The Future of Financial Decision Making Using Cognitive Computing

Future of Financial Decision Making�Accelerating & Scaling Expertise �Using Cognitive Computing & IBM Watson

Sridhar Iyengar Distinguished Engineer Cognitive Services Research : Lead Architect IBM T.J. Watson Research Center [email protected]

© 2014 IBM Corporation 6/28/16

Topics Covered § Cognitive Computing – The new era,

an introduction – Basic Terminology – ‘Cognitive’ – Why is IBM and increasingly the

industry Passionate about Cognitive Computing & AI

§ Managing complexity and harnessing big data effectively and intelligently using learning systems

§ Examples of Watson use in Insurance & Banking

§ Where are we headed?

§ Wrap-up ‘Watsononourshoulder,inourpockets,inourhome,car,office…makesusallsmarter’

© 2014 International Business Machines Corporation 3

IBM Research Defines and Transforms the Future of Technology, making an impact to society

World Class Talent - Foundation of IBM Research

Genomic Medicine

Micro-Cloud

Precision Agriculture

Debater (GC) Quantum Computing Synapse (GC)

Opening Frontiers of Science and Technology

Intelligent Security Medical Sieve (GC)

GC : IBM Research Grand Challenge


The exponential growth of data, especially on the cloud, is changing industries, and driving new applications and business models

© 2015 International Business Machines Corporation

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2009 2010 2011 2012 2013 2014 2015 2016 2017

Exa

byte

s How big is “Big Data”?

Multimedia

Manufacturing & Enterprise IoT

Consumer oriented IoT

Text data Genomic

Structured

Other

The true value of Big Data is in the embedded context

Raw data Feature extraction metadata

Domain linkages Full contextual analytics

Location risk

Occupational risk

Dietary risk Family history

Actuarial data

Government statistics Epidemic data

Chemical exposure Personal financial situation

Social relationships

Travel history

Weather history . . .

. . .

Patient records

BusinessMoment

Refine&Curate

MethodologyTechnologyKnow-how

Data

Continuously curate information to make it suitable for consumption

© 2014 IBM Corporation

Cognitive: of, relating to, or involving conscious mental activities (such

as thinking, understanding, learning,

and remembering)1

Open API’s are creating larger ecosystems



Personality Analytics

Influencer Analysis

Micro-segmentation

Cohorts

Individuals

New consumer insights based on social and enterprise data have changed the nature of marketing and customer relationships

Like-Minded Community Detection

Life Event Detection

Style KitchenGallery

DreamHome Wedding

Hobbies / Interests / Projects

© 2016 IBM Corporation 9

Expertise EcosystemTechnology

160+ Partners currently developing

cognitive applications

20,000+ API developers worldwide

3800+ Ecosystem Partner

Applicants

50Cognitive APIs

expected by end of 2016

Based on

50+ Core technologies

28Cognitive APIs

currently available

2000+Cognitive consulting

Professionals – and growing

7Years of cognitive

knowledge

Nearly ten years of focus give us the comprehensive cognitive platform to create highly differentiating customer experiences vs. a small set of off-the-shelf point solutions with limited scope.

Watson is uniquely positioned to provide enterprise strength solutions to address the ever increasing challenges businesses face

Ø  Industry Overview

Cognitive Computing Research Agenda


Use Case Scenarios

Core Capabilities

System Infrastructure

Debating / Research

Medical Imaging

Underwriting

Geological Exploration

Financial Advise, Risk…

Immersive Environments

Emotional Interactions

Large-Scale (Deep) Machine Learning

Video Newscasting

Reasoning, Planning, Decisions

Deep Knowledge Representation

Multilingual NLP & Speech

Computer Vision

CPU / GPU Acceleration

Material Discovery

Conversational Dialog

Neuromorphic Systems

Approximate Computing

Personalized Healthcare

Scalable Graph Stores

Narrative Generation

Semantic Data Curation

New Computing Paradigms

Augmented Reality

Pattern Mining & Discovery

Optimization & Scaling

Domain Specialization

M e t h o d s T o o l s A P I . .

