AI and RegTech: Transforming Banking Efficiency and Security

 The banking industry is undergoing a transformative shift with the integration of Artificial Intelligence (AI) and Regulatory Technology (RegTech). These technologies are not only streamlining operations but also enhancing security and compliance, ensuring banks can meet the demands of the modern financial landscape efficiently and effectively.

AI-Driven Fraud Detection

AI's role in fraud detection is crucial, as it provides banks with the tools to analyze vast amounts of data for anomalies and patterns indicative of fraudulent activity. By employing sophisticated algorithms, AI systems can swiftly identify unusual transactions that may indicate fraud, significantly reducing the risk of financial loss. This proactive approach allows banks to safeguard their customers' assets while maintaining trust and compliance with regulatory standards​ (Finextra Research)​.

The Advantages of RegTech in Banking

RegTech complements AI in fraud detection by focusing on the regulatory compliance aspect of banking. AI-enhanced RegTech solutions automate and optimize the compliance processes, handling everything from monitoring transactions for anti-money laundering (AML) compliance to managing the myriad of regulatory requirements more efficiently than traditional methods. This not only reduces the manual workload but also increases accuracy and reduces operational costs​ (Finextra Research)​.  In my current role, I am focusing on methods by which we can implement Reserve Bank of India regulations seamlessly, integrating it with all products and internal processes in the Bank.  Conventional approaches focused on "dissemination" or regulations to business units.  This  no longer works for two reasons - one, the regulations has become too complex, and two, with most of the customer processes moving to digital, manual oversight is just not sufficient.  Even though, now it has become easier to get data much easier electronically, nobody even "reads" the data. Hence, what is required is an intelligent system which can not only read the data fully and learn from it and drawn inferences on customer risk as well as the potential. It is well known that in newer areas, regulation always lag, hence it is important to think ahead of the regulations and be prepared for it.

Synergistic Benefits of AI and RegTech

The combination of AI and RegTech provides a dual advantage to banks:

• Enhanced Detection and Compliance: AI not only detects potential fraud but also helps in predicting compliance risks before they materialize. This predictive capability ensures that banks can address potential issues ahead of time, thereby avoiding penalties and enhancing regulatory relationships.
• Cost Efficiency and Innovation: By automating routine tasks, banks can allocate resources to more strategic areas, such as customer service and technological innovation, leading to better customer experiences and new financial products.

Future Outlook

As technology advances, the role of AI and RegTech in banking is set to grow even more integral. The future promises even greater integration, with AI driving more personalized banking experiences and RegTech ensuring that these innovations remain within regulatory frameworks. Banks that leverage these technologies effectively will not only enjoy competitive advantages but will also set new standards for security and efficiency in the financial sector.

The integration of AI and RegTech is reshaping banking, making it more secure, efficient, and responsive to both customer needs and regulatory demands. As banks continue to navigate the complexities of the digital age, these technologies will play a pivotal role in defining the future of banking.

Thank you for now.

Attention to Every Karma

 A few years back, while attending to a training programme at IDRBT, Hyderabad, I was introduced to a few meditation sessions by Brahma Kumaris.  While I should say, I am not a regular practitioner of any of the concepts that have been propagated by them, I am clearly attracted towards some of the daily thoughts mail they send regularly.  Here also, while I am not a regular reader of these, make it a point to read it whenever I get some time.  

The purpose of the post is to share with my readers a post which I received a few days back. It was thought provoking and I believe, will help everyone. Hence, reproducing it here in verbose:

"Our every thought, word and action are the energy we send out to the world, which is our karma. Situations and people’s behaviors are the energy on the return, which is our destiny. Every karma gets recorded on the soul, and brings consequence either in this life or in future lives. With inner power we learn to create right karmas, and face consequences of past karmas with stability. Do you take credit for situations when life is smooth? Do you blame God or other people when it hits a rough patch? Do you believe you create your destiny, or that it was pre-destined? We are the creators of our destiny. Every karma has a consequence which can come to us today, in a few days, few years or few births. What we do today in response to what is happening to us is our present karma, and is completely our choice. Let us create the right thought, words and behaviors now as present karma, regardless of the situation. The right present karma settles past karmic accounts, creates a pleasant experience today and a beautiful destiny for our future. Let’s not focus on what people and situation do to us, let us focus on keeping our karmas right. 

