Artificial Intelligence: How to Stay Competitive in the Banking World

When I think about artificial intelligence (AI) my mind quickly races to thoughts of a sci-fi, like future with driverless cars and C-3PO type robots (of “Star Wars” fame). With these more sensational breakthroughs coming in the near future, it is easy to overlook the other ways artificial intelligence is impacting the banking world today.

Artificial Intelligence: How to Stay Competitive in the Banking World

At the foundation of every AI program is one thing: data. Banks have been collecting and storing a wide array of data for decades. That is why the banking industry is a perfect candidate for a study on the benefits of the new concepts and technology associated with AI. Banks currently use new deep-learning concepts to help them analyze a wide array of different data sets; that assists them in making decisions on the many problems and tasks they face.

Banks today are writing computer programs that look through their customers’ online banking data for fraud and their transactional/product history for customer segmentation and sales opportunities. Banks have also begun to use AI for internal management and evaluation. The programs look through warehouses full of raw data—that’s the “learning” part of the deep-learning process. It means that these programs find a vast number of significant patterns. For instance, artificial intelligence might find that looking at their employees’ sales performance is directly correlated to their email use. This might cause a bank to create new internal expectations of their employees’ email use. In addition, AI programs can also look into internal structures and find opportunities for optimization and efficiency.

One bank that’s at the forefront of using AI to inform their business decisions is Citibank. Hidden within the data of their over 200 million customers they continue to find countless opportunities. To date, Citibank has implemented hundreds of “proofs of concepts” and “use cases” from data analytics—and they have no plans on slowing down. Especially as technological advances in computer power will allow them to make real-time decisions from live feeds of their customers’ data.

However, banks have a lead weight holding back their ability to innovate and take advantage of these new technologies: that’s the cost of maintaining their old, outdated legacy systems. A figure widely reported is that 70-80% of a bank’s entire IT spending goes to maintaining their legacy systems. That is why we’ve seen a sharp increase in the banking industry’s interest in small fintech companies and technologies. Banks are investing and partnering with third parties to utilize their technology. By skipping the often expensive and long internal research and development process, banks are investing instead in pre-developed technology. Banks are quickly learning that to stay competitive today often requires looking externally.

That’s where we at three+one come in. We have a very specific set of data-analysis tools in our tool kit that can help public and higher education clients and their banks find huge opportunities. Our liquidity analysis uncovers time-based deposit opportunities from a public entity’s banking transaction history. We have a prebuilt data-analysis solution that uses leading edge technological tools, allowing banks to keep their customers happier (with higher interest rates). It pays for itself by lowering the internal cost of their high government deposit collateral rates.

That is why many of the most competitive banks and finance teams around the country have reached out to us for help. They have found that three+one offers tools, skills, and opportunities that just aren’t available to them in-house, either due to time or capital restraints. We use the latest AI tools and make them accessible for public entities, Higher Ed institutions, and their banks. Because we work mainly with your data, we’re able to keep your internal costs low.

Maybe it’s time for you to take advantage of what artificial intelligence and our analytic tools can offer. When you’re ready to be more competitive and innovative, we’re here for you.

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See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

Artificial Intelligence: I Am Talking to Whom?

Have you ever conversed with a machine? Would you know if you had? Artificial Intelligence is one of those big research and development areas in banking innovation. You might be more familiar with chatbots, or text boxes that pop-up on various sites asking if you need assistance. Is it really a person on the other end, or is it just a computer? The likelihood is a computer.

 Artificial Intelligence: I Am Talking to Whom?

Artificial Intelligence (AI) holds great promise for many sectors, including banking. It is promoted as a tool that can “improve the customer experience”. From my perspective this is a conundrum; my best and worst experiences as a customer have involved people. A real person can go a long way to not just solve a problem, but help the customer feel really good about the company based on the resolution and how it was resolved.

 Artificial Intelligence: I Am Talking to Whom?

Obviously the opposite can be true. Can a machine do that? I will never say “no” as I am so impressed with what is being accomplished each day with technology.

All the major banks are working on AI projects. The regional and smaller banks will benefit from other companies willing to provide the services in which AI is required. We are experiencing AI each day, but we suddenly saw an uptick in the number of articles and announcements by banks in the area of AI research and development. This can be really cool! We are already speaking to our phones and those phones get us answers. We talk to a chatbot that simulates a person, and they get us answers and make recommendations. We are beginning to live in the Star Trek era, at least with our gadgets (not the space travel – yet). In other, unobservable ways, we are benefiting from AI as it is deployed in fraud protection.

As always, when I write these blogs, I ask you: what are you doing to enable greater use of technology in your organization? Are you prepared to operate more efficiently, to do more with less and improve the organization you work for, and the taxpayers or tuition payers that support it? Technology changes are coming at us rapidly. On the one extreme you can use the excuse of wait and see, which simply means we do things the same way we always have. The other extreme is trying to adopt every new thing that comes along, throwing good money at fun ideas. In the middle is a steady, yet flexible plan that systematically keeps you moving forward rather than falling generations behind or spending funds on the quick fad, gone tomorrow services. Regardless, one thing is for sure – how you bank today will not be how you bank tomorrow.

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See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

It’s Real Money

Consider these annual increases to one’s bottom line: +$325,000, +$750,000, and + $1,100,000.

