More use cases means customers and employees

can experience AI’s ability to automate tasks, prioritize

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Produced in partnership with

AI gains momentum
in core financial
services functions

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2  MIT Technology Review Insights
W
ith 2.5 billion payment cards used in
more than 200 countries and territories
across the globe, Mastercard faces a
gigantic fraud risk. Credit card fraud
accounted for more than $32 billion in
losses—or about 6.6 cents per $100 in transactions—in
2021, with more than one-third occurring the U.S.,
according to a December 2022 Nilson Report study.
Fraud risks of this scale require real-time
authentication of individual transactions, which
opens the door for errors—potentially allowing
a fraudulent transaction or denying a legitimate
purchase. However, real-time verification also allows
cardholders—and Mastercard—to benefit from
the global marketplace. To tackle this challenge,
Mastercard marries fraud-detection technologies
with AI, using the data it collects over its network.
Hitting the right balance between denying potentially
legitimate transactions and allowing questionable
transactions is a challenge, says Rohit Chauhan,
executive vice president of AI at Mastercard.
“It’s a really tricky kind of model where you want to
decline every possible fraudulent transaction, but at the
same time, let the legitimate transactions pass through
without any friction,” he says. “On an average day, we
see over a billion transactions, and since data is what
“The use of AI is about future-
proofing Mastercard. If it’s the new
electricity, we want electricity to be
flowing through every division within
Mastercard.”
Rohit Chauhan, Executive Vice President of AI, Mastercard
Key takeaways
1
As AI continues to grow in financial
services, AI-powered functionality will
increasingly flow into the hands of
employees and business operations.
Working cooperatively with AI creates the
most value, as it takes on manual, repetitive
tasks that frustrate employees.
2
With education and increased exposure to
AI, employees can find more job
satisfaction, create better opportunities for
customers, and build expertise, raising their
value. Most companies don’t offer enough
education about the best uses of AI.
3
Increasingly sophisticated AI platforms and
better data will streamline the handling of
regulatory requirements and ESG
compliance. Ensuring data quality and
model consistency will be important, as will
removing biases from data.
fuels AI, we were definitely one of the early adopters.”
Yet, the benefits of AI adoption surpass improved fraud
detection. As such, the application of AI throughout
Mastercard has become a priority, Chauhan said.
“The use of AI is about future-proofing Mastercard,”
Chauhan says. “If it’s the new electricity, we want
electricity to be flowing through every division within
Mastercard, and every business unit should be
benefiting from it, rather than just the places where it
naturally incubates.”
 MIT Technology Review Insights 3

Could generative AI change finance?

In November 2022, OpenAI released an accessible version of its GPT 3.5 large language model (LLM). The
model spurred a resurgence in interest in AI, seeking ways to harness the capabilities of LLMs to perform
automated knowledge work.

ChatGPT and generative AI systems will certainly be used to create better applications, like chatbots, to
improve customer service, but the true power of the ML model will likely come from its ability to ingest a wide
variety of unstructured data and then to synthesize answers to natural language queries, says Masood Ali,
senior director of data strategy and governance at financial institution Royal Bank of Canada. The capability
could make audits much more efficient and allow easier and more in-depth know-your-customer compliance.

There are concerns, however; the LLM frequently “hallucinates” (the research term for when a model produces
inaccurate content), raising the risk of basing decisions on flawed information.

However, says Ali, “Just having ability to ask questions in a natural language way and to be able to semantically
search against lots and lots of documents or different types of data has certainly become a lot more possible
than a few years ago.”

Mastercard is not alone. Financial services and banking AI impacts the entire business,
see AI as an opportunity to automate massively at
benefitting processes and employees
scale, keep up with accelerating customer expectations,
Historically, applications of machine learning in finance
stay competitive in an evolving marketplace, and
focused on detecting anomalies, such as fraud;
prepare for disruptions. As AI use cases grow beyond
algorithmic trading; evaluating financial risks—such
fraud detection and searching unstructured data
as creditworthiness; or customer support tools, such
(data that isn’t organized or in the correct format for
as chatbots. A 2019 study by Oliver Wyman, Marsh,
an application), businesses will increasingly put AI-
and Hemes Investment Management found financial
powered functionality into the hands of non-technical
institutions that use ML models and AI for fraud
workers and business operations, allowing innovation to
detection, for example, see a 15% improvement in fraud
happen across the organization.
reduction and legitimate transaction approvals.