"You are on the journey of your life, living your life your way and according to your values and principles. Whether it is simple eating, drinking, dressing or living habits or sanskars, choose only what is right for your karmic account, only what increases your inner power, what spreads happiness. Your every thought, word and behaviour should be pure and powerful, irrespective of situations. Emerge your original qualities of peace and happiness. Use them in every karma. Have beautiful karmic relationships with people, with nature, with objects, with everything which is there for you. All your happiness, health, harmony and success today is because of your beautiful past karmas. And a few challenges are consequences of your not-so-right past karmas. Accept them without questions, face them knowing that your power lies in the now. Choose a pure present karma to settle the past and secure a happy future. Be grateful to everyone who is right to you, even to anyone who has not been right to you, for giving you the opportunity to increase your inner power and settle your past karma. At every moment have all your karmic accounts settled."

Whether one believes in it fully or not, it is worth reading and thinking about.

My first experience with Scaling Up....

It was quite a few years back, when SMS (Short Message Service) was the only option for communicating on a mobile phone (other than voice calls).  Even, mobile phones were not so common, though it was over 5 years old in India.

And our Bank, was still working on a distributed system, albeit successfully.  We were an innovation hungry team, and wanted to deliver the best to the customers through technology.  So, we wanted to introduce SMS alerts!  (Now, looking back, it may seem anything but innovative.  But, this was, way back in 2002, when no Bank was "alerting" the customers when a transaction took place in their account.)  And, how do you do that?  One of the vendors came out with what is called "Jataayu Server" which can connect a Windows Server to a SIM card and send SMS messages.  So, the first part of the problem is solved, we thought.  Now, somehow, it was sufficient to generate message whenever a transaction happens.

The application was working using Sybase database.  So, we developed a few triggers which can get generated on any transaction being originated in an account.  This would get read by a Java application, which later gets transmitted to a central server, in turn connected to the Jataayu Server, which sends the message in the form of an SMS.

It was rather a Eureka moment!  After all it worked like wonder!!  Whenever a transaction happened in an account in a branch of the Bank, an instant alert is generated and sent to the mobile phone of the customer!!!

And we successfully launched the service and everyone was happy... until....  It started getting delayed... Beyond our expectations and imaginations...

We were into a troubleshooting mode.  With some effort on debugging we could locate the culprit.
A SIM card was designed to be used with a simple mobile phone.  And could send only 7 to 10 messages per minute.  This speed constraint is due to GSM handshake speed limit when using a SIM card to send SMS messages.

When I look back, that was my first experience with scalability or a rather the lack of it.  From that day, whenever I think about designing a system, I pose to myself three questions.   What are they?  I reserve that for a future post.

Bye for now.

Panel Discussion on Leveraging Technology driving Co-operative Banking

Last week, I got an opportunity to represent Federal Bank at the elets Maharashtra Cooperative Banking Summit at Vivanta by The Taj, at Mumbai.

Following is the link to the discussion, in which I speak from 21:26 mins to 30 mins.

Request my readers to view and offer their comments.

Let us all pay homage to the great personality - Dr. A P J Abdul Kalam

Let us all pay homage to the great personality who left us yesterday – Dr. A P J Abdul Kalam, who all of us would remember for a long time not just as a President, but as a great human being who was simple, motivating and wanted each of us to dream about a better India and world.  Also, let us imbibe the spirit of at least a few of his messages and practice it in our day to day life.

Following is excerpted from his book “My Journey: Transforming Dreams into Actions”:

“My father loved to tell us the story of our great-great-grandfather, who once saved the idol of Ramanathaswamy Temple.  The story went that on a festival day, the vigraha,  or idol, would be taken out of the sanctum sanctorum and carried in procession around the temple precincts.  The temple has number of tanks dotting it, and the idol was taken around the periphery of these tanks too.  During one such precession, in a sequence of events no one remembers clearly any more, the vigraha fell into the tank.  What a calamity that was!  People stood rooted in horror, imagining the wrath of gods falling upon them very soon.  One person however, did not lose his presence of mind – his great-great-grandfather. He leapt into the tank and retrieved the idol in no time.  The gratitude of the priests and other temple officials was overwhelming.  Yes, he was a Muslim.  And yes, cast and religious purists would be horrified at the most scared element of the temple being handled by someone not authorized to do so, but none of these feelings were articulated.  Instead my great-great-grandfather was treated like a hero.  The temple also made a proclamation that from now on, at the festival, the temple would give Mudal Marayadai to him.  This was a rare honour for anyone, let alone for someone from a different religion.  It meant that on each such festival day, the temple would first honour or give marayadai to my great-great-grandfather.  This tradition went on for years and the marayadai would be given to my father too. This sense of harmony continued into later years.

