Second Installment: SAS Executive Stu Bradley Discusses 2024 Anti-Fraud Report and Its Findings

Stu Bradley, Senior Vice President of Risk, Fraud, and Compliance Solutions at SAS, with Erik Vander Kolk of Banking Exchange. Second in a four-part series

Erik Vander Kolk
One thing I noticed on the survey that surprised me, in the area of robotics and biometrics, it seems like, compared to other industries, the finance industry is ahead of the curve?

Stu Bradley
Correct. When you look at financial services, over half of the respondents’ organizations are using physical biometrics for things like authentication. And over a third of are using robotics, which is again ahead of the average across industries.

When we look toward the future from a biometric perspective, it’s on the behavioral biometrics side. Roughly one-third of financial services respondents are already using the behavioral biometrics, with another 25% or so looking to adopt it in the next year or two.

Banks are building platforms of a multitude of different financial services. Some they’re building themselves. Some they’re buying from vendors. They’re acquiring fintech capabilities for others. This is all about, how can they embed banking services in the lifestyle of their customers with social apps, etc.?

You also have the movements around faster payments. Because of the aggregation of the different banking services and the need for faster payments, banks have been under tremendous pressure to be able to leverage a wider set of data in real time in order to make better and safer decisions. Triangulating all of those data points is absolutely key to that for things like authentication, proving out digital identity and other ways they're engaging with their customers.

Erik Vander Kolk
A lot of this discussion, it seems, revolves around data management.

Stu Bradley
I often refer to this as creating the necessary data ecosystem. That starts with the internal data, but what are the other data points they need to seamlessly integrate into their decisioning across the customer journey? That data includes things like biometrics and device reputation, public records and validation, among other things. Making sure that internal and external data comes in at the right points in the decisioning ecosystem to make better and more holistic decisions, they won’t only reduce risk but also streamline their overall processes.

Banks find themselves in a bit of a technology arms race. Among their significant investments in technology, and the RPA, or robotic process automation, piece of that has been a really successful tool to date. As the expense of rolling out these programs has increased, they’ve also had to manage the bottom line, and driving efficiency into that operational process is absolutely critical.

I gave an example of the automated collection of data on the compliance side. It could be the automated filing of suspicious activity reports and meeting other compliance objectives. RPA is really the first step of driving greater automation into their overall decision-making process.

Erik Vander Kolk
As you well know with SAS being a global player in the banking industry, the US banking industry is quite unique in that we still have quite a few midsize banks. You mentioned the technology arms race. This puts these banks in a challenging spot in order to compete with the top 10 largest banks in the United States. Could you address cost issues for those banks in keeping up? That’s a large part of our audience, and I know they’ll be interested in your perspectives on this.

Stu Bradley
Erik, you've raised one of my favorite topics. This is a conversation I'm having quite frequently. I think what you're calling out is the cost of compliance that is increasing for institutions across the board. It's especially increasing for mid-tier financial institutions, and that increase isn't relative to the size of the financial institution — meaning the cost of compliance is a greater percentage of the overall cost as you start to go down market into these mid-tier organizations.

That's becoming really problematic for them, as they're looking to compete in a very competitive market and generate sufficient margins. What we see is financial institutions starting to think a little bit differently around how they're making decisions across their customer base. They’re seeing opportunities to consolidate some of that.

When you look at compliance spend and IT spend, many organizations have done this in silos. You had risk spend for originations. You had fraud spend for application fraud and managing your overall transaction monitoring. You had compliance spend for anti-money laundering and sanctions and customer risk ranking, and then different spend for the collections process.

Organizations are starting to realize that this data is very similar across all of those different facets of their business. Yet the way they've grown their IT infrastructure has been by individual use cases. Banks across tiers are finding that their IT organizations are struggling to keep up with the needs of the business. The market moves fast, and the business needs to be agile, but their IT partners are buckling under the weight of their legacy infrastructure.

Erik Vander Kolk
What can these banks do to succeed?

Stu Bradley
The question becomes: how do you continue to serve the business needs of bringing new capabilities to market in an agile way, while managing the overall risks of that? And also do so in a way that helps you rationalize the complexity of the IT infrastructure investments that you've made? Decisioning is a great way to do that. I'll give you an example.

Think of customer onboarding. There's a slew of different decisions that are made at the time you onboard a customer. Do I originate or not? How do I price this product? I'm going to run an application fraud check. I'm going to do a customer risk ranking for compliance. I'm going to screen for sanctions. I'm going to validate identity with some of the third-party data and capabilities we’ve talked about. Then, once you onboard, you're going to want to market to that individual to help increase wallet share and give them a next best action, next best offer.

There's a lot of different decisions that are made, but they’re all made in different silos. So, this concept of enterprise customer decisioning is, how do you leverage the same data, the same infrastructure, across a multitude of different decisions?

Ultimately, it's not only at the time of onboarding. It's from the time you onboard a customer, to the time you manage that customer from a credit risk or a collections perspective, and in every single transaction in between. You can do that on the same infrastructure, and by doing so, you actually generate much better insights about the individual customer. And you can provide that more seamless, more engaging customer experience that's been so elusive for a lot of financial institutions.

Erik Vander Kolk
How does this pertain to the US midsize banks versus the large banks?

Stu Bradley
Enterprise, customer decisioning is great to say. But as it pertains to the mid-tier organization? Being able to do that while serving access to analytic capabilities or AI — whether that's for a data scientist that knows how to build it themselves or it's from a no-code, drag-and-drop interface that gives less sophisticated operators access to advanced technologies — being able to do that in a cohesive way, with the guardrails of that data and AI lifecycle I mentioned before, becomes a very, very valuable tool for those mid-tier financial institutions.

The trick is, well, how do you provide that with those out-of-the-box capabilities? But then also serve the megabanks that have a different set of needs? If you can do that in a holistic, meaning integrated, way but have the right components that give the large financial institutions — the ones that have the larger budgets, that are more IT intensive, more analytically astute — give them the ability to select the components that are going to be more valuable for them. Then you’ve got a winning strategy across all the tiers within the marketplace and, ultimately, across a wider cross-section of your readership.

Be sure to read every installment in our four-part interview series:

SAS Executive Stu Bradley Discusses 2024 Anti-Fraud Report and Its Findings

• First Installment
• Second Installment
• Third Installment
• Fourth Installment