On Saturday, Deutsche Bank released a paper titled “Unleashing the potential of AI in securities services,” which gives an insight on the potential usage of artificial intelligence and machine learning in security services and post-trade custody by banks.
This globally leading investment bank is no new to the game of AI; they have used AI earlier for advanced client segmentation processes along with their S-2 Predict tool to prevent settlement failures. And also as self-executing bots for natural-language messaging as part of their client-facing chatbot for customer assistance. Now they have pushed the usage of AI technology for risk management and for better understanding of client activities.
AI comes into play in risk management during the management of various risks that occur due to time-zone differences, imperfect communication across various sectors/chains, involvement of multiple clients, and also the hectic time pressure that comes while settling a trade. Tackling these risks using AI and ML gives both the banks and the clients a notable competitive advantage.
Deutsche Bank also mentioned in the paper that AI can be applied to the existing data to identify the current and real-time trends by using historical trends or identifying future trends by mixing past and present data. It can be used in client segregation, i.e. by dividing clients with similarities into various groups. This process will help the custodians develop better products and services that will meet the client’s shared and individual needs. Not only that, but AI can also assist and speed up the decision-making process by analysing all the data and trends in no time.
The paper gives insight into the various AI uses along with learning types, algorithm types, governance (to ensure model accuracy and consistency) and a list of key recommendations. The paper also specifies the benefits due to the usage of AI and ML in banks that includes: improving speed, efficiency, settlement lifecycle, and also open up new employment opportunities.
“The opportunities are endless, and we are not even yet scratching the surface. Going forward, we will continue pushing this emerging technology to the forefront – stay tuned!” mentioned Paul Maley, global head of securities of Duestch bank in the paper.