Banks employ AI to forestall mis-selling

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By Lee Kyung-min

Banks are implementing artificial intelligence (AI) to make sure the sellers of highly complicated financial products are fully informed about investment risks, industry officials said Tuesday.

Yet concerns remain that more specific measures will be needed given the DLF fiasco laid bare the so-called “digitized” bank work that did little to ensure consumer protection and was used only for efficient and brisk sales of high-yield products.

Programs to aid more responsible sales will include handwriting recognition technology and legal compliance reviews, functions that can be more accurately and thoroughly managed by machines than people.

The new methods designed to enhance consumer protection are a belated effort to dispel criticism following the DLF fiasco whereby many people, mostly those aged 60 and older, lost their entire investment.

DLF is short for derivative-linked funds, intricately structured options-based funds sold by many financial firms, including Woori and Hana Bank.

Woori Bank will apply machine reading comprehension technology, a compliance-bolstering method, to review whether bank workers follow designated guidelines to ensure consumer protection while selling certain products.

The technology was intended to make sure terms and conditions for products and services provided by the bank are in full compliance with related laws.

“If there does exist a breach or even the possibility of one, the technology will send out alerts with recommendations,” a Woori official said.

Hana Bank is in the process of updating its current handwriting recognition program to make sure that consumers read all parts relevant and necessary before making what could be a risky investment.

The bank will train bank sales officials to have them thoroughly check whether customers neglected certain parts on a document where their signatures are required.

“Smart technologies aside, workers will have to do their part to better protect consumers,” an industry official said.

Shinhan Bank is expected to use text-to-speech program whereby a machine reads certain conditions to customers before they sign off on an investment plan.

These moves came after the lenders learned from a series of incidents that a lack of prevention measures can be costly, going as far to affect the bank CEOs' management terms.

Woori Financial Group Chairman Son Tae-seung whose move to seek a second term was all but guaranteed until the Financial Supervisory Service (FSS) sanctioned him over the DLF case. Woori is now moving to take legal action against the FSS' ruling.