AI adoption, PNC setbacks: Top tech news for March 2024

April 1, 2024 12:10 PM

In this month's roundup of top tech news: Organizations like First Horizon and TransUnion explore the use of artificial intelligence, Metropolitan Commercial Bank leaves the banking-as-a-service marketplace, BNY Mellon and Microsoft team up to oversee a new data management platform and more.

Click here to read last month's roundup of top tech news.

An interesting aspect of this case is the bank's characterization of credit card data as "trade secrets."

Michael Nagle/Bloomberg

JPMorgan Chase accuses TransUnion, others of stealing 'trade secrets'

Article by Penny Crosman

JPMorgan Chase has sued TransUnion for what it calls an "elaborate, decade-long scheme" by Argus, a unit of TransUnion, to "secretly misappropriate JPM's valuable trade secret data." The "trade secret data" the bank refers to is anonymized credit card data. The case does not involve personally identifiable information.

In the lawsuit the New York bank filed against Chicago-based TransUnion last week in Delaware Federal District Court, it said Argus Information & Advisory Services collected the bank's credit card data while under contract as a data aggregator for the Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Reserve Bank of Philadelphia. Argus then, without permission and in violation of its contracts with those agencies, used that data in the benchmarking services it sells to other banks, according to the bank. The complaint also names Verisk Analytics, which bought Argus in 2012, as a defendant.

"While Argus did not have access to any of our customers' personally identifiable information, this data is valuable and competitively sensitive," said Seth Wheeler, Chase's chief data and analytics officer. "Argus used Chase's data for its own commercial gain, and it's time this pattern of behavior stops once and for all."

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"At the end of the day, the mental health of our associates is key to the success of the customer experience," says Jason O'Dell, vice president for voice services at First Horizon Bank.

Elijah Nouvelage/Bloomberg

The AI bringing zen to First Horizon's call centers

Article by Penny Crosman

Call center agents who have to deal with angry or perplexed customers all day tend to have through-the-roof stress levels and a high turnover rate as a result. About 53% of U.S. contact center agents who describe their stress level at work as high say they will probably leave their organization within the next six months, according to CMP Research's 2023-2024 Customer Contact Executive Benchmarking Report.

Some think this is a problem artificial intelligence can fix. A well-designed algorithm could detect the signs that a call center rep is losing it and do something about it, such as send the rep a relaxing video montage of photos of their family set to music.

First Horizon is using artificial intelligence and such video "resets" to bring a state of calm and well-being to the people who talk to customers on the phone all day. Down the road, it also plans to use a large language model to automatically summarize calls, a use case Ally Bank and KeyBank have adopted.

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Trading On The Floor Of The NYSE As U.S. Stocks Rise, Dollar Steady Amid Tax Debate

Metropolitan Commercial Bank will end all banking-as-a-service relationships this year "to reduce the Company's exposure to the heightened, and evolving, regulatory standards related to these activities," according to its 2023 annual report.

Michael Nagle/Bloomberg

Metropolitan Commercial to exit the BaaS business entirely

Article by Miriam Cross

Metropolitan Commercial Bank is the latest financial institution to wind down or curtail its banking-as-a-service program.

The New York City community bank, which is a unit of Metropolitan Bank Holding Corp., announced in its 2023 annual report that it had decided to exit all banking-as-a-service relationships in early 2024 and expects to complete the process over the course of this year. The annual report was filed on February 28. This news follows the bank's announcement earlier in 2024 that it would exit consumer-facing banking-as-a-service relationships.

"The decision to terminate these financial service partnerships will reduce the Company's exposure to the heightened, and evolving, regulatory standards related to these activities," reads the report. "This decision … reflected recent developments in the payments and non-bank financial service industry, regulations applicable to this business line of the Company, and a strategic assessment of the business case for the Company's further involvement at this time."

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ChatGPT As Cyber Firms Warns That AI Bots Will Bring Nastier Phishing Scams

False information, job losses, diminishing skills and human interaction, among other concerns, have bankers worried about deploying both generative artificial intelligence, like ChatGPT, and more long-accepted forms of AI like machine learning, according to a new survey of American Banker readers.

Gabby Jones/Bloomberg

A third of banks ban employees from using gen AI. Here's why.

Article by Penny Crosman

Though financial services leaders are aware of and hopeful about the benefits of using artificial intelligence to become more efficient and to help employees do their jobs, 30% still ban the use of generative AI tools within their company, according to a survey conducted by Arizent, publisher of American Banker.

About 15% said they have completely banned the use of generative AI — algorithms that can be used to create new content — for all employees. Another 20% said they restrict use of gen AI to specific employees for limited functions or roles; another 26% said they don't ban gen AI today, but they are considering putting a policy in place. Asked if they're going to loosen or remove employee restrictions on publicly available generative AI tools in the next year, 39% said no; 57% said maybe.

A key thing that holds bankers back from using generative AI is the difficulty of assessing the risk of a gen AI application, according to Chris Nichols, director of capital markets at SouthState Bank, a $45 billion-asset institution based in Winter Haven, Florida, and early adopter of generative AI.

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Venkat Achanta, executive vice president and chief technology, data and analytics officer for TransUnion.

Samanta Lopez

TransUnion launches new data analytics platform powered by AI

Article by Frank Gargano

TransUnion, one of three major credit bureaus in the U.S., is launching a new cloud-based platform to create a unified portal for its suite of data analytics, credit risk and fraud detection offerings assisted by artificial intelligence.

Generative AI has grown in both interest and adoption across the banking industry since the introduction of Open AI's ChatGPT in November 2022, with institutions like Ally Financial, JPMorgan Chase and SouthState Bank all incorporating the technology into different divisions. Smaller banks like Grasshopper Bank in New York have also taken cues on AI from their larger peers and have adopted products for improving efficiency.

