Cover: The AI Book, by Susanne Chishti

“AI is a constellation of technologies that allows machines to sense, comprehend, act and learn. Like any powerful technology, AI entails responsibilities that need to be understood, communicated and addressed. I can only applaud the valuable contribution of this book and advocate for using AI+DLT to guarantee the ‘trustlessness’ of next-gen platforms: contexts where trust in parties is unnecessary because the system itself guarantees validity veracity and integrity of data and predictions.”

Laura Degiovanni, Founder and CEO, TIIQU

“As a GDPR EU representative, I work exclusively with companies that move personal data across borders. Because that data comes from various sources located in multiple countries, it enables AI systems to uncover patterns, make connections and manage risk. These international data flows are crucial to grow the use of AI in financial services.”

Jane Murphy, EDPO

“AI is changing financial services beyond recognition. This is a timely and excellent handbook on the subject and should be compulsory reading for all in the financial services sector. It treats in straightforward terms the complexities, major challenges but importantly also sets sight on the abundance of opportunity AI offers. The editors have gathered an impressive array of market commentators, practitioners and AI experts to produce the AI reference book of 2020.”

Kieran Rigby, Global President, Claims
Solutions, Crawford & Company

“AI is a new world for most of us, but it is developing fast so the more insight and transparency we bring to the topic the better for everyone. AI presents a fantastic opportunity for our profession to do things much quicker, more rigorously and with more personalization than has ever been possible before. But we need to embrace this and share experiences. This is why The AI Book is super helpful.”

Sian Fisher, CEO, Chartered Insurance Institute

“The UK remains a global leader in Insurance. Brokers are integral to this, as is the commitment to fully understand and embrace the risks and opportunities of Innovation, especially in Technology, and fast-moving areas like AI. On behalf of its 1850+ FCA-regulated members, BIBA remains actively engaged here – on data ethics, digital upskilling, and Insurtech, for example. BIBA is pleased to support ambitious projects like The AI Book, and its focus on making accessible ideas and experience from all areas of Financial Services, not just Insurance, so that we can continue to deliver the best outcomes for customer.”

Steve White, CEO, British Insurance Brokers Association

“As an AI practitioner, I truly believe the AI technology to be only valuable in real-world applications. The AI Book, written by technology and business experts, is a great tool for busy executives both in China and abroad who would like to learn more about AI and how it may impact their businesses.”

Dong Li, PhD and MBA, CTO, Sunshine P&C
Insurance Company

The AI Book is a much-awaited cornerstone to holistically applying artificial intelligence to finance while highlighting the importance of trust, transparency and ethics. AI brings transformative changes for economies and societies in the world, and these changes need to benefit all people. The AI Book demonstrates how we can harness the potential of AI for financial services by putting our human values at the heart of it. The book written by great AI experts globally can guide and inspire you to think further into the future. A must read.”

Gülser S. Gorat, Director, UNESCO

“Artificial intelligence is the stealth disruptor of the financial services industry and its impact is being felt in every corner, from risk modelling and compliance to chatbots and roboadvisors. But with such transformational power comes legal, regulatory and ethical issues. The AI Book, crowdsourced from leading industry experts, provides important insights into the use of AI in financial services, as well as the debates surrounding its application.”

Joy Macknight, Managing Editor, The Banker

“As a major financial services company we are already experiencing on a day-to-day basis how transformative, and disruptive, AI can be for our business, from trading, risk analysis, research, and wealth management to even straightforward processes such as client identification and KYC reporting. This book has proved to be an invaluable guide to these many different applications for AI in finance and how it can benefit businesses, and where it may not. In sum, a very timely and helpful contribution to understanding the real world implications of AI in finance.”

Miranda Carr, Managing Director, Research,
Haitong International (UK) Limited

“Technologies are meant to solve business problems. Artificial Intelligence is no exception. It can help make decisions and predictions by analysing huge amount of data in real time. The highly computerized and data-rich financial services industry is a key industry that is very suitable for AI applications. AI can help in many financial service scenarios such as credit decisions, risk control, asset allocation and portfolio rebalancing. You will find all these interesting topics in The AI Book, written by global AI pundits and industry insiders. I highly recommend it.”

Ning Tang, Founder, Chairman and CEO, CreditEase

“Artificial Intelligence has been transforming the world digitally, bringing limitless potential to push us forward to enormous business opportunities and social wellbeing. Contributing US$15.7 trillion to the global economy by 2030 according to PwC’s research, AI should also go hand in hand with proper governance and responsible framework. A good read of the AI Book to help harness the power of AI in an ethical and responsible manner. Responsible AI starts with responsible leaders!”