 It's Real Money

These levels of added income are “real money” that our clients have experienced—without jeopardizing any legal, safety, or liquidity requirements.

Short-term interest rates are moving up and smarter public entities and Higher Ed institutions are taking advantage of this trend. And they’re bringing new levels of income to their bottom lines.

These surprising new levels of income can:

1) Range from tens of thousands to hundreds of thousands of dollars and more. This is “real money” and it cannot be ignored.

2) Enable you to:

Subsidize upcoming budgets and capital projects

Supplement shortfalls in sales tax revenue

Supply employees with cost-of-living increases

Cover the cost of adding new teachers and/or programs

Subsidize tuition discounts or cost-of-living increases.

Since 2008, finding new sources of income has become tough. All the more reason to employ innovative and alternative methods to capture more income.

Using our proprietary cashVest® liquidity analysis, three+one can help you realize new levels of added income. Our data provide the basis to identify time value and marketplace worth on all your operating and non-operating cash.

Our data analysis can be a valuable tool that you and your financial partners can use to develop a successful liquidity strategy—and bring in “real money” that you never thought was out there.

For your sake and that of your employees, students, and/or taxpayers, this is something you mustn’t ignore.

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See Us At These Upcoming Events and Conferences:

NYS GFOA Annual – March 29-31
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

Trumping Dodd-Frank

At the end of December, I listed ten predictions for 2017.

Prediction number four stated the following: “The Dodd-Frank book will be closed for new regulations, but will not be open for revisions. Do not expect the law to be repealed.”

 

Trumping Dodd-Frank

 

On Friday, February 3rd, President Trump signed an executive order to overhaul certain aspects of the Dodd-Frank Wall Street Reform Act of 2010.

As expected, no additional pages will be added to the already existing 24,000+ pages of regulations.

While specifics need to be defined and worked out, early indications are that changes impacting public entities and Higher Ed institutions will be nominal. The ones most affected by any changes will be the banks public entities deal with.

In my opinion, the regional banks that serve these sectors should benefit the most with the elimination of the capital stress test for banks with asset levels under $250 billion. This will result in lowering significant overhead and capital-related costs.

In addition, I do not expect there to be any changes in banks’ deposit level requirements since they were established under the international guidelines of Basel III.

It is also hoped that the overreaching government regulations and compliance requirements that have saddled banks—of all sizes—over the last several years will be eased.

I think that most of the Dodd-Frank redesign will be centered on the larger banks’ proprietary trading practices as well as the oversight of the Consumer Financial Protection Bureau. The CFPB has exploded both in bureaucracy and overreach, while showing little success in serving and protecting the public’s best interest.

As mentioned over the last several years, the landscape of banking is changing. I’m pleased to say it’s now for the better. I do think it will be in everyone’s best interest if banks have the ability to focus their resources on their clients rather than on the regulators.

Finally, the pendulum is starting to find a level of equilibrium—and that should be better for everyone.

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Investment Policy Statement

 Investment Policy Statement

During the month of January, three+one is publishing a five-week Winter Blog Series to discuss the five different categories of our cashVest® score. Every three+one liquidity analysis includes a cashVest score to establish a baseline going forward. It has been demonstrated, time and again, that if an entity follows our recommendations in each of the five categories, and a higher cashVest score is achieved, the more money an entity will earn on their low- and non-performing cash.

This week will highlight our fifth category:

Investment Policy Statement:

 Investment Policy Statement

 

An Investment Policy Statement (IPS) is the very foundation of an entity’s approach to maximizing the value of its operating and non-operating cash. That is why it is such an integral part of the regular cashVest reporting service. Keeping your policy up to date regarding regulations and the marketplace is just as important as understanding the opportunities and safeguards that an IPS puts in place.

Here are some guidelines and recommendations you should find helpful when reviewing or designing an IPS.

1.) An IPS should provide enough structure for both the entity and third parties to have a clear understanding of what is or is not permitted, both internally as well as externally by your bank(s) and/or Register Investment Advisor (RIA).

2.) An IPS should truly reflect your entity and be tailored to its specific needs. It should also reflect any limitations for which your entity is accountable.

3.) Your IPS should be updated and/or reaffirmed annually through a systematic process. If you are comfortable with your policy and feel it is serving you well, then simply reaffirm it. If you feel it needs an overhaul, then do so, but then share the revised IPS with all of your financial-institution partners.

4.) Don’t hesitate to seek help from us at three+one, entities similar to yours, and/or financial, accounting and other third-party partners.

5.) It is important to remember that an IPS should address the investment of operating cash and differentiate from long-term funds; for example, endowment vs. capital funds. Short-term liquidity should reflect the ability to access cash so it is not left unattended, but rather available at a moment’s notice.

6.) Once your IPS is constructed or reaffirmed, you should have your legal counsel review and approve it.

At three+one, we have many templates for you to review and use as a framework to personalize and reflect the specific needs of your entity or institution.

As this five-week winter blog series come to a close, it is my hope that you have a better understanding of three+one’s cashVest score and the five key elements that make up the score.  It has been proven that if you follow all five criteria and principles of three+one’s  cashVest score,  your organization will realize an immediate increase in revenue.

If you have questions or wish like to receive more information on our services, please visit threeplusone.us.

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