Transform 2021

Live now: Data, Analytics, & Intelligent Automation Summit, presented by Accenture.

July 12-16

The banking and financial services sector has typically lagged behind in AI adoption, but that’s starting to change. According to Insider Intelligence’s AI in Banking report, 80% of banks are highly aware of the potential benefits of AI. The aggregate potential cost savings for banks from AI applications has been estimated at $447 billion by 2023.

During a panel at this year’s Transform, Roey Mechrez, CTO and co-founder of BeyondMinds, spoke to Francesco Delle Fave, executive director in machine learning products at Goldman Sachs, Steve Flinter, VP of AI and machine learning at Mastercard Labs R&D, and Hui Wang, VP of data science, PayPal, about the major AI and machine learning news in the financial services industry.

In the old days there was often a 10- or 20-year lag in terms of wide adoption of a new technology, Wang said, but that gap is becoming smaller and smaller.

“The latest and greatest from academic research and the tech giants is being adopted in fintechs like PayPal within only one or two years,” Wang said. “We now have some of the most sophisticated real-time fraud detection models running on the most sophisticated deep learning architecture.”

Major AI trends in the financial industry

“AI and machine learning is being used in a broader array of applications than ever before, including security, fraud detection, identity, personalization, and even internal efficiency applications,” Flinter said.

There’s also been a shift away from a very model-centric view of the world into a more data-centric, data-driven view he said. Organizations are beginning to rethink how data is collected and used in the enterprise, and made AI- and ML-ready.

Another trend that’s growing among FIs is AI engineering, or MLOps, Flinter says. Organizations are shifting their focus to think about the full-life cycle of AI, from  the R&D side of AI and machine learning through to production: developing, testing, and iterating on new AI applications.

The fourth and final trend is ethical AI or explainable AI. It’s the focus on how bias can potentially lead to unintended outcomes for consumers when deploying these financial models, particularly in lights-off or black-box scenarios.

“At PayPal, we’ve been using AI for fraud detection for almost as long as we’ve been here,” Wang. “But in the last few years, it’s on almost all fronts of our business in terms of empowering a better experience for our customers.”

In investment banking, the main objective is to serve clients, said Delle Fave. “As data becomes more available, as services become systematized, AI is permeating everything we do.”

AI and machine learning is enabling personalization, improving data analysis, allowing companies to be more rigorous in the way they interpret signals, information, and noise to develop more sophisticated trading strategies, and helping them design and build new products.

Adoption challenges

But there are challenges to massively adopting AI across an organization with many different use cases, Mechrez said, and surveys have shown many companies fail to shift new machine learning models to production. Data readiness is often the problem.

“We have come from an era of data being managed for transactional processing purposes, and then through data analytics, and now we’re having to rethink how we manage data for ML purposes,” Flinter said. “That means rethinking our data architectures, looking at things like data streaming and so on. A lot of the back-end infrastructure needs to be rethought and redesigned to enable ML at scale.”

On the product side of things, many banking and financial services companies lack real understanding as to what AI or ML can actually do.

“In some cases, it’s been my experience that some product teams think it’s flying rockets, flying cars, and it will solve every available problem and you can squeeze anything out of a small amount of data,” he said.

The solution is more education around what is truly possible and managing expectations as teams try to design AI and ML into product stacks.

“But even if we have the best model running live and generating great predictions, so what?” Wang said. “What do we do with them? If we can predict perfectly that a merchant is going to churn out tomorrow as an example, what do we do with that?”

That’s called the last-mile challenge in adopting AI: a prediction that doesn’t lead to action doesn’t do a company any good. How can a company go from the machine learning model to a product or experience that improves the customer’s life or helps the company?

At Goldman Sachs, the first step is discussing the problem with their client, so the client knows exactly what problem they’re trying to solve and how they’re applying AI to solve it, Delle Fave said.

“The objective is first to demonstrate value to the client,” he said. “Then, once this is done and the client understands, you start simple and incrementally build and add layers of complexity to potentially improve effectiveness, efficiency, or speed depending on the requirements we have, always interrupting constantly with the client so that they understand the way we’re building it.”

