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Shield: AI Bringing Open Banking to the Masses

With more than half of financial tech leaders predicting that Open Banking will completely transform how financial services are delivered in less than three years, now is the time for financial institutions to begin making changes to their systems to stay competitive and keep up with the modernisation of banking.

Shiran Weitzman, CEO and co-founder, Shield
Shiran Weitzman, CEO and co-founder, Shield

This process of adapting to Open Banking is discussed at length by Shiran Weitzman, the CEO and co-founder of Shield, the AI-powered workplace intelligence platform for financial compliance teams. In this Weekend Read, Shiran details the in’s and out’s of Open Banking, how companies can best prepare for its arrival, and the benefits this form of technology garners. 

In three short years, Open Banking is set to “completely or significantly change how traditional financial services are delivered,” even though, according to that same study, an astounding 98% of financial institutions are unprepared for Open Banking regulations. Open Banking is much needed by consumers who split meals with Venmo, invest savings via Robinhood, and budget their paycheck using Mint, as it’s set to provide an easy-to-access platform where they can view and manage all their financial information and share it amongst their various financial service applications quickly and efficiently.

Among the many challenges faced by financial institutions as they adapt and prepare for Open Banking policies is the compliance concerns that arise in an open ecosystem where various platforms and services work together and are reliant upon each other, but because Open Banking inherently leads to a more digitiSed financial environment, there are modern technology solutions that can turn these compliance concerns into a competitive advantage.

With the ability to make services across financing more efficient, one example of an Open Banking benefit is when applying for a home loan, consumers must be prepared to spend great amounts of time tracking down and printing bank statements and financial documents that in large part, are already digital, but because there is no set standard for where digital financial information is stored or how these various institutions and applications communicate with each other, consumers are left to manually collect these documents, a cumbersome and overly time-consuming task.

With Open Banking, however, everything would be right in front of the consumer, making it simple to gather what’s needed before sending it off to the institutions giving out the loan in an email-like message.

Beyond home loans, the current lack of standardisation when it comes to different financial platforms and institutions working together can be a nightmare for compliance executives and their teams. Currently, in today’s siloed banking world, the storage of consumers’ financial data can be a headache, especially when it needs to be shared with other platforms. As regulators across the world develop Open Banking policies, they must work with the various tech companies driving innovation to promote a transparent environment to ensure consumer protection.

What Powers Open Banking?

The copious benefits to Open Banking are only made possible thanks to advanced technologies like artificial intelligence, which enables “encryption, transparent data archiving solutions and provides secure passage of information between consumers and banks without the use of passwords.” In Open Banking, responsible data access and security is paramount, which is why AI is so crucial.

Open Banking is reliant upon communication amongst various financial service providers, and AI is uniquely efficient at combining data sources through systems like Natural Language Processors (NLP) and Financial Context Recognition (FCR). With AI, financial institutions can automate the data capture, enrich it with other third-party data (like payment apps, credit card platforms, etc.), and seamlessly archive and retain that data, which is crucial for compliance.

AI not only automates the data capture process, but also has the ability to proactively detect and alert on abnormalities and provide an in-depth analysis and breakdown of compliance triggers based on specific needs, regulations, and procedures. The ability to pinpoint alerts and provide detailed breakdowns are particularly essential for mitigating various risks across communication channels, including market abuse, insider trading, spoofing, front-running, and even sexual harassment and racism. Nefarious activities are always possible but have been even more rampart over the past year as we’ve transitioned into a work from anywhere economy.

Addressing Money Laundering

Money laundering is a global problem on a massive scale, with the United Kingdom alone estimating that it cost its economy £37 billion per year, but Open Banking and the use of AI technology has an opportunity to mitigate those risk. With Open Banking, access to data is essential, which, coupled with AI’s ability to process data in real-time, can lead to a lower compliance risk for finance and banking institutions. Beyond avoiding debilitating fines and deterring criminals from relying on services, a concerted technological effort can also lead to more efficient finance institutions that can offer innovative services at a better cost, boosting its overall reputation.

Through Open Banking, institutions will have a better understanding of their customers and how they operate because of the easy access they’ll have to significantly more data. AI can use this data to become more knowledgeable and powerful, and ultimately provide a clearer picture of typical customers and how they operate, so that when a criminal does come along, they can be easily pinpointed because of their abnormal behavior.

With the potential to lead to a better, more modern banking systems that fight against the threat of money laundering and financial crime posed by the unique nature of today’s economy, Open Banking is inevitable, however, we must have a greater understanding of those benefits and how they can be addressed for widespread adoption. Banking and finance have been slower to adopt an all-digital approach than other industries, but Open Banking and its use of artificial intelligence will be the driving factors to a more open, transparent, and competitive banking system that stands to benefit everyone. As Open Banking policies are rolled out, it’s imperative that regulators work with all parties to understand the key role each plays in building a better banking and finance environment.


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