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  • AI vs. Traditional Finance: How AI is Disrupting the Traditional Banking Landscape

    The financial sector is facing an increasingly complex and competitive landscape, and one way that banks and financial institutions are responding is through the use of artificial intelligence (AI).

    With the ability to analyze large amounts of data, identify patterns, and automate processes, finance AI is proving to be a valuable tool for improving efficiency and effectiveness in the financial sector.

    In this blog post, we will explore the changing financial landscape, the challenges faced by the finance industry, and how finance AI can help overcome these challenges.

    Financial Landscape and Emerging Technologies 

    The financial industry is rapidly changing with the emergence of new technologies, such as blockchain, digital currencies, and finance AI. According to a report by ResearchAndMarkets, the global AI in the banking market is expected to grow at a compound annual growth rate (CAGR) of 31.38% from 2020 to 2025. This growth is being driven by the increasing adoption of AI-powered solutions by banks and financial institutions to improve their customer experience and operational efficiency.

    One of the key advantages of finance AI is its ability to automate processes and reduce the need for manual intervention. This can significantly reduce operational costs and improve the speed and accuracy of financial processes. For example, some of any company’s most data-intensive procedures are found in accounting, tax, and finance.

    Every aspect of the organisation needs statistics for revenue, spending, forecasting, and reporting. It may be quite challenging to get the data, verify the figures, and then construct the reports that will convey the information. However, a lot of these jobs and procedures may be automated with AI, which can save you time and money.

    Challenges in the Financial Sector and How AI Can Help 

    Despite the benefits of finance AI, the finance industry faces several challenges that can hinder the adoption and implementation of AI solutions. These challenges include data privacy and security concerns, lack of skilled professionals, and regulatory compliance.

    Let’s explore these challenges deeper and understand how AI helps overcome these challenges with AI-driven accuracy, automation, efficiency, and security.

    AI-enabled ERP Systems 

    One area where this evolution is particularly evident is in the office of finance operations. Finance teams are under pressure to do more with less, and they need tools that can help them to streamline processes, reduce costs, and provide better visibility into financial performance.

    Modern ERP systems are stepping up to meet this need. They come with new features and functionalities that are designed specifically for finance operations. For example, modern ERP systems can automate routine tasks such as data entry and reconciliation, freeing up finance professionals to focus on higher-value activities.

    By incorporating artificial intelligence (AI) and machine learning (ML) capabilities, ERP systems are better equipped to perform more traditional data-intensive tasks like predicting cash flow, identifying risks, and decision-making. More specifically, AI-powered ERP systems can automate financial reporting, identify fraud risks, and provide real-time insights into financial performance. For instance, a finance team would be able to get access to all relevant ERP systems within a single dashboard, simplifying the alignment between FP&A and business teams up to three times faster than the spreadsheet approach.

    AI Data Analytics in Finance: Reconciling Data

    The rise of big data in recent years has led to the increasing importance of big data analytics in finance. However, accessing and reconciling large amounts of data from disparate sources into usable financial models can be complicated and time-consuming. Manual processes, such as using spreadsheets and VBA scripts, often lead to errors and slow downs, making reporting processes inefficient and repeatable.

    AI platforms enable data analytics that can help streamline financial reporting processes. By quickly connecting to data from multiple sources, automating data analysis and preparation, and providing transparency, reusability, and version control, AI platforms empower finance teams to deliver valuable business insights faster and more accurately.

    Teams can easily collaborate on projects and incorporate machine learning elements to enhance their analysis with AI democratization for automated forecasting.

    Retail banks and corporate/investment banks both face various challenges in their day-to-day operations. To address some of these challenges, banks are turning to AI technology to help them make more informed decisions and streamline their processes.

    Applications of AI in Finance:

