Insights Distilled: Stopping “needle in a haystack” scams

Hello and welcome to Insights Distilled, a weekly email briefing that curates tactical technology news for financial services execs. We send you the top stories you need to know – and explain why they matter. Our tech news roundup helps you stay on top of the innovations driving business agility in your industry. To get next week’s edition in your inbox,?sign up here.

Mastercard’s new AI-powered network for stopping a particularly brutal type of scam could save UK banks about ￡100 million per year.?

Distilled: Nine British banks are betting on Mastercard’s new Consumer Fraud Risk platform, which flags suspicious transactions?to prevent?authorized push payment scams in real-time. ?

As the UK prepares to roll out regulation to require banks to reimburse victims of authorized push payment (APP) scams, Mastercard is stepping up to the plate with new fraud fighting technology. ?

APP scams, where victims get swindled into willingly sending money to bad actors under false pretenses, is particularly hard to police and accounts for 40% of UK bank fraud losses, according to Mastercard. Its algorithm – trained on years of account-to-account transaction data – flags and blocks suspicious transactions before money leaves a potential victim’s account. ?

Since early tester TSB started using the system four months ago, it has detected 20% more APP fraud and estimates that the tool could save UK banks about ￡100 million per year. “It’s a good example of the power of sharing data,” according to head of fraud Paul Davis. ?

Eight other big UK banks have signed up, including Lloyds and NatWest, and Mastercard plans to roll out the tool globally in the coming months. Meanwhile, 17 Australian banks launched a similar fraud reporting network earlier this year. ?

Generative AI exhaustion is starting to overwhelm execs: “Everyone’s trying to fit it in everywhere.” ?

Distilled: To manage?the flood of generative AI ideas, execs need to prioritize projects based on ROI and consider building tools in-house. ?

2023 is all about GenAI. ?

“I don’t think I’ve had a partner or vendor meeting this year where I wasn’t pitched a generative AI play,” Rocket Mortgage CIO Brian Woodring told The Wall Street Journal. In some cases, features seem tacked on just to take advantage of the hype, he added, without compelling reasons why GenAI is the right tool for the job. ?

He’s also been inundated with vendors selling products that Rocket Mortgage realized it could “confidently and more cheaply build in-house,” like a tool that analyzes data from phone calls, he said. ?

To avoid GenAI overwhelm without missing out on the potential benefits, FinServs should ruthlessly prioritize projects, build light-weight experiments that allow them to fail fast, and carefully track ROI. ?

For example, JPMorgan is using GenAI to analyze emails for signs of fraud, because it has become such a prevalent type of attack lately, while Goldman Sachs is letting engineers use it to write code, because it calculated that “superhumanizing” high-salaried developers gives it a high ROI yield.?

HSBC is experimenting with quantum technology to protect itself against future cybersecurity threats. ?

Distilled: Experts estimate that quantum computers may one day be able to?break current encryption systems in seconds, so banks have a strong incentive to fight fire with fire and find ways to use the technology to keep secrets safe. ?

Quantum – an emerging computing paradigm that promises to perform calculations at blistering speeds – is one of the biggest cyber threats of the next decade, so HSBC is testing ways to “stay ahead of the curve” in protecting itself. ?

The bank is trialing an advanced security system powered by Amazon’s AWS, Toshiba, and telecom giant BT Group that uses a technique called quantum key distribution (QKD) to protect data privacy. ?

HSBC’s test involves sending information – like mock financial transactions and video communications – between its HQ and one of its data centers, while maintaining encryption and blocking eavesdroppers through?QKD. JPMorgan and Danske Bank have also successfully experimented with the technique?

As Insights Distilled has previously reported, other FinServs are testing quantum in different areas of their businesses as well, with varying results:??

A former exec said?UBS abandoned its experiments because they didn’t provide strategic advantage, while Credit Agricole found it could achieve “faster valuations and more accurate risk assessments” using quantum techniques, and Mastercard is experimenting with ways to use the tech to improve its loyalty and rewards program.?

This is a condensed version of the?Insights Distilled?newsletter. To see items 3 - 5,?sign up here?to receive the full email in your inbox.

Quick bits:?

Personnel news: HSBC’s head of artificial intelligence for markets and securities services, Ash Booth, just jumped to JPMorgan. Meanwhile, fintech unicorn SumUp poached its new chief product officer, Anna Kuriakose, from Meta, and payments startup Clowd9 hired former Goldman Sachs partner Christian Channell as its chief financial officer. ?

Money moves: Blackstone is reportedly leading a $50 million investment in Israeli fintech Stampli, which makes an AI-powered accounts payable product. ?

Industry insights: American Express is being investigated over sales practices and former employees told Insider that they were made scapegoats, while neobank Revolut lost ~$23 million to criminals because of a payments loophole. ??