AI data protection and BFSI compliance strategies are going to be commonplace in the future, according to a wide spectrum of industry experts.
And why not? With entire economies and financial sectors embracing digitization rapidly, there are growing cyber threats, particularly at a time when data is the new oil as outlined by several business titans. At the same time, there is the looming burden of continually evolving regulatory compliance, newer regulatory standards and legislation, and so on.
How can BFSIs stay on top of these twin challenges if they may be called as such?
The answer, as they say, is blowing in the wind! But first, let us look at the digital growth story as a foundation for bringing these two core challenges into play.
BFSI (banking, financial services, and insurance) segments throughout several regions are already pressurized by the swift transition to digital operational modes along with continual evolution and disruption in the space. With digital banking becoming a preferred format today, several banks are also limiting their physical presence likewise.
Yet, in another unique pattern in India, for instance, bigger banks are making their branches simpler to access and tying up with next generation neo-banking entities for better consumer experiences and accessibility to various services/products.
As per several reports, the digital banking market in India alone is expected to witness 22% CAGR (compounded annual growth rate) from 2019 to 2024.
This will come due to more smartphone and internet usage along with technological progress. Even PWC estimates neo banking models raising a whopping US$394 billion within 2026 with funding of US$90 million and more last year for the space.
APAC is also expected to witness at least 100 brand-new financial institutions by 2025 spanning several markets.
Backbase and IDC reports indicate how 63% of consumers are looking to shift to neo-banks over the coming five years too. However, with rapid digitization, there are several new hurdles or risks which have also cropped up.
Things like data security, compliance risks, and risk management have come into the BFSI lexicon more than before, along with cyber security solutions. BFSIs are now required to continually adhere to evolving compliance and data security regulations of Governments worldwide, while protecting themselves and their data from cyber attacks.
Compliance, anti-money laundering, and security regulations have stringent deadlines and hefty penalties for cases of non-compliance throughout several regions.
These include the establishment of security solutions for lowering risks related to malware infections, making sure that updates are done in a timely manner, and also boosting overall authentication for vital BFSI systems.
The necessity of these regulations cannot be denied, since digitization automatically brings more risks for entities including breaches of data, cyber-attacks, and identity theft online.
Governments are also more tuned into the concerns of their citizens regarding the privacy and security of data. Another issue is the seeming gap between consumer behavior and what they actually desire.
Hence, BFSIs could well list security as their biggest challenge currently, especially since financial services continue to be a preferred target for hackers and cybercriminals.
Simultaneously, the complexity factor spills over when you consider how apps are now increasingly essential for the industry.
Applications are interfaces for consumer engagement, interaction, and experiences. Several studies indicate how most entities think of such applications as indispensable for business, while some feel that they help ensure a competitive advantage too.
Vital applications for businesses also have the propensity to use the cloud, which is highlighted as the most crucial technological aspect by BFSI players over the next few years.
Hence, security looms large as a key factor, irrespective of where applications are hosted, whether on the premises at data centers or in the cloud.
Applications with poor developmental parameters may come with several vulnerabilities while being easy prey for hackers to gain access to critical data.
This may lead to business failures, major cyber threats, compromises of user data, and costly disruptions to business while inviting the Government’s ire and denting the image of the brand in question.
Also Read: How Can AI and Risk Management Work Together?
Experts feel that using AI for staying on top of compliance regulations and data security measures is the best way to go. AI tools will not just spur better decision-making, but also help companies secure their applications better without compromising user experiences through multiple layers of security and other checks.
AI-backed solutions will work out (in real-time) whether any application request is coming from a legitimate or fraudulent point of contact or source.
These tools can rapidly combat prospective fraud risks, while enabling legitimate customer requests to go ahead smoothly.
AI-backed tools will help BFSIs reduce real-time security risks, while protecting their entire suite of applications. They will also be able to lower overall hindrances for customer engagement which is legitimate.
BFSI players are already navigating a whole new digital ecosystem with newer rules and higher competition. Yet, there remain huge growth opportunities, provided the data security and compliance ends of the bargain are successfully met.
AI tools can be a reliable solution for companies in this regard.
This means using AI-backed tools for enabling better security of data and monitoring along with staying on top of necessary compliance in tandem with identifying legitimate/fraudulent requests.
Automation may help lower human errors and other regulatory breaches. Executives can swiftly get huge data volumes processed and simplify decision-making on compliance matters with the right AI tools.
Using AI for BFSI compliance and data protection means that entities can quickly identify fraudulent requests while enabling smoother processes for legitimate consumers. There will be no need for costly and experience-hindering security checks for genuine customers as well. Real-time monitoring, identification, and mitigation will be enabled through AI.
Some of the major challenges pertaining to integrating the right AI tools with the existing BFSI system, along with setting up suitable regulatory and governance protocols for the core network.