Biometric technology can enhance fraud and anti-money laundering processes, but can carry big risks. As it becomes more widespread, financial firms and tech vendors must develop the security and governance frameworks to realize its potential – before regulators force them to.
The ability to distribute trustworthy credit is a societal cornerstone. But what happens when traditional credit scoring methodologies aren’t available? Will new 'advanced' credit models in emerging markets be self-fulfilling prophecies?
Developing AI algorithms without strict definitions could create ethical problems for financial firms. To avoid mishandling their algorithms and potentially harming certain customer groups, firms must ensure their AI tools are no broader than the definitions they are based on.
New ways to capture and package previously inaccessible data have given financial institutions (FIs) a diverse set of methods with which to assess the creditworthiness of corporate and retail customers. Despite the appeal, however, deploying this data does not guarantee clearer credit risk assessments – instead, it may muddy already murky waters.
Thanks to a booming payments market, the amount of transaction data is growing – as is its value. But regulation around it is patchy at best, and as more transaction data is used to feed models and analysis, more transparency and clarification around its use and abuse are needed.
The speed at which the liquified natural gas (LNG) market is maturing has created inconsistencies in how LNG is priced – not least in Asia, where growth is fastest. The obvious but untested solution – an Asian pricing hub – will take time to develop, but in the meantime benchmark assessments could offer a viable alternative to existing pricing methods.
The IASB issued IFRS 17 in a bid to standardize insurance contract accounting, but reinsurance firms, because of their particular idiosyncrasies, will struggle to comply. Unless the IASB makes significant modifications to the standard, reinsurers everywhere will have to reassess the nature of their life insurance contracts.
Many projects labeled ‘private blockchains’ are merely database hygiene or ‘permissioned DLT’ solutions given a more marketing-friendly moniker. But increasing misuse of the term ‘private blockchain’ could create confusion in the market and undermine a clear understanding of blockchain’s real strengths in specific use cases.
Impending regulation affecting shipping fuel will reduce atmospheric pollution but send shockwaves through the shipping and oil industries. Market players have several strategic options, but uncertainty clouds their choices. To what extent is the industry able to adapt, and what will be the likely cost of compliance?
As fear around cyberattacks grows, so-called ‘bug bounties’ offer firms an opportunity to buy information on security vulnerabilities in their systems before they become public or fall into the hands of bad actors. In future these transactions will be moderated by trusted intermediaries; until then firms should carefully weigh up their pros and cons.
In striving for growth, many FinTech firms enter different markets with solutions that use the same underlying technology. As highlighted by recent AML-related issues, however, this technology is seldom regulation-friendly. To withstand deeper inbound regulatory scrutiny, FinTechs must adopt robust risk technology.
Tied to the growing popularity of machine learning (ML) tools is the need to explain their underlying rationale. But buzzwords, like ‘glass box’, are steering the explainability conversation off course. Meanwhile, without proper investment in the tech innovations and governance methods to properly validate ML, it could proliferate throughout the financial industry without the necessary safeguards.
A relative lull in transformative IFRS-related system implementations means that financial firms can relax a little. But not too much: now is the time to work strategically with other players to create real value from IFRS compliance.
Advanced analytics and AI promise revolutions everywhere, but real-world constraints abound. This is notably true in the world of credit scoring, which needs to be understandable, is often slow to give out real-world results, and can be muddied by the addition of unnecessary factors.
A lawsuit against Google’s parent Alphabet threatens broader data security. Regulators should provide clarity on breach disclosure timelines; financial services institutions and suppliers should welcome it.