The pros and cons for AI in financial sector cybersecurity

Much has been written about the threats and perils artificial intelligence (AI) poses to financial services and how it can be used by cybercriminals to infiltrate customer accounts. In an industry already plagued by constant fraud concerns, where it’s predicted that the global cost of fraud will surpass $40 billion by 2027, the explosive popularity of AI, and the additional hazards it presents, have not necessarily been met with widespread enthusiasm across the sector.

Because using AI does not require deep technical acumen as an operator, it can actually enhance the abilities of common, run-of-the-mill criminals motivated to leverage it for offensive purposes. Launching an attack on a financial institution can require little more than telling the AI what to do. The technology can take on many of the activities criminals once had to learn themselves, such as writing scripts for phishing scams. And it does it all with much greater speed. 

All that said, there is a flip side to the coin that has not attracted nearly as much attention. AI also has a significant role to play in enhancing financial institutions’ defensive posture against cybercriminals. It can be integrated into security tools to spot suspicious activity and better safeguard information and protect customers better than humans, or existing technology, ever could. 

We will see a rise in AI-powered cyber-attacks in 2024 and beyond. At the same time, we can expect to see AI play an increasingly larger role in helping banks and lenders manage risk and thwart nefarious actors in some of the following key areas and ways.

Accelerated fraud and threat detection

In 2023, credit card transactions accounted for nearly 50% of payment revenues in North America. Combined with other payment methods, these numbers only continue to grow year after year. Humans cannot monitor this volume of activity and spot irregularities that may constitute fraud fast enough to prevent a customer from being victimized. 

Financial institutions have used technology for some time to do this work. AI can enhance these systems by monitoring for signs of fraud with much greater speed and accuracy, all in real-time. AI can process information and derive meaning from patterns to spot cyber threats, respond to incidents faster, and accelerate decision-making and action-taking, helping financial institutions reduce fraudulent transactions. 

Enhanced customer engagement

Attempting to extract personal account information through impersonation is one of the most common approaches used by fraudsters. Unwitting customers, particularly older adults, often fall prey to these scams, resulting in billions of losses. With increasing frequency, banks are turning to AI to help their customers distinguish between genuine and phony communications and information requests. 

For example, artificial intelligence can support banks through their own customer outreach processes. Embedded into a bank’s mobile application, AI can help to neutralize the risk of deep fake phone calls that trick customers into giving up sensitive information. In 2024, we can expect to see the emergence of more AI-powered applications such as these to preserve the sanctity and security of communications between financial institutions and their customers. 

A movement towards orchestration

Consider the appliances in a typical kitchen, many of which are now connected or infused with some level of modern technology. A microwave, refrigerator, and dishwasher may all individually be integrated with some aspect of AI to make them work better. But there is no overarching orchestration between these appliances. Human input and management are still required. 

The same can be said for many of the AI-infused security tools currently in use today. Though AI is used in tooling sets for threat detection and modeling, it is happening in a one-off manner. In the year ahead, expect movement towards a more orchestrated approach to security, marked by increased connectivity among the various security functions and reduced management by humans. 

For financial institutions, technology is a force for keeping up with an evolving market and raising the bar on customer experiences. It’s also critical for maintaining an elevated security posture. AI is already seeing greater adoption in financial services than in many other sectors. Banks must now seize the opportunity to enhance security using all the tools at their disposal. This requires a modern infrastructure that allows integration into new technologies, including AI-powered tools. Those willing to adapt will see the investment pay dividends.