Cognitive computing is transforming the financial services industry by enhancing human skills and expertise. Cognitive systems analyze large amounts of structured and unstructured data to provide actionable insights, improve customer engagement, and enable operational transformation. Early applications demonstrate significant improvements in areas such as customer segmentation, risk assessment, fraud detection, and regulatory compliance. As cognitive systems continue learning, they will increasingly augment human intelligence across various financial services functions.

1. 1
Pawel A. Stefanski
Financial Services Sector Leader, IBM Middle East and Africa
@PawelAtIBM
The cognitive financial institution

2. What is Artificial Intelligence?
… Machine Learning?
… Cognitive computing?

3. 3
The new era of cognitive computing will transform our future
Tabulating
Systems Era
Programmable
Systems Era
Cognitive
Systems Era

4. 4

5. 5
Learn and
improve
Cognitive systems amplify human cognition
Collate
human
intelligence
Build
speed and
scale
Interact in
a natural
way
Cognitive
computing
Machine
Learning
Reasoning &
Decision
Making
Language,
Speech &
Vision
Processing
Human
Interface
Technologies
New
Computing
Architectures
Knowledge
Representation
(Big) Data – “a new natural resource”

6. Watson: a cognitive system

7. 7
Watson Reference Model
Developer
Tooling
Platforms as a
Service
Watson Services
Data as a
Service
Watson Content
Application
Tooling
Content
Tooling
Software as a
Service
Watson Applications
Cloud Infrastructure
Public Private
Crowd
Sourced
Watson Built
Apps
IBM Built
Apps
3rd Party
Apps
Knowledge
Organization
Skills
Foundational
Cognitive
Skills
Higher
Reasoning
Skills
IBMWatsonMarketplace

8. 8
Watson cognitive services are grouped into three categories
Higher Reasoning Skills
§ Conversation
§ Language Translation
Knowledge Organization
Skills
§ Document Conversion
§ Retrieve & Rank
§ AlchemyLanguage
§ AlchemyData News
Foundational Cognitive Skills
§ Speech to Text / Text to Speech
§ Personality Insights
§ AlchemyVision / Visual Insights
§ Visual Recognition

9. 9
Tone Analyzer understands and helps fine tune your message
Online Dating Profile
I'm a hard working adventurous, very talented man who's been caring and
helpful throughout my life, I like to travel, play my guitar, dance, and cook, I
love the beach, sailing my boat, and the outdoors.
I raised two great kids and now I'm starting a new chapter in my life.
Thanks.
What I’m doing with my life
Working toward a new goal, keeping fit, helping others, and traveling
whenever i get a chance.
I’m really good at Listening, enjoying the moment, and many other things.
The six things I could never do without
Family, the ocean, intimacy, friends, adventure, music, love.
On a typical Friday night I am
Meeting with friends, listening to a band or playing my guitar, dancing or just
staying home with someone special and enjoying each other.
You should message me if
You're looking for a relationship with someone that likes to sail his boat, ride
bicycles, travel, swim, go to the beach, listen to music and enjoy everyday
pleasures together.

10. 10
Emotional Analysis helps build empathetic systems

11. 11
Personality Insights – Mahatma Gandhi
For more than twenty years past I have been paying special
attention to the question of Health. While in England, I had
to make my own arrangements for food and drink, and I can
say, therefore, that my experience is quite reliable. I have
arrived at certain definite conclusions from that experience,
and I now set them down for the benefit of my readers.As
the familiar saying goes, ‘Prevention is better than cure.’ It is
far easier and safer to prevent illness by the observance of
the laws of health than to set about curing the illness which
has been brought on by our own ignorance and
carelessness. Hence it is the duty of all thoughtful men to
understand aright the laws of health, and the object of the
following pages is to give an account of these laws. We shall
also consider the best methods of cure for some of the most
common diseases.As Milton says, the mind can make a hell
of heaven or a heaven of hell. So heaven is not somewhere
above the clouds, and hell somewhere [Pg 2] underneath
the earth! We have this same idea expressed in the Sanskrit
saying, Mana êva Manushayanâm Kâranam Bandha
Mokshayoh—man’s captivity or freedom is dependant on
the state of his mind. From this it follows that whether a man
is healthy or unhealthy depends on himself. Illness is the
result not only of our actions but also of our thoughts. As
has been said by a famous doctor, more people die for fear
of diseases like small-pox, cholera and plague than out of
those diseases themselves.Ignorance is one of the root-
causes of disease. Very often we get bewildered at the most
ordinary diseases out of sheer ignorance, and in our anxiety
to get better, we simply make matters worse. Our ignorance
of the most elementary laws of health leads us to adopt
wrong remedies or drives us into the hands of the veriest
quacks. How strange (and yet how true) it is that we know
much less about things near at hand than things at a
distance. We know hardly anything of our own village, …

