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Banks need to wait before they see benefits of AI and machine learning

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The positive impact of banks applying artificial intelligence (AI) and machine learning might come later and at a greater cost than expected, according to a department head working at a multinational bank.

The multinational bank’s back office head shared her experience on the condition of anonymity, saying that the bank she works at is “heavily engaged” with the latest technology and platforms, having implemented AI and machine learning to its know your clients (KYC) and anti-money laundering (AML) processes.

“These innovative technological upgrades are quite expensive and often take years to be implemented. I worked in many American banks before, in the US, and whenever they tried to upgrade a KYC or customer onboarding system that they wanted to use on a global level, it often took up to ten years,” the source told to Asian Private Banker.

“I would say that AI and machine learning will have an overall positive impact, but I also hesitate to make a call on how soon it will be before we begin to see the benefits outweigh the costs.”

Although the implementation of new technology is a drawn-out process, the source continued: “From a long-term perspective, I hope the usage of AI and machine learning improves efficiency and will ultimately benefit the industry — especially banks that intend to heavily rely on these types of technologies to prevent financial crime.”

Despite her hopes for technology to play a bigger role sooner than later, she speculated that complete virtual client onboarding may be some way off given that regulators are “raising the bar” on KYC requirements.

“Governments and regulatory bodies say they want financial inclusion and that they don’t want you to derisk. At the same time, they don’t change their legislation or regulatory requirements while expecting the industry to simply due diligence processes,” she explained. “Our hands are very tied.”

She also said that banks and clients hope to shorten the time needed for client onboarding — achievable with digital solutions — but the difficulty comes in the form of increasingly stringent regulatory requirements, which are not standard across jurisdictions.

“We are in line with the wishes of our customers. However, the reality is that you have to work under various regulatory regimes which, on the topic of KYC, are raising the bar. The expectations are getting harder and harder to meet,” she concluded.

In a survey conducted last month by Asian Private Banker, private banking COOs voted ‘KYC and client onboarding’ as the top priority when it comes to the deployment of regtech.

Meanwhile, a recent report published by banking software provider, Temenos, showed that over 86% of wealth managers feel positive about the digitisation of wealth management services, and 34% were reported to be in the midst of deploying AI within their firms.

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