Commonwealth Bank of Australia is developing artificial intelligence technology to help with cyber security, fraud detection and regulatory compliance, in a sign banks are attempting to put the power of big data to use in reducing risk.
CBA’s chief information officer David Whiteing told The Australian Financial Review that so-called machine learning technology will be used to help the bank make sense of large sets of “noisy” data and alert management to areas requiring their attention.
The work will come alongside a broader program of innovative projects investigating the possibilities of technologies such as the internet of things, quantum computing and the blockchain.
“When you have a large data set and people can’t see the signal for the noise, machine learning capability will sift out and provide you with the top five things that are worthy of further investigation,” Mr Whiteing said.
“While these projects are experimental, with machine learning, we are solving real bank problems: fraud detection and cyber security.”
Artificial intelligence (AI) technology has accelerated dramatically in recent years, after it was realised that graphical processing units (GPUs) from video games could also process deep-learning algorithms, allowing computers to crunch vast amounts of data at speed in order to self-learn.
Technology giants including Google, Intel, Microsoft and IBM are all vying to be at the vanguard of the trend from a business perspective, and innovative smaller players like Brainchip are impressing investors on the ASX with futuristic applications.
“You could start using it around financial crimes and counter-terrorism regulations,” Mr Whiteing said.
“There is a whole bunch of things you can get into … We are developing a lot, and have good capabilities _ [although] not enough, and not to scale – but those are the types of problems we are putting it towards.”
CBA, whose Colonial First State wealth arm is also using AI to analyse investment data, is not the only bank studying artificial intelligence.
Westpac Banking Corp director Craig Dunn told the Reimagination ’16 summit last Thursday financial services “is obviously an example of an industry that is ripe for the use of artificial intelligence and is already doing that” given banks manage so much data.
Westpac is working with start-up Red Marker to use natural language processing techniques to detect content at risk of breaching legal regulations as the content is being created.
ANZ Banking Group, meanwhile, has been working on Robotic Process Automation to streamline back office work, including helpdesk support and payroll administration.
In September IBM bought the Washington-based advisory firm Promontory Financial Group, which former APRA chairman Jeffrey Carmichael runs in Australasia. IBM’s artificial intelligence technology, known as Watson, is now being applied in banks to reduce bank compliance costs, as “regtech” (regulatory technology) investment gathers pace around the world.
Polymaths and the blockchain
Yet Mr Whiteing, an IT consultant before he joined CBA more than three years ago, says that as CIO he aspires to be a polymath and worries about betting on any one technology.
“I am cautious about predicting, because it is constrained by my imagination,” he said.
“I really worry about just creating a pattern, and applying the pattern, because then you end up potentially having a blind spot – because the pattern didn’t tell me to do it, therefore I don’t do it.”
CBA will continue with its distributed ledger experiments in 2017, after announcing in October it had used a combination of blockchain, smart contracts and the internet of things to facilitate a trade transaction with Wells Fargo of the US.
It has also been participating in various trials with the R3 global bank consortium. It was a year ago this week that CBA sponsored the Coala workshops in Sydney which hosted Harvard University law professor Lawrence Lessig to discuss blockchain regulation.
Mr Whiteing said CBA’s blockchain experiments started around two years ago after he returned from a trip to Silicon Valley with a curiosity of finding out more about it, rather than needing a particular problem solved.
Not about money
While CBA has an annual IT investment budget of more than $1 billion, Mr Whiteing said it would be wrong to think exploring new applications of emerging technology was solely the preserve of big companies.
“None of the stuff I have talked about requires money … The biggest resource you can provide is a bit of time. Create the time to think about it, to ask the questions and a bit of capacity to try a few things differently,” Mr Whiteing said.
“Boards and senior managers across the economy need to realise that it is important to put at least some of current budgets aside to model potential futures. If you exhaust all the capacity on the here and now, and you don’t have at least some focus on the future, then the future will eventually catch you out.”
Last week, in the foyer of one of CBA’s buildings in Sydney’s Darling Harbour, the bank hosted a three-day event for staff and guests it called “Amaze”. It included staff hackathons, fintech presentations and lectures on the future of finance.
Mr Whiteing told around 500 staff huddled on internal staircases and on the balconies in the internal atrium of the building that CBA will need to innovate with outside companies to remain relevant in the future.
“A large bank with a large technology and operations capability is essentially, through the platform model, being broken down into a series of mini-businesses that have accountability and have autonomy to get things done, but are very much in alignment,” he said.
The Amaze event included a display of various old banking hardware, to recognise the 50-year anniversary this year of CBA turning on the switch on its very first computer – an IBM 360, initially used to process staff payroll.
Other items on display included a magnetic printing tester from 1969, a Gelman signature verification system and a Nippo L Type check writer from 1980, and various desktop computers, including a J&M Dolphin from 1981 and a Sanyo MBC-775 PC from 1986.
The event was designed as both a celebration of good decisions made in the past and a call to arms for the future, Mr Whiteing said, adding he has two messages for staff.
“First, some of your choices and leadership decisions need to be taken in a way that may not deliver in your time – you are laying down investments that other generations will benefit from,” he said.
“The other is the velocity is changing so much that we need to do big things in the next 12 months that in the old days might have taken five or 10 years. We have to move at pace in a way previous generations did not.
“So what are we going to do that in 50 years’ time someone is going to look back and say ‘Those guys did a great thing, and we can celebrate that’?”