Tuesday, 25 June 2024

Swift and global banks launch AI pilots to combat payment fraud

5 min read

Swift today announced two AI-based experiments in collaboration with its member banks, to explore how technology could assist in combatting cross-border payments fraud and save the industry billions in fraud-related costs.

In the first pilot, Swift is enhancing its existing payment controls service – which helps financial institutions detect anomalies that could be indicative of fraud – by using an AI model that will create a more nuanced and accurate picture of potential fraud activity, using historical patterns of activity on the Swift network. Swift will work with payment controls customers to refine the enhancement, and the test will use the customers’ own live traffic data – giving the findings real world applicability.

In a separate experiment, Swift has convened 10 leading financial institutions to test how it can use advanced AI technology to analyse anonymously-shared data from different sources, in a way that will strengthen the global financial ecosystem. AI’s capability for confidential data sharing could be a game-changer for the industry. The tests could lead to the wider use of information sharing in fraud detection, building on its success in assessing cybersecurity threats.

The group, which includes leading banks from around the world including BNY Mellon, Deutsche Bank, DNB, HSBC, Intesa Sanpaolo and Standard Bank, will test the use of secure data collaboration and federated learning technologies. It will leverage a secure infrastructure that will enable financial institutions to exchange relevant information with strong privacy-preserving controls. Swift’s AI anomaly detection model will then be able to gather insights and identify potential fraud patterns from a much richer dataset.

Fraud cost the financial industry $485 billion in 2023 alone. AI has a strong role to play in reducing these costs and, at the same time, tackling the issue will significantly help the industry achieve the G20’s goal of increasing the speed of cross-border payments. Swift is uniquely placed to spearhead industry efforts against fraud due to its role as a trusted entity at the heart of the financial ecosystem, and because of the breadth and reach of the data that travels across its network.

Tom Zschach, chief innovation officer at Swift, said: “AI has great potential to significantly reduce fraud in the financial industry. That’s an incredibly exciting prospect, but one that will require strong collaboration. Swift has a unique ability to bring financial organisations together to harness the benefits of AI in the interests of the industry, and we’re excited by the potential of both of these pilots to help further strengthen the crossborder payments ecosystem.”

Swift has built an AI governance framework in collaboration with its community, to ensure that accuracy, explainability, fairness, auditability, security and privacy are integral to every aspect of its AI applications. These pilots are rooted in responsible use of AI and are aligned with emerging global standards, such as ISO 42001, the NIST AI Risk Management Framework and the EU AI Act.

Isabel Schmidt, executive platform owner, payments enablement at BNY Mellon Treasury Services, said: “Combatting fraud successfully will require industry collaboration, collective action, and strong leadership from operators like Swift. We’re excited to help lead the first wave of innovation in this space and look forward to seeing even more banks join the initiative.”

Ole Matthiessen, global head of cash management and head of corporate bank APAC, Middle East and Africa at Deutsche Bank, said: “Our passion for holistic payment solutions is founded on expertise, technology, and innovation; not only in terms of our own strategic product development, but importantly through our strong dedication to drive partnership and collaboration across the market. Through these industry initiatives, we have the potential to enhance our ability to detect fraud and reduce operational costs, whilst delivering a premium customer experience and contributing towards a more secure market environment.”

Manish Kohli, head of global payments solutions at HSBC, said: “Building financial resiliency and strengthening risk management is a key priority for our clients and they are looking to us to help them better manage uncertainty and threat through our solutions while supporting their businesses to grow and transform. By utilising new technology and collaborating across the industry to fight fraud, we are helping protect our customers, our data and the bank.”

Enrico Canna, head of anti-fraud and customer protection centre at Intesa Sanpaolo, said: “Extending and strengthening the collaboration of anti-fraud experts and the exchange of data, also at an international level, will improve the prevention and fight against fraud.”

Re-disseminated by The Asian Banker

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