For so long, new tech has been utilized by fraud artists, costing many unsuspecting victims countless dollars. Now, AI tools and strong fintech partnerships could be used to stop fraud in its tracks.
With quickly evolving innovations, financial institutions must be at the forefront of tech. Kyle Hauptman, Vice Chairman at NCUA shares his views on the changes facing the industry and how they can be beneficial for everyone.
Join us as we discuss:
- Adapt or close: staying relevant in today’s tech-powered world
- The relationship between regulations and fintech partnerships
- Preventing scams and fraud using revolutionary AI
Staying relevant in today’s tech-powered world
Innovation is, and always has been, necessary for survival, no matter the industry. That said, the core of what credit unions do has not changed for centuries: helping people with financial management.
“That core of it hasn't changed, but they always innovate — they were there early with ATMs way back in the day, and credit unions network with each other, even banks,” Hauptman said.
As a regulator, developing a tolerance for failure is a challenge, but that very practice is essential for the art of innovation in finance.
Invention — the sister of innovation — requires a pragmatic approach. An acceptance that with new solutions comes new problems.
“One of the things I always say — and it's not always applicable — is to fail small if you can. It always depends on what you're trying to do, but have a $5 failure, not a $5 million failure,” Hauptman said. “Test something, try a little transaction. Test, test, test, test, try to minimize your failures.”
The relationship between regulations and fintech partnerships
Many institutions want risk management to be black and white when, in reality, it operates in a gray area.
“With cost benefits, you have to realize not innovating is a risk,” Hauptman said. “When you realize that by staying still, you will hit an iceberg eventually, once you know that not changing is the riskiest path, it can positively change your cost-benefit.”
The future of digital assets and blockchain
Right now, Hauptman claimed the industry is in a “Gold Rush stage” of Bitcoin. Dreamers and thinkers alike are crowding into this perceived pile of money and overvalued assets.
The industry has seen this type of response before with the World Wide Web flood of fraudsters and investments leading to a crash. But with that crash came clarity.
“Once you shift away all the debris, and you have a helpful bear market, that's what cleans out a lot of problems and also cleanses scams and con artists,” Hauptman said. “They clear the brush out. I think when it's all said and done, there'll be concrete, actual uses.”
Digital assets that make it possible to send money instantly — and more — have proven use cases that help prevent fraud. A crypto winter clears bad actors.
Preventing fraud through AI
Many credit unions are still experimenting with incorporating AI's use cases particularly in the area of fraud detection. Scammers have seen the value of AI as well, with some AI systems are even capable of replicating the voices of real people.
“We talk about fraud detection — if somebody can call up and sound like me and look like me on a video or whatever — yeah, all technology will be used by a scammer, and all technology is helping to fight scams. So that'll happen both ways,” Hauptman said.
The key is focusing on leveling up defenses alongside fraudster advances to stay on pace and come out on top. In order to evolve their fraud prevention capabilities, credit unions and beyond must forge partnerships with high-value fintechs.
Stay tuned for new episodes every week on the Leaders in Lending Podcast.