The Chicago-based credit bureau officially debuted the platform, known as OneTru, on March 13. Through the new platform, TransUnion combines its preexisting hybrid cloud framework with an AI-powered platform it acquired in part through the 2021 purchase of the digital identity firm Neustar to offer financial institutions AI and machine learning tools for addressing credit, marketing and fraud needs.

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Side by side photos of BNY Mellon and Microsoft signage.

"When we collaborate with Microsoft we make it easier for clients to say '...through you, we can access the whole ecosystem,'" said Akash Shah, chief growth officer at BNY Mellon.

BNY Mellon, Microsoft jointly market data management platform

Article by Miriam Cross

Bank of New York Mellon is taking the next step forward with its software and data management business.

The New York City custody bank announced in February that it was enhancing the tools it offers to clients, which include asset and wealth managers, in a combined effort with Microsoft. For BNY, it's important to be the place "where clients trust us to connect with their data, store and analyze it, and give them insights to make better trade, risk or operational decisions," said Akash Shah, chief growth officer at BNY Mellon.

BNY's data and analytics unit is more than 20 years old and has more than 800 clients, including asset managers, sovereign wealth funds, insurance companies, broker-dealers and registered investment advisors. It connects them to third-party data sources and provides analytics tools that can be accessed via application programming interface, data feeds or a portal and kept on the premises, in the public cloud or in the private cloud through Microsoft Azure.

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Preliminary rulings by a Pennsylvania judge will allow a jewelry company that claimed it lost $1.1 million to fraud to move forward with suing individual bank employees.

Jamie Kelter Davis/Bloomberg

PNC faces setbacks in fraud lawsuit

Article by Carter Pape

This month, a judge in Pennsylvania allowed a lawsuit to move forward against PNC Bank and some of its employees individually over $1.1 million in fraud losses suffered by a local jeweler in 2022.

While the lawsuit concerns a small amount of money relative to the size of PNC's annual revenue last year of $32 billion, the case could set a costly precedent for it and other banks should the Pennsylvania state court rule in favor of the plaintiff, Joyce's Jewelry. On preliminary requests by PNC to dismiss the charges and end attempts at recovering attorneys fees, the judge has ruled for Joyce's.

The preliminary ruling is a "wake-up call to bankers," according to Howard Kaplan, an attorney representing Joyce's in the matter.

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Al Drago/Bloomberg

FDIC rebukes Sutton Bank, Piermont Bank over fintech partners

Article by Penny Crosman

Banks that offer banking-as-a-service to fintechs be warned: Regulators continue to critique these programs. In the most recent example, the FDIC announced consent orders on March 29 against Sutton Bank in Attica, Ohio, and Piermont Bank in New York City.

Other banks that have been slapped with similar consent orders in recent months include Blue Ridge Bank, Cross River Bank, Lineage Bank and Choice Bank.

In these orders, regulators tell the banks they need to step up their oversight and monitoring of their fintech partners, and insist their boards must be involved. When the fintechs take on new customers, it's the bank's responsibility to make sure they aren't criminals, terrorists or money launderers. As the fintechs process transactions, the banks have to monitor them to make sure they meet all Bank Secrecy Act, anti-money-laundering and countering financial terrorism rules.

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In a simulation exercise hosted by the Global Resilience Federation on March 19, banks and credit unions tested their ability to withstand an industrywide wiperware attack on the ACH network, which disrupted transfer and direct deposits for numerous fictional customers.

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Are U.S. banks ready for a major ACH outage?

Article by Carter Pape

On March 19, amid a campaign to disrupt the U.S. financial system, fictional hacking group Purple Rain used wiperware to halt automated clearinghouse, or ACH, payments across multiple banks and credit unions, preventing Americans from receiving their paychecks and paying their bills, but the total extent of the disruption was not immediately clear. Wiperware is a type of malware that can destroy or "wipe" data on a targeted system or network.

That was the premise of the exercise put on by the Global Resilience Federation, a cross-sector nonprofit hub for the exchange of cyber, supply chain and other threat intelligence, and Nacha, which operates the ACH network. The point of the exercise was to assess the ability of banks, credit unions, core processors and other participating firms to respond to the fictional but, according to the federation, plausible scenario.

"My message today is for all of us to prepare for these threats that could potentially be launched against your ACH systems," said Bill Nelson, chair of the federation. "We hope that this tabletop exercise will prove to be a useful tool for you to determine how you would respond and recover from a destructive attack."

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Left to right: Sathish Muthukrishnan, the chief information, data and digital officer at Ally Financial. Kristiane Koontz, the director of banking transformation at Zions Bancorporation. Imran Khan, head of TD Invent at TD Bank Group.

Developing software internally "feeds into employee morale and productivity," said Sathish Muthukrishnan, chief information, data and digital officer at Ally Financial, pictured at left. "You're not only maintaining somebody's code, you're building something new and solving a customer problem." Kristiane Koontz, director of banking transformation at Zions Bancorp., is at center; Imran Khan, head of TD Invent at TD Bank Group, is at right.

The challenges unique to managing tech teams

Article by Miriam Cross

Some challenges involved in managing technology teams at financial institutions echo those that exist everywhere, from handling poor performers to buoying morale.

Others are more pronounced in technology, or are unique to the sector.

Technology executives and leaders at banks and credit unions find their teams crave change and want to know their creations have impact. But they also must demonstrate a business case for new technologies rather than being dazzled by buzzy, emerging tech like generative artificial intelligence. Depending on the pace of change or their skill set, technology employees may be struck by burnout or by boredom. Those with sought-after skills may balk at return-to-office mandates or try to use their qualifications as leverage.

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