12. 12
In 10 years, cognitive systems will be to computing what transaction
processing is today
§ Amplify human creativity
– Inspiring us to new alternatives to decision options
– Bringing the breadth of all human knowledge to the tip of our tongue
§ Learn their behavior through formal and informal training processes
§ Interact with humans on our terms – in the language of humans
§ Demonstrate their expertise through trust and depth of character
§ Evolve strategies of success – adapting to ever changing knowledge and
understanding
§ Establish transformative relationships between humans and machines

13. Present and future of a cognitive
financial institution

14. 14
6 Core Functions of
Financial Services
§ Transactions / Payments
§ Deposits & Lending
§ Investment / Wealth Management
§ Insurance
§ Capital Raising
§ Market Provisioning
Clusters of Disruption
11 clusters of innovation
1
2
Source: June 2015 World Economic Forum, The Future of Financial Services
Established financial services institutions are acknowledging disruptive
innovation

15. 15
1
A.T.Kearney 2015 Robo-Advisory Services Study; 2
Fidelity, 2014 Advisor Insights Study; 3
BNYMellon, The Generation Game; 4
Deloitte Center for Financial Studies; 5
Celent, FI Survey of Digital Transformation; 6
Cerulli, Advisor Metrics 2013
$2.2tr 40% 72%
93%15% 43%
Estimated AUM managed
in digital advice offerings
by 20201
of millennials describe
themselves as self-directed
investors3
of financial institutions say digital is
either critical or important to strategy,
yet 67% rate their firm’s offerings as
undifferentiated or poor5
Advisors actively using
technology had on
average 40% more AUM2
of advisors in the US
are over age 556Millennial financial asset CAGR from 2015-
2030, fastest of any segment. Share of
2030 HH wealth remains below 20%, with
boomers at 44.5% and gen X at 31%4
Wealth Management is also undergoing significant change

16. 16
Heightened
security threats
Pressure
to perform
$
Emboldened
customers
Disruptive
competition
Increased
regulation
Disruptive forces are forcing financial services industry to focus on
three key areas
Improved
engagement
Operational
transformation
Actionable
insights

17. 17
Cognitive computing enhances human skills, thereby scaling up
their level of expertise and productivity
Risk and
compliance
Enabling assurance across all
business processes
Monitor
Wealth advisor
assist
Scaling sales and
service expertise
Decide
Self-service
engagement
Delivering one-on-one
experiences at scale
Engage
Customer service
support
Accelerating expertise
on demand
Explore
Direct-to-consumer
cognitive virtual
agents serving,
guiding and advising
via web and mobile
Employee-facing
applications that
supplement service
across the customer
life-cycle
Employee-facing
applications that
enhance wealth
management
operations
Improved
engagement
Operational
transformation
Actionable
insights

18. 18
PREDICTING CASH
FLOWS &
OVERDRAFTS
PREDICTING LIFE
EVENTS
94% 9
PREDICTING
CHURN
different life events predicted with
95-97% accuracy
improvement
over existing models
50%
accuracy a week ahead
87% accuracy 4 weeks ahead
improvement,
eliminating delivery of irrelevant
offers to 3.6 million customers
TARGETING
OFFERS
91%
Early results analyzing real-world data show significant promise

19. 19
A leading US Financial Services firm uses cognitive solution to enable
‘segment of one’ engagement’ with clients
§ Interact in natural
language
§ Communicate via text
and/or voice
§ Answer questions with
confidence
§ Seamlessly handle processes
and transactions
§ Possess context
§ Offer insight-driven
recommendations
§ Learn and adapt
Conduct conversationsPersonalize every interaction Provide assurance
WatsonAnalytics
Improved engagement
Demonstration of Financial Advisor

