Jeffrey Vögeli: UBS turns to artificial intelligence to advise clients

Big global banks like UBS are turning to technology to mine data for insight on their customers that could help lenders stay competitive in the digital era

UBS GroupAG, facing the threat of competition from Google and Amazon.com, has turned to a Singapore-based technology company that uses artificial intelligence for help delivering personalised advice to the bank's wealthy clients.

Sqreem Technologies beat some 80 teams competing in the Innovation Challenge, a contest organised by Switzerland's biggest bank that offered $30,000 and a potential contract to the winner. Their task: extract the information most relevant to an individual client from an explosion of data and deliver this tailored content to clients' mobile phones, iPads and other digital devices.

"Banking is one of the most rudimentary industries when it comes to digitalisation," Dirk Klee, chief operating officer for UBS wealth management and responsible for digital initiatives, said in an interview. "EBay, Amazon - everything is getting more and more digital. The question is how we translate this into a similar experience for our clients."

Big global banks like UBS are turning to technology to mine data for insight on its customers that could help lenders stay competitive in the digital era. The introduction of mobile payment systems offered by internet giants like Google and Apple has alerted traditional banks to the potential threat from tech companies with vast databases and the know-how to exploit them.

Information overload
"We have the data! Too much of it!" UBS, the world's biggest wealth manager, said in a web posting announcing the competition in September.

More than 70 per cent of financial institutions in North America believe that big data analytics, as this field of engineering is known, offers them a significant advantage over their competition, Cap Gemini SA said in a 2014 report. More than 90 per cent believe that successful big data initiatives will determine the winners of the future, the consultancy said.

Five finalists vied to win over a panel of judges at the bank's offices in Singapore on November 28. Klee said the bank chose Asia as the venue because, in addition to being a hub for wealth management, clients in the region are more likely to use mobile phones and other digital devices to interact with the bank.

Privacy concerns
Sqreem was founded seven years ago by Chief Executive Officer Ian Chapman-Banks, a technologist for 20 years, and Rene Raiss, a Columbia University graduate who says he spent 15 years on Wall Street developing algorithms for trading derivatives, including at Merrill Lynch & Co.

In a YouTube video presentation, the founders show how they deploy a cloud-based computing engine driven by artificial intelligence to crawl through a wide range of openly available, unstructured data to find all possible combinations of the likes, interests and affinities of Singapore's six million-odd people, based on a list of 130,000 things that people do every day. Unstructured means the data has to be understood from its content, not as a result of it being organised in a database.

Behaviour patterns
"We have identified over 85 million individual behavioural patterns that are engaged in by the people in Singapore," Sqreem says in its video.

Fine-tuned for financial services, the technology allows Sqreem, which stands for Sequential Quantum Reduction and Extraction Model, to build a profile of an individual showing potential match-ups with different types of wealth management products.

In response to questions about privacy concerns, Sqreem said it designed the system to be fully anonymous. UBS would use Sqreem to match results with its own data on clients.

Other banks are also spending on data analytics. Goldman Sachs Group Inc in November led an investment of $15 million in Kensho Technologies, an analytics platform that can automatically answer "complex financial questions posed in plain English," according to its website.

'Limitless opportunities'
Credit Suisse Group AG, UBS's smaller Swiss competitor, is expanding services to include a digital platform for its private bank clients that will also leverage big data, starting in Asia.

UBS plans to roll out a digital service in Asia next April that will let clients access any market relevant to their investments.

jvogeli@bloomberg.net
© Bloomberg