Elton Yeung, Vice Chairman, PwC China

“AI is an emerging technology and The AI Book is required reading by professionals in trade finance and working capital markets globally. AI is being increasingly harnessed in a variety of applications, starting with invoice data capture, credit assessment and pricing, to fraud and money laundering mitigation in suspicious transactions. Check out The AI Book for the all the latest in AI and machine learning tools.”

Walter Gontarek, CEO and Chairman, Channel Capital

“In financial services, the harvesting of data and wrangling of it to unlock its power for Artificial Intelligence and Machine Learning is proving to be the lifeblood of the industry. As we progress into the future, Machine Learning in financial services will continue to lead the pack and allow us to solve increasingly complex problems that would otherwise be impossible without harnessing the power of AI. The AI Book is packed with information from leading experts on how AI is used and impacts the financial services industry.”

Shuki Licht, Chief Innovation Officer, Finastr

“AI will undoubtedly impact every stage of the insurance value chain, from customer acquisition and customer experience, to underwriting, product development, pricing and ultimately through each stage of the claims settlement process. Few other technologies have the potential to impact the industry so significantly as an enabler to innovation in a changing world where information underpins every decision. Insurance organizations ignore or limit the application of artificial intelligence at their peril; utilizing and understanding data to the benefit of the ultimate customer will always be a successful business strategy and a competitive advantage. This book will help leaders and executives understand more about how to get that done.”

Ruth Polyblank, Vice President, Insurance, Mastercard

“From the early days AI for the financial industry, to Deep Blue, invented by Ron Coleman at IBM, the AI chess game that beat Kasprov in 1997, these were all incremental steps that have lead us to the most significant and profound changes that will reshape the financial markets. Today, we are seeing many platforms emerge, and free open source code from the biggest players like Google, and it will be several years before we know who will emerge as the tech AI victors. But one thing is certain, we are in the exploratory services phase of AI, where banks are learning from service providers who know how to piece the correct AI components together to solve real problems. Within two to three years, we will witness an AI boom no different from the Internet craze of the 1990’s. If you plan to be in the AI game, strap yourself in, read The AI Book, and this will guide you and shape your thinking on how you can take advantage of the forthcoming AI wave.”

Steven O’Hanlon, CEO, Numerix LLC, NYC

The AI Book

The Artificial Intelligence Handbook for Investors,
Entrepreneurs and FinTech Visionaries

Edited by

Susanne Chishti

Ivana Bartoletti

Anne Leslie

Shân M. Millie















Wiley Logo

Preface

Artificial intelligence (AI) is changing our lives. It has never been more important to have a clear understanding of what AI is and the ramifications of its mass adoption, particularly in the financial services sector. However, the inherent complexity of the topic is often intimidating to non-specialists, and the absence of a broad-based dialogue on the topic of AI is hindering business decision-making. The AI Book explains what exactly artificial intelligence is; how is it being used in financial services; what is at stake; who are the major players; and what lies over the horizon?

AI and Deep Learning have broad ranging applications in deposits & lending, insurance, payments, investment management and capital markets. Deep learning solves the classification problem by letting the machine learn by itself. Similar technologies are used in assessing the right premiums for insurance markets and making predictions about stock market prices based on a large number of variables, which can then be used for automated trading.

Deep Learning is now used in finance to make connections between large numbers of seemingly unconnected events and variables to make predictions for fraud detection, insurance pricing and trading stock.

However, data needs to be unbiased, or otherwise the machine will learn the bias that is inherently embedded in the data. It is a known fact that many facial recognition algorithms work well with certain races but much less reliably with other races and gender. So there are many ethical issues associated with the use of AI in finance, particularly issues linked to privacy and the use of personal data.

AI is the new electricity, and with great opportunity comes great responsibility. AI is not perfect and therefore it is crucial for all of us in finance to fully understand how AI can be used properly.

The AI Book is the first crowd-sourced book globally on the future of artificial intelligence in the financial services sector – a book that provides food for thought to FinTech newbies, pioneers and well-seasoned experts alike. The reason we decided to reach out to the global AI, machine learning and FinTech community in sourcing the book’s contributors lies in the inherently fragmented nature of the field of AI. There was no single author, group of authors or indeed region in the world that could cover all the facets and nuances of AI in finance in an exhaustive manner. What is more, by being able to reach out to a truly global contributor base, we not only stayed true to the spirit of FinTech and the AI community, making use of technological channels of communication in reaching out to, selecting and reviewing our would-be contributors, but also made sure that every corner of the globe had the chance to have its say. Thus, we aimed to fulfil one of the most important purposes of The AI Book; namely, to give a voice to those that would remain unheard, those that did not belong to a true FinTech and AI community in their local areas, and spread that voice to an international audience. We have immensely enjoyed the journey of editing The AI Book and sincerely hope that you will enjoy reading it, at least as much.