20. 20
Understands
speech,
gestures and
customer
expressions
Collates
latest
information to
offer market
defining
service
channels
Learns from
each client
interaction
and studies
preferences
A bank in Japan pioneers robots for personalized client engagement
in branches
Customer
service
robots
Differentiates the bank
Captures customer details
Reduces demands on staff
Takes advantage of its physical branches
Redeploys human tellers to higher-value work
Infers preferences from every interaction
Improved engagement

21. 21
A Spanish bank exploits cognitive to offer insights to agents
Smart
advisor
Increased accuracy
99% less response time
Widens the scope
Take advantage of its physical branches
Agents can answer a wider range of questions
about foreign trade and international regulations
Answers in minutes instead of days
Scans
masses of
structured &
unstructured
regulatory
data
Learns and
improves
with each
customer
interaction
Ranks most
optimal
responses
as a
guidance
Actionable insights

22. 22
Value add
Greater potential for sales and
closer targeting of customer
Actionable insights into client
networks & personality
Focus on instant client demand
saving manual effort & time
Continuity and deeper intimacy
of client relationship
The cognitive smart advisor identifies the personality and risk-profile
of the client, using diverse data sources to align financial objectives
with each individual
Cognitive
empowered
advisor
Advisor
matching
Lifecycle-driven
conversation
Personality
insights
Risk propensity
Network value
Actionable insights

23. 23
A brokerage firm in North America uses deep learning for improved
customer service
Knowing Your
Customer
Increased revenue
30 – 50%
Reduced churn
Through informed cross- and up-selling
Due to better targeted customer interactions
Better accuracy potential
Predicts the
next
generation of
high-value
customers
Offers
advisors
personalized,
targeted
action
guidance
Improves
cross- and
up-selling
Actionable insights

24. 24
Pre-Built
Cognitive Wealth Management Offering
Create dynamic, behavior
based client segments to gain
insights on product
opportunities
Prioritized list of clients
requiring immediate attention
with recommended actions
Determine client life and
financial events across the
lifecycle of the client
relationship
Prediction of client attrition
and recommended actions for
retention
Client Insight for Wealth Management provides every FA with
a Predictive, Prescriptive, Cognitive Assistant
Actionable insights

25. 25
Client Insight for Wealth Management provides every FA with a
Predictive, Prescriptive, Cognitive Assistant
• Identifies attrition risk, potential life events and product propensities
• Indicates reasoning and recommendations
Client psychographic profile and insights
Prioritized, summarized portfolio news
Prioritized news on client interests
https://www.youtube.com/watch?v=osN07kzVg2E
Actionable insights

26. 26
Client Insight for Wealth Management has demonstrated powerful
results in POCs with financial services firms
• Life Event Identification: Predicted 8 life events with ~95-98% accuracy
– Predicted such life events as client marriage, birth of a child, move, divorce, job change,
retirement, and others
• Client Attrition: IBM’s dynamic model was 281% better in predicting client
attrition than baseline regression models
– Provided early warning signs and offered insights on risk
• Customer Lifecycle Evolution: Time to first options trade, 42.6X lift over baseline
logistical regression; 18% out of the top 1% highest ranked accounts traded
options within 30 days of prediction, an event that occurs in just 0.28% of the
population.
• Cross-sell Offer Propensity: Mutual fund cross-sell prediction 30 days in
advance; 65% improvement over baseline logistical regression; 38% of true
positives captured in top 10% of highest ranked accounts
• Dynamic Segmentation: Created client segments using behavioral
segmentation and cash flow pattern identification
– Identified 12 behavior segments, 108 microsegments, and 4 cash flow types
– Used to optimize offers provided to clients
Actionable insights

27. 27
A pilot concept for Financial Analysts to provide them with an
objective tool to support their research
Financial
Pro/Con
Advisor
Provide the buy-side analyst with
interpretable and conveyable
supporting and opposing
arguments and evidence for an
investment thesis.
Analyze wide
variety of
sources in an
objective,
unbiased
way
Offers
advisors a
decision aid
Provide
justification
and
evidence
when
needed
Actionable insights

28. 28
Regulation Ingestion
Obligation
Lifecycle
Management
3
1
2
4
Natural Language
Processing
Document Parsing
Machine Learning
Obligation and
Control Identification
& Mapping
28
Operational transformation
Regulatory compliance empowered by cognitive computing