    1. Sales Tax Reporting: The complexity of tax codes and varying rates across different jurisdictions can make sales tax reporting a daunting task for businesses. Errors in reporting can result in financial penalties, legal disputes, and damage to reputation. AI can help automate sales tax reporting by leveraging machine learning algorithms to track sales and tax rates across different regions, reducing the risk of errors. AI can also help identify patterns in sales data to uncover potential areas of risk and opportunities for optimization.
    2. Income Tax Provision Compliance: Income tax provision compliance requires businesses to accurately calculate and report their tax liabilities and ensure compliance with tax laws and regulations. This task can be challenging due to the complexity of tax codes and frequent changes to tax laws. AI can help streamline the income tax provision process by automating data collection, analysis, and reporting. It can also help identify potential tax savings opportunities and optimize tax planning strategies.
    3. Fixed Asset Depreciation: Fixed asset depreciation is a crucial accounting process that determines the value of an asset over its useful life. Calculating depreciation can be time-consuming and prone to errors, particularly when dealing with a large number of assets. AI can help automate fixed asset depreciation calculations by leveraging machine learning algorithms to analyze asset data and calculate depreciation schedules accurately. It can also help identify opportunities to optimize asset utilization and improve depreciation strategies.
    4. R&D Calculations: Research and development (R&D) expenses are often a significant cost for businesses in innovative industries. Calculating R&D expenses can be complex and require the tracking of numerous variables. AI can help automate R&D expense calculations by analyzing data and identifying R&D expenses eligible for tax credits and deductions. It can also help optimize R&D investment by identifying promising areas of research and development.
    5. Sales Apportionment: Sales apportionment is the process of allocating a company’s income across different jurisdictions based on its sales activity. This process can be complicated due to varying tax laws across different regions and the need to track sales data accurately. AI can help automate sales apportionment calculations by analyzing sales data and identifying the appropriate allocation of income across different jurisdictions. It can also help identify areas of risk and opportunities for tax optimization.
    6. Demand forecasting: Forecasting demand is a crucial task for businesses to optimize inventory levels, production schedules, and supply chain management. It can be challenging due to numerous variables that can impact consumer behavior and demand. AI can help forecast demand by leveraging machine learning algorithms to analyze historical sales data and identify patterns that can inform future sales predictions. It can also help businesses optimize production and inventory levels to match predicted demand.
    7. Management reporting: Management reporting involves gathering, analyzing, and presenting data to inform business decision-making. This task can be time-consuming and require the tracking of numerous data points across different departments. AI can help automate management reporting by collecting and analyzing data from various sources and presenting it in a clear, actionable format. It can also help identify areas of risk and opportunities for optimization across different business functions.
    8. Identify accounts of interest: Identifying accounts of interest involves analyzing financial data to identify accounts that require further investigation or monitoring. This task can be challenging due to the volume of financial data businesses generate and the need to identify potential areas of risk. AI can help identify accounts of interest by analyzing financial data and identifying anomalies or patterns that require further investigation. It can also help businesses optimize their auditing and monitoring strategies to improve financial transparency and reduce the risk of fraud.
    9. Predictive models to assess creditworthiness: Assessing creditworthiness involves evaluating a borrower’s ability to repay a loan based on their credit history and financial information. This task can be time-consuming and require the analysis of a large volume of data. AI can help assess creditworthiness by leveraging machine learning algorithms to analyze credit data and identify patterns that indicate a borrower’s ability to repay a loan. It can also help businesses optimize their credit underwriting process by identifying potential areas of risk and improving the accuracy of credit risk models. AI can help lenders make informed lending decisions and reduce the risk of default.

    Conclusion

    Overall, AI can help businesses tackle a range of financial and accounting challenges by leveraging machine learning algorithms to analyze and automate complex tasks. By reducing the risk of errors, optimizing financial processes, and identifying areas of risk and opportunity, AI can help businesses improve financial transparency, reduce costs, and make more informed decisions.

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  • Unlocking the Future of Banking with Artificial Intelligence (AI)

    Artificial intelligence has profoundly affected almost every business, including banking and finance. The integration of AI in banking apps and services has made the sector more customer-focused and technologically relevant.

    AI-based solutions can help banks save money by enhancing efficiency and making judgements based on data that a human agent would find incomprehensible. Furthermore, intelligent algorithms may readily detect false data.

    What are the use cases of AI in banking?

    Artificial intelligence is already being used by banks and fintech companies in their services since it is becoming an essential part of the world we live in. You may benefit from the various advantages of the technology with the aid of these well-known banking-related AI apps. Let’s look at a few crucial applications of AI in banking.

    Cybersecurity and fraud detection

    Every day, a sizable number of digital transactions take place as customers use applications or online accounts to pay bills, withdraw cash, deposit checks, and do a variety of other tasks. Therefore, the financial sector needs to put more effort into cybersecurity and fraud detection.

    This is where AI in banking becomes extremely practical and efficient. Artificial intelligence (AI) can help banks lower risks, track system problems, and improve the security of online financial transactions. AI and machine learning are able to detect fraudulent behaviour quickly and alert banks as well as customers.

    Chatbots

    Chatbots are one of the best instances of artificial intelligence applications in banking. Once deployed, they may work whenever they choose, unlike others who have regular office hours.

    Additionally, they maintain a record of the usage patterns of certain clients. It facilitates their efficient comprehension of consumer requirements.

    By integrating chatbots into their banking apps, banks can ensure that they are reachable to their customers around the clock. Additionally, by understanding consumer behaviour, chatbots may offer customised customer care and propose suitable financial services and products.

    Loan and Credit decisions

    Banks have started integrating AI-based technologies to help them make better, safer, and more profitable lending and credit decisions. A person’s or company’s creditworthiness is now solely taken into account by many banks based on their credit history, credit ratings, and customer references.

    It is impossible to overlook the reality that these credit reporting systems routinely contain errors, exclude real-world transaction histories, and identify creditors inaccurately.

    An AI-based loan and credit system can study the patterns of conduct of customers with limited credit history to determine their creditworthiness. Additionally, the system alerts banks to certain acts that can increase the danger of default. In conclusion, these technologies are fundamentally changing how consumer finance will be carried out in the future.