Your model doesn’t even need to be particularly sophisticated or fancy, Flinter said.

“The idea is you need to find the most simple and explainable thing that’s going to bring value to your customer,” he explained. “There are a lot of tools already available that allow you to do that.”

Human expertise isn’t going away

Sometimes you still need to pull a human into the loop to build the most effective AI solution, Wang said. PayPal uses a story-based product methodology, which is about the interaction between the human and the machine, embracing the interdependency of human and machine in an iterative process to get the best outcomes.

“I like to say that our AI solution is like ingredients we cook into a dish,” Wang said. “The algorithm can help us by explaining the number of ingredients we need to cook the best dish, but what if we’re missing the most critical ingredients? That’s where our human experts come in with their domain expertise.”

Fraud detection, one of the most important applications for AI in financial services, also requires a human in the loop, making decisions informed by data. In very low-latency,  high-frequency types of decisions, humans are there to oversee the applications and the algorithms, to see if there are drifts in the models, if the models are picking up anomalies correctly.

“It’s that kind of long-term monitoring of models that we need to think about in security applications so we can ensure that they’re performing as we expect them to perform while making automated decisions,” Flinter said.

Transform 2021

Live now: Data, Analytics, & Intelligent Automation Summit, presented by Accenture.

July 12-16

Presented by Amazon Business

Digital transformation has spurred a significant trend in the procurement landscape for years. New technological solutions have pushed the boundaries of what’s possible, and what’s affordable, for organizations of every size to evolve their operations and unlock areas of growth. But the pandemic has accelerated this shift online, explains Rob Green, General Manager, Amazon Business Public Sector at Amazon Business.

The new Amazon Business “B2B E-Commerce in Evolution” report dives deep into the trends reshaping B2B ecommerce for midsize to enterprise businesses, as necessitated by the shift to remote work and the demand for cost containment. The goal: to capture the insights buyers and sellers need to know to evolve their operations and achieve success in the rapidly shifting landscape of procurement.

“This shift towards eprocurement is important because it will accelerate lasting changes across the entire organization that will positively impact growth, efficiency, and more,” Green says. “When B2B buyers incorporate more digital solutions into the purchasing process, operational efficiencies are felt across the entire organization.”

The eprocurement trends to watch

“Our data shows that the B2B purchasing experience is showing customer demand for more selection and shipping options that are eco-friendly and sustainable; organizations are increasingly setting goals to support buying from local businesses; and, there is a greater emphasis on sourcing from diverse sellers,” Green says. “All of these trends play a larger role in B2B procurement.”

For sellers, one of the largest trends was the role eprocurement has played in opening new channels and opportunities to have a global reach. The survey found that 59% of sellers reported expanding their customer base is a top priority in 2021, and selling products globally is a top priority for 40%. A global audience offered by online channels means that sellers have unprecedented ability to expand their business significantly.

In ranking the most valuable features of the purchasing process, buyers overwhelmingly indicated that online features are more valuable than traditional ones, like phone calls or viewing products in person. This means sellers can lean on online procurement features to make their selection stand out, such as improving their product detail pages and images. These efforts will give their items a virtual shelf that has no geographical boundaries and can reach a wider customer base outside their historical reach.

“This ability to scale is spurred by more global visibility, but also by increasing desire from B2B buyers for a more consumer-like experience where self-service is the expectation,” Green points out. “Buyers value convenience, and sellers that can offer this benefit along with robust product detail will be well-equipped to grow.”

For buyers, social and environmental considerations are playing a larger role in the procurement process, particularly for mid-sized and enterprise businesses. Research revealed a few key trends reflecting industry shifts towards value-based buying and selling decisions: 83% of buyers surveyed said their companies plan to increase spending reserved for Black and minority-owned businesses in 2021 and of those, almost half (48%) plan to increase their budgets for spending with diverse sellers by 20% or more. While increasing efficiency was the top buyer procurement priority for 2021 at 40%, improving sustainability was of almost equal importance at 39%. Amazon Business provides the tools for buyers to easily identify and connect with brands and products that align with those values.

