regulators also lacked knowledge in this space.

While regulators may well be behind the curve regarding emerging technology such as AI and its application for compliance, the crucial factor is being able to clearly communicate the capabilities and limitations of statistical models to ensure their use does not unintentionally violate policy or the law.

A look ahead

Our survey has shown that while several benefits are already being realised by compliance teams using AI, barriers and challenges remain. With all of this in balance, what outlook do fintech companies have?

A significant number of respondents, 78 percent, said they anticipated implementing proprietary AI solutions as part of their AML programmes in the future, with 57 percent of those looking to do so in the next 12 months.

Separately, 44 percent said they anticipated implementing third-party solutions which featured AI capabilities in the future, with 63 percent targeting this over the coming year.

As the hype and overpromise surrounding AI begins to wear thin, the value and results from such capabilities are emerging. Demand is increasing among financial institutions exploring more effective solutions that can help them become more proactive in combatting financial crime.

Download the full survey report ‘AI and FinTech: An intelligent choice or artificial hype?’.