More than 140 authors submitted 142 abstracts to be part of the book. We asked our global FinTech and AI communities for their views regarding which abstracts they would like to have fully expanded for the book. Out of all contributors, we selected 74 authors who have been asked to write their full chapter, which has now been included in this book. We conducted a questionnaire among all our selected authors to further understand their background and expertise. In summary, our selected authors come from 20 countries. More than 75% of our authors have postgraduate university degrees (78%) (see Table 1), have strong domain expertise across many fields (see Table 2) and 87% of our finalist authors had their articles published before.

A bar graph is shown in the x-y plane. The x-axis represents different degrees: “High School Degree,” “Undergraduate University Degree,” and “Postgraduate University Degree.” The y-axis represents “%” ranges from 0.00 to 80.00. The graph illustrates the highest educational qualification of finalist authors. More than 75% of authors have postgraduate university degrees.

Table 1: What is the highest educational qualification of our finalist authors?

A bar graph is shown in the x-y plane. The x-axis represents different areas: “Payments/PayTech,” “Retail Banking,” “Corporate/Investment Banking,” “Private Banking,” “Asset Management,” “Insurance,” “Compliance/Regulation,” “Risk Management,” “Cybersecurity,” “Enterprise Innovation,” “Blockchain,” “Big Data Analytics,” “Artifical Intelligence/Machine Learning,” “Internet of Things (IoT),” “Cryptocurrencies,” and “Platform Business Models.”  The y-axis represents “%” ranges from 0.00 to 90.00. More than 79% of authors have domain expertise in Artifical Intelligence/Machine Learning.

Table 2: List all areas our authors have domain expertise in; multiple choices were possible

Table 3 and Table 4 show that more than 40% of our finalist authors are entrepreneurs working for FinTech startups and scaleups (many of them part of the founding team), 10% each comes from established financial and technology companies and more than a third from service providers such as consulting firms or law firms servicing the financial services sector.

A bar graph is shown in the x-y plane. The x-axis represents different types of companies: “Startup and Scaleups,” “Established Payment Company,” “Established Financial Services Company,” “Established Technology Company,” and “Service Provider (consulting, legal, risk, etc).” The y-axis represents “%” ranges from 0.00 to 45.00. More than 40% of our finalist authors are entrepreneurs working for FinTech start-ups and scaleups, 10% each comes from established financial and technology companies and more than a third from service providers such as consulting firms or law firms servicing the financial services sectors.

Table 3: Authors selected the type of company they are working in

A bar graph is shown in the x-y plane. The x-axis represents size of companies: “1-10 people,” “11-50 people,” “51-100 people,” “101-1000 people,’ and “1001 plus people.” The y-axis represents “%” ranges from 0.00 to 35.00. More than 40% of our finalist authors are entrepreneurs working for FinTech start-ups and scaleups, 10% each comes from established financial and technology companies and more than a third from service providers such as consulting firms or law firms servicing the financial services sectors.

Table 4: Size of companies our authors work for

Almost 30% of our authors work for startups with up to 10 people and another 25% for startups/small and medium-sized enterprises (SMEs) with up to 100 people. More than 40% of our authors are employed by a large organization of more than 100 employees.

We are very proud of our highly qualified authors, their strong expertise, and passion for artificial intelligence and FinTech by being either entrepreneurs or often “intrapreneurs” in large established organizations who all are committed to play a significant role in the global FinTech and AI revolution. These remarkable people are willing to share their insights with all of us over the next pages.

This book would not have been possible without the dedication and efforts of all contributors to The AI Book (both those who submitted their initial abstracts for consideration by the global FinTech community, as well as the final authors whose insights you will be reading shortly). In addition, we would like to thank our editors at Wiley whose guidance and help made sure that what started off as an idea, you are now holding in your hands.

Finally, I would like to thank my fantastic co-editors Ivana Bartoletti, Head of Privacy and Data Protection at Gemserv; Anne Leslie, Senior Managing Consultant, IBM; and Shân M. Millie, Board Advisor & CEO of Bright Blue Hare. Editing a crowd-sourced book naturally takes several months and Ivana, Anne and Shân were always a pleasure to work alongside with their strong domain expertise and vision for the future of artificial intelligence!