“As the line separating consumer and B2B purchasing blurs, procurement teams and professionals can support meaningful causes through their business purchasing decisions,” Green says. “Sustainability is top-of-mind as buyers look to reduce their carbon footprint.”

Facilitating diversity in the procurement world

“One of the most positive shifts we’re seeing in the business world right now is towards more equitable work practices, and as an extension, a greater emphasis on supporting small, local, minority, women, veteran, and LGBTQ-owned businesses,” Green says. “By supporting these diverse businesses, buyers can help spur economic development in their communities.”

According to the survey, 39% of buyers consider increasing diversity among suppliers a top priority this year. However, matchmaking or finding a small or diverse business to purchase from is not always simple, Green adds. Amazon Business connects a wide audience of buyers with small, diverse, and local sellers through advanced search and filtration features, as well as tools for diverse sellers to upload their national or state-recognized credentials and increase visibility with those businesses looking to purchase from them.

Transition and growth in a digital procurement world

One of the biggest benefits of a digitalized procurement world is that sellers and buyers are realizing brand-new opportunities that weren’t possible via traditional commerce channels. For instance, digitization opens the door for small sellers to connect with large buyers who they may have trouble reaching.

“For example, certified Black- and veteran-owned small business Aldevra increased its sales by more than 300% since 2016 on Amazon Business,” Green says. “The company now works with customers across the nation, signaling the long-term positive effect of ecommerce on the success of smaller sellers.” To achieve the same growth, small businesses should take note of buyer preferences and align their online presence accordingly. The survey found that more than 80% of buyers highly value detailed product descriptions. Sellers can leverage online tools, such as pricing comparisons, listing optimizations, and customer reviews to meet the expectations of larger buyers.

On the other hand, larger sellers can focus on reaching buyers of any size online and improving operational efficiency to drive down costs and focus business improvements elsewhere.

The future of procurement

The biggest trend might simply be that procurement is moving online. The survey found 85% of business buyers’ organizations were propelled to move more of their procurement online and 96% said they anticipate their organizations will continue doing more purchasing online, even after pre-pandemic business functions resume. And more than a third (36%) of buyers said they anticipate their organizations will make 50% or more of their purchases online this year.

The momentum towards online purchasing is likely to have major implications on the future of business buying, Green adds. The vast majority (91%) of buyers prefer eprocurement over traditional methods, citing product range, competitive prices, and order speed as the top benefits. Additionally, the adoption of more consumer-like purchasing capabilities is spurring the adoption of additional B2C trends in the B2B world.

“Expectations between consumer and business purchasing experiences have blurred as buyers expect the same fast, convenient, and personalized digital buying capabilities they’ve grown accustomed to at home,” Green explains.

With procurement shifting online, sellers can prepare by leaning into digital features like enhanced product content, business pricing, and quantity discounts as well as advanced fulfillment that will provide customers with the experience they seek as expectations continue to shift.

“For seller organizations, adapting to meet buyer demands will allow them to remain relevant with their B2B customers, to make the most of the huge opportunity to engage more deeply with customers via digital channels,” he says.

For a closer look at the most important digital procurement trends impacting buyers and sellers, download the free “B2B E-Commerce” in Evolution” report from Amazon Business.

Amazon Business B2B E-commerce in Evolution Report methodology

Amazon Business surveyed 250 B2B buyers and 250 B2B sellers across the U.S. in 2021. Buyer respondents included full- and part-time employees across a range of job levels who worked at organizations of various sizes in the following sectors: government, education, healthcare, and commercial industries. All buyers’ organizations made an annual revenue of more than $25 million. All buyer respondents played an influential role in their organization’s procurement process. Seller respondents included full- and part-time employees across a range of job levels who worked at organizations of various sizes that sold products across a variety of categories.

Sponsored articles are content produced by a company that is either paying for the post or has a business relationship with VentureBeat, and they’re always clearly marked. Content produced by our editorial team is never influenced by advertisers or sponsors in any way. For more information, contact [email protected].