Digital disruption is occurring at every level in the financial services industry. From new technology to new competition to heightened customer expectations- the industry is in the midst of a period of rapid change. Financial institutions (FIs) must now think in new and innovative ways, and forward-thinking FIs have responded to these market disruptions by accelerating their digital transformation.
At the Singapore Fintech Festival this week, Microsoft is launching white papers on two of the most important drivers of this change – AI and open banking. Microsoft is partnering with the industry to chart the opportunities and challenges presented by these disruptive technologies, and help customers navigate the developing regulatory landscape.
Responsible AI (Artificial Intelligence)
Artificial Intelligence is one such frontier technology that can power digital transformation in financial services. A recent Microsoft/IDC study highlights that AI adoption is growing in Asian FIs: more than half (52%) of firms surveyed are already on their AI journey, adopting the technology across a variety of contexts including:
- Enhancing customer experience
- Empowering employees to make data-driven insights
- Streamlining regulatory compliance
This interest is coupled with a growing global consensus that AI adoption must be implemented responsibly, and that this should be guided by principles.
“The OECD, EU, G20, Singapore and others have issued principles on responsible AI, but financial institutions have many questions on how to shift from the level of principles to practice – and harness the potential advantages of AI responsibly”, says Marcus Bartley Johns, Regional Director, Government Affairs and Public Policy, Asia at Microsoft. “Singapore has taken a leading role in issuing guidance both for the financial industry and all industries, and there is strong interest in piloting this guidance”.
Putting responsible AI into practice requires a multi-disciplinary approach, and open dialogue between the industry and regulators. To this end, Microsoft has partnered with Standard Chartered, Deutsche Bank, Visa and Linklaters to pilot Singapore’s responsible AI guidance, with the findings captured in “From Principles to Practice: Use Cases for Implementing Responsible AI in Financial Services”. This explores what a cross-industry effort and ongoing dialogue with stakeholders to advance the responsible adoption of AI in financial services will entail, and puts the concepts into context through the analysis of specific use cases, based on the collective experience of the group. This group has also benefited from close engagement with the Monetary Authority of Singapore and Singapore Personal Data Protection Commission, the regulators that designed Singapore’s AI principles.
Open banking, which enables data sharing between banks and third party providers through the use of application programming interfaces (APIs), is poised to be the next wave of digital transformation in the financial sector.
Open banking is different from other forms of digital transformation, because it is widely supported by regulators around the world. In some countries, regulators are requiring banks to adopt open banking. “This is one of the reasons why open banking is unlikely to be a short-lived trend,” says Joy Fuyuno, Asia Regional Senior Counsel, Financial Services Industry at Microsoft. To remain competitive, incumbent financial institutions will need to embrace the opportunity presented by open banking. And given the jumpstart that open banking has received from regulators, the time to do so is now.
Open Banking: A Shared Opportunity, co-authored by Microsoft, Linklaters, and Accenture, explores the various drivers behind open banking in Asia and the issues financial institutions and regulators will have to address to ensure that all participants — financial institutions, third party providers, and consumers alike — can benefit from the shared opportunity it presents. The paper also offers recommendations for the industry and regulators and perspectives drawn from over a dozen interviews of people representing different parts of the open banking ecosystem, including incumbent financial institutions, fintechs, technology companies, consultancies and others.
Although open banking is still in early stages in Asia, we are entering a new phase that is likely to bring more innovation and a wider range of products and services. Going forward, it will be important for regulators and all participants in open banking to share learnings and best practices as they embark on the journey together. We hope this paper will help spark that ongoing dialogue.
“From Principles to Practice: Use Cases for Implementing Responsible AI in Financial Services” is co-authored by Microsoft, Deutsche Bank, Linklaters, Standard Chartered and Visa, and can be downloaded here.
“Open Banking: A Shared Opportunity” is co-authored by Microsoft, Linklaters and Accenture, and can be downloaded here.