Susanne Chishti

Bestselling Co-Editor, The FINTECH Book Series

CEO FINTECH Circle & FINTECH Circle Institute

About the Editors

Susanne Chishti (Editor-in-Chief)

Susanne Chishti is the CEO of FINTECH Circle, Europe’s first Angel Network focused on FinTech investments and the founder of the FINTECH Circle Institute, the leading FinTech learning and innovation platform offering Corporate Innovation Workshops to C-level executives, and providing FinTech courses. She is also the co-editor of the bestselling publications, The FinTech Book, The WealthTech Book, The InsurTech Book and The PayTech Book (all published by Wiley).

Susanne has received the following awards:

  1. Fintech Champion of the Year 2019 (Women in Finance Awards)
  2. Social Media Influencer of the Year 2018 (Investment Week)
  3. Top 7 Crypto Experts globally 2018 (Inc. Magazine)
  4. City Innovator – Inspirational Woman in 2016
  5. European Digital Financial Services “Power 50”, an independent ranking of the most influential people in digital financial services in Europe (2015).

During her MBA, she started her career working for a FinTech company (before the term was invented) in Silicon Valley, 20 years ago. She then worked more than 15 years across Deutsche Bank, Lloyds Banking Group, Morgan Stanley and Accenture in London and Hong Kong. Susanne is an award-winning entrepreneur and investor with strong FinTech expertise. She is a judge and coach at global FinTech events and competitions and a conference keynote speaker. Susanne leads a global community of more than 130,000 FinTech entrepreneurs, investors and financial services professionals globally (www.fintechcircle.com).

Ivana Bartoletti

Ivana Bartoletti is a policymaker, international public speaker and media commentator.

In her day job, Ivana is head of privacy and data protection at Gemserv, where she advises organizations on compliance with privacy legislation, especially in relation to AI and blockchain technology. With an academic background in human rights and law, she has previously worked as adviser to the Minister of Human Rights in Italy and has held senior roles in privacy and information governance at Barclays, Sky and the NHS.

Ivana was awarded “Woman of the Year” (2019) at the Cyber Security Awards in recognition of her growing reputation as an advocate of equality, privacy and ethics at the heart of tech and AI.

In May 2018, she co-founded the Women Leading in AI Network, a thriving international group of scientists, industry leaders and policy experts advocating for responsible AI. Their 2018 report made waves among tech leaders, international institutions and the media, who backed many of their recommendations.

Ivana is a sought-after public speaker and media commentator for the BBC, Sky and other major broadcasters and news outlets on headline stories where technology intersects with privacy and data law and politics. Ivana’s own book, focusing on the socio-economic impact of AI, will be released by Indigo Press.

Anne Leslie

Anne Leslie is a senior managing consultant at IBM Security where her focus is on security intelligence and operations consulting, specializing in cyber talent management. She has spent her entire career at the intersection of financial services, regulation and technology, in pivotal roles in both sales and advisory. Prior to joining IBM, Anne was managing director of a blockchain startup specializing in digital identity and online privacy, after leading the France-Benelux RegTech practice at BearingPoint where she was engaged in complex data governance, regulatory transformation and cloud migration programs for systemic banks, global insurers and supervisory authorities. As co-author of The RegTech Book recently published by Wiley, Anne is passionate about responsible technology. She believes that technological innovation should be the result of a human-centred design process that serves the ethical and social purpose of enhancing human well-being for the many and not the few. She is a fervent advocate of inclusive dialogue and multidisciplinary engagement in order to have crucial conversations that count about topics that matter.

Originally from Ireland, Anne has lived in France for over 20 years and today lives happily in Paris with her three children and her partner. She participated as Co-Editor in a personal capacity.

Shân M. Millie

Shân M. Millie specializes in practical innovation, supporting firms and high-performing individuals in value proposition design and incubation, business storytelling, and brand generation. Primarily focused on the insurance sector (since 2008), her work includes board advisory, training, facilitation, and 121 coaching. “I create value for individuals, teams and firms by engineering process and internal creativity, to unlock insight, shape purpose and convert intent into successful outcomes,” she says. Drawing on 25+ years of corporate leadership and brand-building, she works with corporate intrapreneurs, startups and scaleups alike. Clients include the leading insurance organizations in the UK – Association of British Insurers, Chartered Institute of Insurance and British Insurance Brokers Association – established firms including Lloyd’s of London, and leading InsurTechs, including digital claims specialists, RightIndem. Shân founded Bright Blue Hare in 2016, and is a founding associate of multidisciplinary London market consultancy, Green Kite. She is co-editor of the bestselling The InsurTech Book: The Insurance Technology Handbook for Investors, Entrepreneurs and FinTech Visionaries (Wiley, June 2018). Passionate about brilliantly run insurance as a social necessity, she serves as sector expert for the UK Disability Champion’s Access to Insurance Taskforce, and as board member, Insurance United Against Dementia.