With training, retooling, and increased exposure to

Financial firms are increasingly embracing AI adoption
data, business users can play a central role in building
as more applications for business areas emerge. A
analytics workflows, more efficiently handle regulatory
2022 Deloitte survey of business leaders shows more
requests, and ensure the quality of data.
than three-quarters of companies across industries

Whether the systems are called AI, machine-learning

(ML) models, or automated data analytics, data is
taking on a more significant role inside companies,
says John McCambridge, global solutions director for
financial services and insurance at AI and machine
learning firm Dataiku.

“People are using advanced analytics to solve various

problems inside of their businesses and generate lots of
return on investment,” he says. “It’s absolutely a potential
source of value and can solve very specific problems.”
4  MIT Technology Review Insights
(79%) fully deployed more than three types of AI in
2022, compared to 61% in the prior year. A similar
number, 76%, plan to increase or significantly increase
their investment in AI in the next fiscal year.
Mastercard is in that cohort, pushing AI throughout
the company. “We have use cases in finance, audit and
compliance, and in HR,” says Mastercard’s Chauhan.
“You name it, we have it.”
A major area where intelligent automation can benefit
financial firms—and other industries—is compliance
and auditing. The financial services industry faces
a great deal of regulatory scrutiny, and in response,
companies are developing more sophisticated
expectations for their information systems, and
investing more in the quality of data on which those
system work, says McCambridge.
Environmental, social, and governance (ESG)
compliance involves significant record-keeping and
compliance requirements, often based on unstructured
data as well as data from sources that are historically
new for financial firms to absorb, he says. For
employees, he says, AI can reduce workloads and
improve the consistency and the quality of reporting.
“Analytics has enabled
our business to become
more of a trusted advisor
to our clients that we are
auditing. We are going to
clients with issues that
perhaps they would not
have known otherwise.”
Masood Ali, Senior Director of Data
Strategy and Governance, Royal Bank of
Canada
“You can dramatically reduce the amount of energy
required to comply with audit or regulatory requests,”
McCambridge says. “These capabilities are
transformational.”
In addition to more consistent risk management,
companies can improve customer experiences through
better personalization, support assistance, and
feedback analysis, while frontline workers can train
more quickly.
Mastercard, for example, uses AI to capture and impart
knowledge to workers throughout the company, and
the company relies on workers to make decisions
about where the technology can best deliver benefits,
says Chauhan.
AI takes on rote work, and brings
alternative data to life
Financial institutions are aggressively looking to
apply AI to as much of their business as possible. In
the banking industry, risk mitigation and compliance
auditing are common, and institutions are expanding
the use of recommendation systems. In financial
services, algorithmic trading and asset allocation are
common.
Creating models to use across the company to help
employees identify applications not only helps the
business, but also presents learning opportunities to
workers, raising their level of expertise.
 MIT Technology Review Insights 5

In addition, AI systems can remove the repetitive tasks

that frustrate many employees—often since their
efforts would be better leveraged elsewhere, especially
with the latest capabilities to search intelligently
AI explainability
through documents, spreadsheets, and other
As AI systems become an increasing part of
unstructured data, says Masood Ali, senior director
business, their ability to explain the connections
of data strategy and governance at Royal Bank of
that led to a certain prediction will become
Canada (RBC).
more important. Some ML algorithms’ decisions
are easily explained because their variables,
“There is a lot of time spent within financial institutions
or “features” in the field’s terminology, directly
to summarize data and write reports,” he says. “A
relate to some understandable attribute of the
lot of the daily intensive work is manual, because
problem, such as an anti-spam engine that
people have to think about the same things over
assigns points based on whether the sending
and over. That’s where I think AI and ML can make
domain is trusted.
a big difference, especially when it comes to natural
language.”
However, more complex models, such as more
advanced or “deep” neural networks, can
The world is awash in data, and much of it resides in
create synthesized features whose origins are
data sources that largely have remained untapped.
opaque, undermining trust in the system, said
Turning alternative data—from social media, supply
John McCambridge, global solutions director
chain information, or satellite imagery, for example—
for financial services and insurance at AI and
into actionable information is a growing market.
machine-learning firm Dataiku.

By using AI for analysis, RBC can often catch potential

“Many management teams would like to be able
violations of regulations and warn their clients, even if
to have someone explain to them coherently
the issues come in the form of a document or social
why the model is making a particular decision.
media post, says Ali.
Very few teams would be willing to entrust their
day-to-day operations to something that they
“Analytics has enabled our business to become
didn’t understand the functioning of,” he said.
more of a trusted advisor to our clients that we are
“And regulators, of course, also have very clear
auditing,” he says. “We are going to clients with issues
expectations from a governance point of view
that perhaps they would not have known otherwise.
around explainability of how you’re approaching
Risks that are just not on the surface, but that become
the application you’re building.”
apparent from valuable and insightful data, so we can
help clients become more effective in their operations
while safeguarding RBC as a whole.”

