HSBC employs AI fraud detection in $2.3bn tech spree
AI fraud detection

HSBC employs AI fraud detection in $2.3bn tech spree

Europe’s largest bank has spent $2.3 billion on digital platforms, AI, and other tech.

HSBC has revealed a partnership with UK start-up Quantexa, whose AI software will enable the bank to prevent criminal activities such as fraud, money laundering, and terrorism by flagging suspicious activity.

This follows NatWest’s recent announcement that it has prevented £7 million worth of false payments by using a machine learning system.

Following a successful pilot, HSBC hopes to integrate the smart data analytics software into its infrastructure by the end of the year – giving them near-real-time resolution and network analytics on billions of records.

The move sits alongside HSBC’s other digital initiatives. For example, in China, the bank has partnered with messaging app WeChat to provide another means of communicating with its customers.

In an interview with the South China Morning Post, Vivek Ramachandran, head of growth and innovation for HSBC Global Commercial Banking, revealed that the company has further ambitions for AI and blockchain technologies:

Clients want a simple and easy way to track their transactions. They want to reduce the amount of paper used, and they want to access information instantly. This is where blockchain and AI can help.

Internet of Business says

The worldwide reach of HSBC means it’s well placed to spot criminal networks, which often span the globe. The bank’s size also makes it a perfect candidate for data analytics software to scale across the enormous data sets that HSBC deals with, including both transactional and personal information.

Collaboration both internally and with other banks could be the key to success.

Financial institutions are eager to avoid the large fines and settlements that come with regulators uncovering evidence of money laundering. HSBC itself was forced to cough up $1.9 billion to avoid the courtroom in 2012, after evidence that it had laundered over $881 million for Mexican drug barons was brought against them.

With criminal organisations growing increasingly tech savvy thmselves, it’s vital that the banks keep pace with the digital arms race to combat illicit activities.

Despite many banks being in the vanguard of AI and automation, others have been slow to undergo digital transformation in the wake of the 2008-09 crash, and are still using legacy systems and antiquated payment processes. However, the recently introduced second payment services directive (PSD2) leads an industry-wide move to a Digital Single Market in Europe.

With data rights now back in the hands of customers, thanks to Open Banking and – imminently – GDPR, banks are scrambling to become compliant. However, these regulations offer up new customer opportunities to those organisations that are agile enough to seize fintech opportunities and win customers who have come to expect convenience and integration from their digital systems.

The use of AI to prevent criminal activity will play a key part in the open banking era and help the slow advance towards a financial system that customers feel they can trust again.