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Machine Learning And Blockchain Key To Banks' Future: Essential Fintech Reading Aug 6-12


Blockchain And Machine Learning Key To Banks' Future

Writing for American Banker, Paul Schaus makes the case that banks must tap the power of blockchain technology and machine learning or "risk losing millennials to fintech companies that aren't bogged down with old technology."

While banks have built up their online and mobile channels, Schaus observes that the products and services they offer in those channels are built on top of legacy systems that "fail to provide the level of speed and personalization millennials expect. A customer might be able to deposit a check from anywhere with their mobile device, but it can take several days for that deposit to post to the user's account." In contrast, the distributed ledger technology underpinning blockchain systems is designed for near real-time transfer of data. Schaus also discusses how banks are using machine learning to spot suspicious transactions and offer tailored financial advice and product recommendations. He concludes that "banks need to apply these technologies sooner rather than later to meet millennials' expectations."


Christina Rexrode and Rachel Witkowski of the Wall Street Journal report that Heather Cox will be leaving Citigroup to become USAA's chief technology and digital officer, a new role that reports to the CEO. Cox had been Citigroup's head of client experience, digital and marketing until assuming a new role last year, heading a unit called Citi FinTech. Rexrode and Witkowski note that USAA is a banking technology leader. The institution, which caters to military members and their families through insurance, banking and credit card products, "was an early adapter in letting customers deposit checks online. It now allows customers to log on to their mobile banking accounts via facial scans, voice recognition or fingerprints."

Chinese Bank Bailout Progresses

An analysis of 765 banks in China by UBS Group AG shows that a bailout of the country's banks is well underway, with as much as 1.8 trillion yuan ($271 billion) in impaired loans shed between 2013 and 2015. "Contrary to market perception, bank recapitalization and bailouts have begun," UBS's Jason Bedford tells Bloomberg. "Most interestingly, for the first time in a decade we note formal implementations of asset restructuring plans and recapitalizations and bailouts of individual — and large — institutions." However, the work is far from done. UBS Group AG estimates that in order to reach a more sustainable debt ratio the Chinese banking sector will still require up to 2 trillion yuan ($301 billion) of additional capital and the disposal of another 4.5 trillion yuan ($677.5 billion) worth of bad loans.

Closing Compromised Accounts And Opening New Ones Remains A Struggle For Banks

While banks are providing better defenses against online banking fraud, closing compromised accounts and opening new ones for customers remains a challenge. Penny Crosman of American Banker notes that the closing and reopening of credit card accounts has become routine; in contrast, banks "have to reconstruct the accounts, shutting off automatic payments, facilitating bill payments, issuing new checks and re-establishing relationships with other accounts the customer may have with the bank." Crossman reports that banks are progressing in the risk controls they've added to online banking. For example, Wells Fargo conducts real-time checks throughout a session and if something looks odd they might ask for a special code sent to a customer's mobile device or make a call to a landline.

Banker's Guide to Big Data

Topics: fintech