Acknowledgements

After the global book launch events of The FinTech Book, The WealthTech Book and The InsurTech Book, we met thousands of FinTech entrepreneurs, investors and financial services and technology professionals who all loved the books and wanted to learn more how artificial intelligence and machine learning will impact the financial services sector and our world overall.

We came up with the idea for The AI Book and spoke to our FinTech friends globally. Entrepreneurs across all continents were eager to share their powerful insights. They wanted to explain how AI is poised to disrupt lives, businesses, whole economies and even the geopolitical world order and of course, how it will improve the world of finance. FinTech investors, “intrapreneurs”, innovation leaders at leading financial and technology institutions and thought leaders were keen to describe their embrace of the data and AI revolution.

The global effort of crowdsourcing such insights was born with The FinTech Book which became a global bestseller across 107 countries in 10 languages. We continued this success with The WealthTech Book, The InsurTech Book and The PayTech Book. We hope that with The AI Book we can satisfy the appetite for knowledge and insights about the future of artificial intelligence applied to the financial services sector.

We are aware that this would not have been possible without the global FINTECH Circle community and our own personal networks. We are very grateful to more than 130,000 members of FINTECH Circle for joining us daily across our website www.FINTECHCircle.com, our Twitter accounts and our LinkedIn group. Without the public support and engagement of our global FinTech and AI communities this book would not have been possible.

The authors you will read about have been chosen by our global ecosystem purely on merit; thus, no matter how big or small their organization, no matter in which country they work, no matter if they were well known or still undiscovered, everybody had the same chance to apply and be part of The AI Book. We are proud of that, as we believe that artificial intelligence will drive the world of finance. The global AI community is made up of the smartest, most innovative and nicest people we know. Thank you for being part of our journey. It is difficult to name you all here, but you are all listed in the directory at the end of this book.

Our publisher Wiley has been a great partner for The FinTech Book Series and we are delighted that Wiley will again publish The AI Book in paperback and e-book formats globally. A special thanks goes to our fantastic editor Gemma Valler. Thanks to you and your team – we could not have done it without your amazing support!

We look forward to hearing from you. Please visit our website https://fintechcircle.com/ai-book/ for additional bonus content from our global AI community! Please send us your comments on The AI Book and let us know how you wish to be engaged by dropping us a line at info@FINTECHCircle.com

Susanne Chishti Ivana Bartoletti
Twitter: @SusanneChishti Twitter: @IvanaBartoletti
Anne Leslie Shán M. Millie
Twitter: @AnneLes1ie Twitter: @SMMBrightBlueH

Part 1
AI: Need to Know

The figure shows five circles, connected through a line, illustrating the importance and role of Artificial intelligence (AI) in different sectors.

Artificial intelligence (AI) is poised to disrupt lives, businesses, whole economies and even the international geopolitical order. As such, it has never been more important to have a clear understanding of what AI is and the ramifications of its mass adoption, particularly in the financial services sector. However, the inherent complexity of the topic is often intimidating to non-specialists, and the absence of broad-based dialogue on the topic of AI is hindering business decision-making related to its application.

What exactly is AI; how is it being used in financial services; what is at stake; who are the major players; and what lies over the horizon?

In Part 1, we will explore all these questions and more. By delving into the detail behind the hype, readers will gain a firm understanding of the different type of technologies that fall under the more general, and somewhat opaque, “AI” heading. We will have the opportunity to look at how nation states are jostling for position and international competitive advantage relative to their peers through their national AI strategies and action plans. We will also have a chance to learn about tried-and-tested recommendations for successfully embedding AI into the daily operations of financial services firms, while avoiding the myriad pitfalls that still unfortunately get in the way of firms reaping the full advantage of their AI investments.

Finally, we will take a close look at the “human” aspects of AI and examine the reasons why, in the face of the growing sophistication of algorithmic systems, the exercise of sound human judgement, governance and control has never been more important. We will look at the role of boards and directors in the formulation and execution of AI strategy within firms, and we will see how artificial intelligence systems that complement human cognition have the potential to deliver maximized value.