“Very few teams would be willing to entrust their

day-to-day operations to something that they didn’t
understand the functioning of.”
John McCambridge, Global Solutions Director for Financial Services and Insurance,
Dataiku
6  MIT Technology Review Insights

“The analysis from AI/ML is only as good as your

data—it’s the age-old saying, right, garbage in
garbage out.”
Masood Ali, Senior Director of Data Strategy and Governance, Royal Bank of Canada

Challenges and solutions
Ad hoc approaches to data analytics have left many
financial firms still using spreadsheets and other
approaches that are difficult to maintain, and which
often lead to data sprawl. While Excel and other
spreadsheet software have had amazing sticking
power, more sophisticated tools and AI platforms
that offer more opportunities for automation and
governance will become far more prominent
within five to 10 years, as financial institutions move
on from spreadsheet analyses to more data-science-
focused tools, says McCambridge.
“There are more and more situations in which it’s possible
to do something that is both a coherent, responsive
data project, but that’s also robust and well governed,”
he says. “That’s a relatively new phenomenon.”
To gain those efficiencies, there are still hurdles the
financial firms must overcome.
Data quality and governance: The quality of an AI
system is only as good as the quality of the data that
trains it. Companies should make sure that any models
they build—and any models provided by vendors—
have good data quality and consistency. Removing
biases from data is also extremely important to avoid
both regulatory pitfalls and poor recommendations.
Education and culture: Surveys during the past year are
indicating a sentiment swing toward workers embracing
the idea of using AI to do their jobs, but they also reveal
concern over a lack of training and highlight a lack of
use cases. For example, Salesforce found 58% of survey
respondents say they are excited about the prospect
of working with AI, but only 1 in 10 say their day-to-day
work involves AI skills. Likewise, the 2022 Deloitte
survey not only shows a lack of business-wide investing
in automation technologies—just 30% of businesses
surveyed say they are making automation investments
for as many jobs as possible—but also a lack of
training: most businesses (79%) are not educating
their workforce on how best to apply and use AI.
Financial firms should expose workers to AI systems
as much as possible to drive education and show
the benefits of machine-learning powered systems.
Progress will be slow, and employees will be hesitant
to embrace AI, if the business is not ready. RBC’s
Ali points to 10 to 15 years ago, when banks looked
at data analytics and ML differently because the
infrastructure was not in place to allow the technology
to improve businesses.

“The analysis from AI/ML is only as good as your

data—it’s the age-old saying, right, garbage in garbage
out,” says RBC’s Ali. “There’s a lot of data being
created, but at the same time, there has been a lot of
focus on cleaning and organizing data in the best way.”

Companies that find they do not have enough data to

train their models should adopt a commercially trained
model or embark on an effort to produce the right data,
rather than create a poorly trained model, he says.
 MIT Technology Review Insights 7

“GPUs did not even exist 10 years ago, right? And
cloud was just something that people were thinking
about starting to think about,” he said. “So, there has
been a lot of development on the infrastructure side,
on the tooling side, as well as on the digitization of
business processes.”
However, says Ali, “Just having the ability to ask
questions in a natural language way and to be able to
semantically search against lots and lots of documents
or different types of data has certainly become a lot
more possible than a few years ago.”

Now, with growing maturity and exciting

developments such as large language models (LLMs)
taking entire industries by storm, Ali expects things to
change quickly.
“Just having the ability to
With the advent of generative AI, plans for the
ask questions in a natural
application of AI within the workplace have accelerated
dramatically. Financial institutions are no exception.
language way and to be
While many businesses will benefit from moving able to semantically
AI from siloed centers of excellence to creating
capabilities that can be used across the organization, search against lots and
lots of documents or
companies should be tactical in how they apply AI
systems, paying particular attention to the quality of
data on which they are trained.
different types of data
In the end, however, delivering AI capabilities to a wide
swath of users can not only reduce workloads, but
has certainly become a
improve the quality of data, the relevance of decisions,
and the efficiency of workers.
lot more possible than a
few years ago.”
“AI is just a capability—it doesn’t have any domain
knowledge,” says Chauhan. “When the domain
knowledge from workers and the capabilities from
Masood Ali, Senior Director of Data
AI come together, that is when most of the value Strategy and Governance, Royal Bank
gets created.” of Canada
8  MIT Technology Review Insights

“AI gains momentum in core financial services functions” is an executive briefing paper by MIT Technology Review
Insights. We would like to thank all participants as well as the sponsor, Dataiku. MIT Technology Review Insights has
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Michelle Brosnahan was the editor of this report, and Nicola Crepaldi was the publisher.

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