Intelligent Compliance

Publish date:

Compliance costs money. Lapses in compliance cost trust

When we think of compliance and regulations, there is typically a tendency to equate that with costs. There is absolutely no doubt that complying with regulations requires significant resources. By some estimates compliance and regulation costs the banking industry $270 billion a year and that it accounts for 10 per cent of operating costs. Compliance lapses can cost dearly as well. In 2012 HSBC agreed to pay a $1.92 billion in fines to U.S. authorities for compliance lapses which included AML issue.

But here is the thing, compliance lapses due to a lack of reliable compliance processes and mechanisms can potentially lead to loss of trust among consumers and hence, loss of value in the long term. We have seen data from many surveys about how Millennials do not trust their banks (this is due to many reasons of course—but compliance lapses do not help).

I would argue that we should treat compliance not just as a cost, but as something that requires investments in the form of latest technology such as AI, because its value is not appreciated until bad outcomes lead to loss of trust. And trust is something that is at the core of the banking business model and its most important asset; all of us depend on our banks to keep our money safe.

This is also perhaps an important reason for combining resources across the banking industry, and combine data to make the AI algorithms much more reliable. The effectiveness of AI and machine learning is heavily dependent on the data that is used to train the algorithms.

Combating fraud is clearly one of the most effective use cases of AI and machine learning—not only to cut costs but also to increase long term value in the form of strengthening trust among consumers.

Related Posts

banking

Are you ready for data-driven banking?

Rick Vermeer
Date icon December 7, 2018

Data makes the money go around: three reasons why banks should invest more in data now.

AI

Financial services firms are leveraging RegTech solutions to keep regulatory compliance costs in check

Amit Choudhary
Date icon December 3, 2018

RegTech can automate procedures that were formerly done manually to streamline difficult...

banking

How banks can repurpose customer journey innovations from other industries

Ame Stuart
Date icon November 8, 2018

All industries are being disrupted with the technology wave, and now this tide is rising...

cookies.

By continuing to navigate on this website, you accept the use of cookies.

For more information and to change the setting of cookies on your computer, please read our Privacy Policy.

Close

Close cookie information