29. 29
A global financial services organization uses cognitive computing to
manage business proactively
Cognitive
enabled
compliance
service
72% accuracy
Improved Productivity
Lower churn
Demonstrated during proof of concept
Due to associated loss of institutional knowledge
Elimination of manual regulatory evaluations
Identifies and
predicts
regulatory
obligations
Maps
changes
across
business
units, IT
systems and
processes
Understands
the
cascading
impact of
regulatory
changes
Operational transformation

30. 30
A global financial services organization uses cognitive computing to
manage business proactively
Connecting
the purposes,
products and
correlations
70% of reviews find errors
100% of calls are analyzed
New sales opportunities
False-positives are minimized
Because of unforeseen correlations
Compared to 3% before
Enterprise transformation
Uses NLP to
examine
4,000 hours
of calls, daily
Finds clues to
boost sales
and improve
support
Identifies the
purpose,
products and
correlations
behind each
call

31. 31
Cognitive Insurance Scenarios
§Transforming Online Customer Engagement
§An auto insurer deployed an agent-like,
conversation-based capability to sell
automobile insurance electronically
Scaling Expertise in the Call Center
An insurer is aiding call center agents to
rapidly and consistently service member
requests
Improving Client Response Rates
An insurer improved the productivity of its
call center by analyzing historical customer
data to enhance operator training and
optimize content across channels
Transforming Underwriting
A reinsurer is creating a platform that will help
underwriters more quickly identify and react
to emerging trends, operational issues, and
other opportunities
Improving Claims Decision-Making
An insurer is reducing claims processing
times by instantly recognizing and
incorporating relevant passages from policy
documents and communications
Enabling Evidence-based Claims Automation
A life insurer processed claims more
accurately and efficiently by analyzing
medical certificates to classify medical
conditions and treatments

32. 32
AI upgrade to existing robo-system is
expected to lead to higher quality
advice as well as improved financial
behavior by clients (USD$3bn AUM)
Grapevine6 tool provides FA’s
with relevant articles and digital
content to grow their networks
and build rapport with clients by
becoming a source of information
that can better help them meet
financial goals.
AI capabilities analyze historical
economic and market data going back
to the 1960s to spot trends to make
asset allocation decisions with human
oversight. While a passive robot might
buy more stocks when markets drop,
the Responsive program may instead
back out of equities and buy more
bonds.
A global bank is using ENGAGE to
provide Wealth Advisors with contextual
insights about market events, portfolio
changes, and stress tests that impact
their wealth clients - enabling the bank
to economically serve over 10x the
number of clients, including traditionally
ignored mass affluent customers to
reduce churn and drive loyalty.
Cognitive analysis of social media
and conversations on trading floors
helps predict market closes well
before they happen (>500%
improvement in predictive accuracy).
Combination of proprietary AI and
quantitative models delivers real-
time personalised investment
guidance to wirehouses,
Registered Investment Advisers
(‘RIAs’), and Independent
Financial Advisers (‘IFAs’) in US,
UK and Asia (USD$3.6tn AUM)
The LiveWealth™ Intelligent Agent
framework uses cognitive intelligence to
rapidly extract, aggregate and normalise
data from US and international
custodians, banks and other relevant
sources on a near real-time basis to
deliver 360°wealth management
performance analytics, allowing quicker
and more informed decisions.
The GBP£150m AUM investment
advisory offers free, FCA-
regulated advice directly online.
With cognitive algortihms, they
only ask customers relevant
questions in order to build their
bespoke portfolio with human
oversight.
Cognitive capabilities to know what sort
of life events a client is experiencing,
then use prescriptive analytics to
determine the next best action for the
advisor (USD$1tn)
First cognitive deployments in Wealth Management are here

33. 33
Alpha Modus uses cognitive capabilities to create disruptive
investment technologies 80% faster
Looking for alpha
in unstructured
data
Millions saved
Up to 80% faster
Drives innovation
Through cloud-based cognitive platform
Because of rapid development cycles
New offerings launched in less than 7 days
Uses AI to
find alpha in
unstructured
data
Access to
global skill
pool of data
scientists
Leverages
cloud for
rapid
development
Actionable insights

34. 34
The future is already here — it's just not very evenly distributed.
William Gibson, 1993