The Bank of England (BoE), the world’s oldest central bank, is one of the most visible and high-profile investors in innovation. Over the last decade, it has developed its own innovation lab, with projects including The Bank of England Accelerator, Her Majesty’s Regulatory Innovation Plan and The Regulatory Sandbox. It introduced a RegTech cognitive search engine and uses artificial intelligence (AI) technologies for chatbots and predictive real-time insights. More recently, the Bank made headlines with its plans for a “digital pound” on the blockchain, called Britcoin, which will use AI in its executable smart contracts.
Cognitive search engine
The BoE employs a Switzerland-produced cognitive search engine as their company search solution. The tool uses AI and ML to gather data from multiple sources and deliver real-time relevant responses to users’ questions. The Bank also embeds it in its CRM to improve client conversations and reduce meeting preparation times. Users find answers to their questions up to 90% faster than they would with a manual search. This tool not only boosts productivity and improves client trust but also makes it easier and simpler for the Bank to comply with ever-changing regulations.
Chatbots the BoE uses for various services include:
Functional chatbots that help customers with routine questions, such as directing callers to the closest ATMs to their locations.
More sophisticated AI conversational assistants that feed customers investment recommendations and real-time market-related news, among other industry-related data.
Chatbots using a combination of predictive analytics and prescriptive analytics to give decision-makers at the BoE real-time insights. Examples include helping BoE executives gauge their biggest competitors in the micro-lending space and helping them determine which customer segment they should target for their advertising for a new mobile app.
Bitcoin is the Bank of England's plan for a digital currency acceptable by retailers and other companies in lieu of debit and credit cards. Owners would have limits on how much Britcoin they could hold initially, but conversion to sterling and its transactions would take minutes. Unlike most cryptocurrencies, Britcoin will be a stablecoin, meaning it will tether itself to UK currency to avoid the problems of crypto fluctuations.
Supporters appreciate that Britcoin would use AI-enabled smart contracts to execute DeFi transactions that are cheaper, faster, and more transparent than online payments and money transfers. Critics fear the innovation could lead to financial instability, along with higher loans and mortgage rates, among other problems. To resolve these issues, a task force has been assembled to report on the merits of the CBDC (Central Bank Digital Currency) by the end of this year.
Why the Bank is interested in AI
In her 2021 keynote address at the FinTech and InsurTech Live event on how the Bank of England uses AI, Tangy Morgan, an independent BoE advisor, described how the Bank conducted a survey assessing how banks headquartered or operated in Britain have used machine learning and data science during Covid-19, and how the BoE can profit from that report. The BoE found that the use of AI was growing at an exponential pace and could benefit the Bank in various ways.
Possible applications of AI in this context include:
Money laundering prevention AI to identify patterns of suspicious behavior and curb AML.
Underwriting and pricing applications, where big data analytics scrutinizes customers’ risk profiles, tailoring premiums to match individual risks.
Credit card fraud detection, whereby AI analyzes large numbers of transactions to detect fraud in real-time
The Bank of England asservates that “developments in fintech … support our mission to promote the good of the people of the UK by maintaining monetary and financial stability.” Are you based in the UK? What do these uses of AI bring to mind for you? Write us on our platform and let us know.