Things have not changed too much over the past decade. Among the significant challenges facing traditional banks, one of the biggest is the speed of change required versus the old model that prevails to this day. Managers now need to meet this challenge head on. It will not be an easy task given the established privileges and hierarchies that have taken a strong hold in many organizations, making hard and fast change extremely difficult to achieve.

Revolutionary change is afoot. Recent technological developments have disrupted bank business models and together with new regulatory rules are the two single largest factors of this change. Technology provides the important access point between new business models and the ability to perform and deliver revenue growth to the bottom line.

I learned about disruptive technology first hand when I entered the next chapter of my career and established a consulting firm to help Asian clients invest in technology companies based in the start-up nation of Israel. In Israel’s high-tech centres, home to numerous financial technology incubators and accelerators, my eyes were opened to the scope of opportunities offered by companies focused on disruptive financial technology, artificial intelligence (AI) and big data, to name a few. It became clear that these disruptors had the potential to eradicate unsustainable inefficiencies in the transaction banking arena.

A search to identify the most promising high-tech firms with equally strong, strategic management led us to Cortica, the industry leader in Israeli autonomous AI. Still wearing the hat of a transaction banker, it did not take too long to realize that Cortica, which was otherwise involved in autonomous driving, smart cities, and security infrastructure, could bring its groundbreaking technology into the financial industry.

Fintica, a collaboration between Cortica and Duotem Capital Limited, was formed recently with this vision in mind. This new firm utilizes Cortica’s advanced autonomous AI capability to resolve a variety of inefficiencies within the financial industry. Its mission is to achieve efficiency improvements and cost reduction in both pre- and post-trade processes, develop advanced automated risk management and alert triage, and create consolidated analytics services. There is no doubt that the establishment of this and similar ventures will encourage further proliferation of fintech initiatives to improve the overall efficiency of the financial industry.

The technology behind this enterprise based on AI-enabled tools and financial services domain expertise focuses mainly on securities, capital market infrastructure, payments, custody, asset servicing and fund administration. Autonomous AI comprehends concepts and context of financial data, and provides task generalization and predictive power. With its conceptual understanding it can interpret multiple concepts or patterns simultaneously, and make inferences based upon them. This next-level understanding exceeds the capabilities of traditional deep learning systems, which lack true understanding as they focus primarily on classification.

The technology aspects that can be addressed by disruptive technology fall into three categories: process optimization, bots, and AI. Improvements and developments in these areas will lead the technology evolution.

First, process optimization is arguably a prerequisite for any successful technology transformation. Many traditional banking processes are broken and subject to substantial manual intervention. On top of this, single processes historically have been separated and performed in multiple geographical locations around the world, adding to the challenge to address process change. Optimizing and truly automating these processes is a critical first step to enabling good future tool technology.

Second, bots have started to enter the workflow and will continue to do so to increasingly automate routine tasks. Bots can provide substantial process enhancement and reduce repetitive handling.

Third, AI will play a significant role as processes are optimized and routine tasks are automated. This technology provides huge new corridors of new product and service opportunities that until recently were out of reach for most traditional banking organizations. AI offers the ability to anticipate challenges and propose solutions that reduce risk in the organization, and enhance the product and services capability.

To take full advantage of the evolutionary change underway, traditional banks will need to turn to experts in the field of autonomous AI and automation. Solutions are available but traditional players will need to engage more with small specialists and avoid the trap of attempting to build in-house teams. Traditional banks also need change agents (visionary C suite executives) and strong human resources departments to accompany what will be a dramatically reduced and technology-enabled workforce in the years ahead.

One transaction banking provider in particular appears to be breaking new ground on all these fronts and more: Switzerland’s stock exchange run by SIX and, more specifically, its post-trade service provider, which is part of the entire stock exchange vertical, is driving industry transformation at a dramatic pace.

Besides its announcement in early 2018 that it is building the world’s first end-to-end DLT based digital exchange, SIX has also engaged with Cortica to test autonomous AI technology to analyze transaction flow data and interpret behavioural patterns with an eye to improving compliance and efficiency. Though it is still early days, this engagement and willingly experimental approach look promising.

Groundbreaking initiatives such as these will be something to continue to look out for in 2019 and beyond. New technology, especially AI, will serve as the DNA of a driverless financial services industry to deliver innovative disruptive business models, as unsupervised autonomous, collaborative transaction banking services. Leveraging decades of global in-house subject matter expertise infused into this autonomous AI platform will deliver real-time, self-learning, AI-enabled business operating models, which are hardware and volume agnostic digital transaction banking services.  

 

 

Philippe Metoudi is founder and CEO of Duotem Capital Limited. In 2018, he co-founded Fintica Limited and serves as its chief executive officer. Philippe is also a managing partner at AlfaSec Advisors. He co-authored the book Israel and China: From Silk Road to Innovation Highway.