Digitalisation: benefits and challenges
ING CEO Ralph Hamers has told a packed main arena at Money20/20 EU that while digitalisation brings the financial industry many benefits, it also comes with increased risks.
“ING now has nearly four billion digital contact moments with customers in a year. With this increased customer activity comes increased risk of some of those interactions being used for fraud or for money-laundering purposes. We have to tackle this.
“We are doing this internally, through various projects aimed at effectively fighting financial economic crime. And in our ING Labs we work with partners on innovations that can also help other players in the industry facing the same issues,” said Ralph.
Speaking in front of around 3,000 people, Ralph said the more digital one becomes, the more important your reputation is.
“We learnt this the hard way, when an investigation by the Dutch authorities found serious shortcomings in the execution of customer due diligence and transaction monitoring requirements related to fighting financial economic crime. That resulted in a huge fine late last year, and fixing those shortcomings is now our number-one priority.
“We have to manage non-financial risks to the same expert level as we do our financial risks,’’ said Ralph.
“Managing these is not only an ING challenge, but an industry-wide one affecting many of you here in this room. We, as an industry, in close cooperation and collaboration with the regulatory authorities, need to tackle this urgently.’’
Ralph argued that we should be able to put new technologies to work in effectively dealing with these risks. He mentioned that ING was undertaking a number of initiatives using new technologies like artificial intelligence, machine-learning and robotisation.
A data-driven bank
“We are taking steps to make sure that data analytics capabilities are embedded across the whole bank, so that ING truly becomes a data-driven organisation. We’ve launched a data academy to educate colleagues in the possibilities that analytics can bring making sure that all functions can benefit in their day-to-day work, not just a small group of data specialists.
“When it comes to more effectively fighting money laundering, we’ve developed a system in the Netherlands based on AI called the virtual alert handler. It’s been successful in reducing false positives by more than half, allowing our human alert handlers to concentrate on alerts that actually require attention.’’
Ralph said ING was active in Turkey with an AI solution that detects instances of ‘smurfing’, where large fraudulent transactions are broken up into tiny pieces to avoid the conventional rules-based monitoring systems, while in Belgium, ING is testing an AI-based anomaly detection model to better uncover suspicious transactions where we do foreign currency clearing and settlement on behalf of other banks.
Ralph also mentioned that ING is developing a platform in Singapore that helps other banks which have regulated financial institutions as clients to be more effective in their KYC efforts and an initiative called CoorpID that provides a centralised digital vault for corporate customers to store and share all the KYC documentation that they need to provide to their business partners.
“I’m keen to engage with other players in our industry to explore opportunities to put these technologies to use more broadly,” said Ralph.