Emerging IBM Research assets in Financial Services


Operational Risk Analytics

Wealth & Asset Management

Lead Generation

Counter Party Risk

Equity Research And more…


•  Identifies attrition risk, potential life events and product propensities

•  Indicates reasoning and recommendations

•  Client psychographic profile and insights •  Prioritized news based on portfolio

Wealth Management Insights provides every FA with a Predictive, Prescriptive, Cognitive Assistant

Ø  Wealth Management Insights

Financial Thesis

Cognitive Pro/Con Analyst

Supporting or Refuting Arguments and Facts

Expert Opinions Forrester: Apple’s iPad sales dropped 18 percent year-over-year in the last quarter Related Facts XYZ CEO: We are looking for more companies to acquire Events At COP21 in December 2015, 195 countries adopted the new global climate deal Additional Predictions ABC will cut its manpower by 15% in the next quarter

Timeline View

Refuting/Supporting Theses

Watson for Financial Research Ø  Financial Research

Cognitive systems for generating personalized investment advice for wealth clients based on structured client data and latest financial news and investment research

IBM.Next Asset : http://wpncatalog.stage1.mybluemix.net/assets/assets_financial_sentiment_analysis_service

Wealth & Asset Management


Risk Analytics

http://wpncatalog.stage1.mybluemix.net/assets/assets_risk_visual_analytics

Governance Risk & Compliance Visualization Solution


Governance Risk & Compliance Visualization Solution: Example : Visualization of Risks & Controls using a Sankey diagram

Operational Risk Analytics

Here we explore specific relationships between Controls, Risks, and

Business Entities

Notice how this Control affects two different Risks (solid line

is the primary owner)

CTG5 Business Entity has two highly rated

risks affecting it


risks affecting it


risks affecting it

We can show what types of elements are affected by the

Risks by selecting here

http://wpncatalog.stage1.mybluemix.net/assets/assets_risk_visual_analytics © 2015 IBM Corporation 16


IBM Research Division

Regulatory Compliance Parse FFIEC Information Security Handbook for Obligations

~136 pages, 2511 Lines ~ 460 lines contain obligations in main body of document


IBM Research Division

Regulatory Compliance : Compliance Mapping

P1.“ToassurestabilityoftheinsGtuGontheBankwilldevelopaConGngencyFundingPlandocumenGngstrategiesforemergencyfunding.”

P2.“Inanefforttomeasurerisktomarketvalueofequity,theBankwillreviewalllong-termfixedrateassets.

P3.“Shouldafundingandliquidityproblemdevelop,theAsset/LiabilityCommiXee,willimplementtheconGngencyfundingplan.”

PoliciesObliga7ons

O1.Anycreditunionthathasassetsof$50millionormoremustestablishanddocumentaconGngencyfundingplan(CFP)…

O2.FinancialinsGtuGonsshouldhaveaneffecGveprocesstoadministeraccessrights.

O3.Themaximumaggregateamountinunsecuredloans…mustnotexceed50%ofthecorporatecreditunion’stotalcapital.

PolicyasEmbeddedVector

Obliga7onasEmbeddedVector

DeepJointNeural-NetEmbeddingofPolicies

andObliga7ons

O1P1

P3

IdenGfymappingsofobligaGonstopolicies.Discoverpolicygaps.

18

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Cognitive Environment Lab Symbiotic Cognitive Computing Society of Cognitive Agents

Back-end platform (Computational environment)

Front-end sensor-enabled Cognitive Room https://www.youtube.com/watch?v=0heqP8d6vtQ


Mergers and Acquisitions

Shows use of Watson Developer Cloud and Emerging Research Services Financial Sentiment & Outlook Analysis Demo Mergers & Acquisition Cognitive Agent Demo

Selected Demos

Watson Use Cases in Insurance

TRANSFORMED INTERACTIONS

OPTIMIZED OPERATIONS

EMPOWERED ADVISORS

WATSONFORCUSTOMERSERVICE

WATSONFORCUSTOMERSENTIMENTANALYSIS

WATSONFORCLAIMS

WATSONFORUNDERWRITING

WATSONVIRTUALAGENT

INCREASE ONLINE CONVERSION RATES without the need for an agent to intervene and complete the transaction

IMPROVE QUOTE COMPLETION by overcoming common objections that lead to abandonment prior to producing and presenting a quote to the customer

IMPROVE CUSTOMER SATISFACTION with the auto insurance quoting experience

TARGETED BENEFITS

IBM developed a Cognitive Virtual Agent powered by Watson and Big Data and Analytics running in the cloud to help this major US insurer company sell auto insurance via web and mobile