…

“My father was the imam of Rameswaram mosque.  He was a deeply devout man with complete and utter faith in Koran.  He inculcated all the habits of good Muslim in his children and indeed in his entire family.  For the people of the town, he was a philosopher and guide – someone they could turn to with their problems, whether spiritual  or otherwise.

“One of his closest friends was the priests of the Ramanathaswamy Temple, Pakshi Lakshmana Sastry.  Sastrygal was not only the priest but also a very learned man, well versed in Vedic knowledge. 

“There was third person who was as important in the spiritual life of our little community and that was Father Bodal, the priest of the lone church in the town.  He was as involved in the welfare of the churchgoers of Rameswaram as my father and Sastrygal, and was as concerned about the need for harmony and peace in Rameswaram. 

“… the three men kept each other apprised of anything that could potentially threaten the peace among the people and together, they tried to work out ways of clearing miscommunication or scotching rumours before they assume dangerous proportions.   The fundamental requirement for peace – effective communication among sections of the people – was always kept alive by these three patriarchs.  … They quietly soothed the society around them, making it a harmonious whole where everyone could have an opportunity to speak freely to them.

…

“As far as the fact of my religion is concerned, from Rameswaram I followed my destiny that took me into the world of science and technology.  I was always a believer in science, but the spiritual atmosphere of my youth has stayed with me.  I well understood different points of view, particularly about God.  I have read and assimilated the knowledge contained in different religious texts – from the Koran to the Gita to the Holy Bible.  Together they have made me a product of this unique land of ours, a syncretic creation of the best of our diverse traditions.”

Elephant Catchers : A review...

A couple of months back I finished reading Subroto Bagchi's book, Elephant Catchers; The Key Lessons for breakthrough growth.  Here is my brief review:

A very good read especially for those who want to know how to scale up the operations of their company.

This book could be useful, even if you are not in a senior position. Some of the quotes which impressed me:

- Companies do not scale themselves; it is the people who take it to the next step.
- A strategy is most effective when it is presented as a simple idea that touches the chord and then moves people into action.
- Unlike an operation to catch rabbits, trapping an elephant call for expertise over enthusiasm.
- Your customers may begin their relationship with you based on trust and certain personal connect, but as the initial years go by, they begin to build critical dependence on how you manage your internal affairs.  They demand process maturity and vertical expertise.
- Elephant catchers (by elephant catchers, author means people with expertise) are hard to come by.  The best among them always work for the king.
- Just as you need the first-rate, hungry, lean, combative hunters to win logos, you also need the steady farmers who will cross-sell other products and services, seek adjacency while exploring customer needs and make the relationship stick.
- Sales is not witchcraft; it is a science just as much as it is an art. It must be managed with the same discipline as product development, manufacturing and servicing.  A sales organization that is built right can alone scale contribute to the success of the organization.
- It does not take technology to create great things, it takes people...
- I am thankful that I knew how to treat my equity with respect... If you build a company of some consequence, your equity is, in reality, significantly more valuable than cash.
- The board represents wisdom; the management team brings in the intellect and the capacity to execute. Without wisdom intellect can only achieve so much and can even be destructive.

As the readers can understand from the above, the book covers almost every aspect of a growing organization.  There is much more.  I suggest you read the book if you, at least in part, are concerned about scaling your company to greater heights.

What any long term investor should read...

I am impressed by what Vishal Khandelwal regularly posts in his site www.safalniveshak.com.  No doubt I am a regular reader of what he posts there.  Here is a set of slides he has shared.  It is a must read for whoever interested in long term investing.The Return of Uncertainty, and How Investors Can Deal With It (Safal Niveshak)

View more PowerPoint from Safal Niveshak