The financial services industry’s first Cognitive Virtual Agent powered by Watson was delivered in June 2015

The ability to conduct NATURAL LANGUAGE DIALOGUE to help consumers select the coverages that match their needs and budget

The ability to ANSWER A WIDE VARIETY OF QUESTIONS about things consumers want to better understand as they complete an auto insurance quote

The ability to DIFFERENTIATE THE USER EXPERIENCE based on key context variables

CAPABILITIES DELIVERED

TOMORROW’S PROCESS

DIGITAL SERVICE AGENT Engages with customers to

quickly and accurately answer their questions

CALL CENTER ASSISTANT Supports call center reps by

providing immediate answers for common service requests

•  Less customer wait time and shorter phone calls to complete requests

•  Confident and trustworthy answers from every representative

•  Reliable and seamless self-service experience to engage customers

•  Reduce amount of calls to call service centers and call center costs

We are currently developing an Cognitive Virtual Assistant for a major insurer to provide better customer service at a lower cost

Founda7onalRiskAssessment

DeeperInsightsGenera7on

AdvancedDecision-Making

Surface relevant submission

information, augment submitted risk data and generate

preliminary risk rating with summary of evidences

Uncover new relationships and correlations within a risk profile

in order to provide precedent and guidance for the underwriting

assessment process

Automate the decision-making process across submissions and help customize policy offers for

individual risks

+ + + !

Wave1 Wave2 Wave3

We recently signed a strategic agreement to develop a Watson for Underwriting solutions over a multi-year period for a major life reinsurer

We are leveraging Watson to create more holistic company profiles and improve underwriting for a major commercial insurer

Build out strategic intents to gain cognitive insights into companies and the risks they seek to insure by having Watson read publicly available news

Phase 2

Phase 3 Enhance company profiles by integrating additional internal and external data sources in order to improve underwriting decisions

Phase 1 Integrate data from two government data sources with a third party data source to create a more robust company/risk profiles

Watson Company Analyzer

•  Ingest the Company’s NPS surveys and run a set of Watson Alchemy APIs to extract entities, key words, and sentiment

•  Create an enriched data set that combines the raw NPS survey data and the Alchemy API output

•  Develop an exploration tool that allows the Company to explore and visualize the enriched data set

•  Leverage IBM Watson to more readily identify those things that are driving customer sentiment

•  Empower users to explore and discover sentiment trends within the Company’s member base

•  Demonstrate the value of leveraging cognitive technology to generate actionable insights

•  Obtain basic demographic and policy information about the customers who provided complete NPS surveys

•  Combine with NPS raw survey results and Alchemy enriched data to identify sentiment trends and patterns

•  Develop a model to predict promotors and detractors even for those who have not taken the NPS survey

•  Enable deeper understanding of customer NPS responses •  Identify opportunities to take corrective action to address

potential sentiment issues •  Establish a foundation that can be extended to develop ever

deeper insights into what is driving customer sentiment

We are using cognitive and advanced analytics to help another insurer gain actionable insights into customer sentiment

Benefits

Sales & Service – Personal Insurance Cognitive virtual assistants that interact with customers over the phone for both sales and service

Underwriting – Commercial Insurance Improve risk classification by leveraging

Watson to improve the accuracy of SIC and business class code selection by

underwriters

Sales – Group Insurance Leverage Watson to automate and streamline responses to corporate RFPs for group insurance policies

Underwriting – Life Insurance Multiple cognitively-enabled components to

enhance risk assessment, develop customer insights, and streamline processes

We are in discussions with several other insurers around a variety of use cases

Cognitive Computing – What Next : Takeaways •  What : Cognitive Systems enable you to

–  ScaleandaugmenthumanexperGse–  Transformindustries,professions&organizaGons

•  How : Watson Developer Cloud & Watson Ecosystem •  What Next : IBM.Next : Fueling the next wave of

innovations from IBM Research : See it in action •  Healthcare & Financial Services – especially Insurance

is an early adopter •  Cognitive Computing can help you ‘OutThink’ the

competition

The Cognitive Business is coming – ‘Outthink’ your competition

The Future of Financial Decision Making Using Cognitive Computing

Technology

Transcript of The Future of Financial Decision Making Using Cognitive Computing