    Tracking market trends

    Thanks to artificial intelligence in financial services, banks can analyse massive volumes of data and anticipate the forthcoming changes in markets, currencies, and stocks. Modern machine learning techniques can assess market mood and provide investment recommendations.

    AI in banking may also alert users to potential risks and suggest when to buy stocks. Due to its high data processing capacity, its cutting-edge technology also aids in accelerating decision-making and facilitates trading for both banks and their clients.

    Data collection and analysis

    Millions of transactions are recorded daily by financial and banking companies. The volume of information generated makes it challenging for staff to gather and record it. It becomes challenging to organise and accurately capture such a big volume of data.

    In such cases, effective data collection and analysis can be facilitated by creative AI-based solutions. As a result, the entire user experience is improved. Additionally, the information may be used to spot fraud or render credit decisions.

    Customer experience 

    Consumers are constantly looking for more practical experiences. For instance, the reason ATMs are so popular is that they give customers access to essential services like cash withdrawals and deposits even when banks are closed.

    This simplicity of use has only encouraged further innovation. Customers may now open bank accounts on their smartphones from the convenience of their homes.

    Integration of artificial intelligence will enhance customer satisfaction and user comfort in banking and financial services. Know Your Customer (KYC) data capture is accelerated by AI technology, which also removes errors. Additionally, timely product and financial offers can be made.

    By using AI to automate qualifying for situations like applying for a personal loan or credit, clients may skip the bother of going through the entire procedure manually. Additionally, technologies powered by AI can expedite approval procedures for services like loan disbursement.

    Additionally, AI banking supports accurate client data collecting for error-free account creation, providing a great customer experience.

    Risk management

    Exchange rate fluctuations, natural disasters, and political unrest are just a few examples of external global factors that have a substantial influence on the banking and financial sectors. In these unsettling times, it is crucial to proceed with extra caution while making business decisions. AI-driven analytics may offer a somewhat accurate prediction of upcoming events, helping you to stay organised and make choices on time.

    By estimating the possibility that a consumer will fail on a loan, AI helps in spotting risky applications. It predicts this future conduct by looking at previous behaviour patterns and smartphone data.

    Regulatory compliance

    The banking sector is among those with the strictest regulations in the world. It is against the law for banking clients to use banks to conduct financial crimes, and governments utilise their regulatory powers to ensure that banks have proper risk profiles and don’t have widespread defaults.

    Banks frequently hire internal compliance personnel to deal with these problems, but manual fixes are much more time- and money-consuming. To comply with the compliance standards, which are often modified, banks must continuously upgrade their processes and workflows.

    AI is utilised to interpret new compliance criteria for financial institutions and improve their decision-making using deep learning and Natural Language Processing (NLP). Even though it cannot replace a compliance analyst, AI banking can improve its processes.

    Predictive analytics

    Two of the most common applications for AI are predictive analytics and general-purpose semantic and natural language applications. Data may contain unique connections and patterns that AI may spot that were previously undetectable by conventional technology.

    These patterns could indicate underutilised cross-sell or sales opportunities, operational data measurements, or even factors that affect revenue.

    Process automation

    Robotic process automation (RPA) algorithms increase operational efficiency and accuracy while reducing costs by automating time-consuming repetitive procedures. Users can now focus on more difficult activities requiring human involvement.

    Banking businesses are now successfully using RPA to speed up transactions and increase efficiency. OCR technology, for instance, may be used to inspect documents and extract data from them far faster than people can.

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  • The Pros and Cons of Using MLOps in Your Business

    Machine Learning Operations (MLOps) is a critical component of modern machine learning (ML) workflows. MLOps is an approach that seeks to optimize the process of building, testing, and deploying ML models, ensuring that they are efficient, scalable, and reliable. In this blog post, we will examine the advantages and drawbacks of using MLOps in your business.

    What are the Pros of Using MLOps in Your Business?

    1. Better Collaboration: MLOps fosters better collaboration between data scientists, machine learning engineers, and operations teams. Through more streamlined communication channels and faster feedback loops, MLOps creates a collaborative ecosystem that leads to better decision-making and a more efficient workflow.
    2. Improved Model Accuracy: One of the key advantages of MLOps is that it helps improve model accuracy. By using MLOps to test and validate your models, you can identify and address issues early in the development cycle, ensuring that your models are accurate and reliable.
    3. Faster Time-to-Market: MLOps automates many of the repetitive and time-consuming tasks involved in building and deploying models. This leads to faster time-to-market, allowing your business to capitalize on new opportunities and stay ahead of competitors.
    4. Better Scalability: MLOps ensures that your ML models are scalable. This is particularly important as businesses collect ever-increasing amounts of data. By using MLOps to create scalable models, you can ensure that your operations remain efficient and effective, even as you scale up.
    5. Increased Efficiency: MLOps automates many of the repetitive and low-value tasks involved in ML development. This frees up data scientists and engineers to focus on more complex and value-adding activities, improving overall efficiency and reducing time-to-delivery.

    What are the Cons of Using MLOps in Your Business?

    1. Steep Learning Curve: MLOps is a complex system that can be challenging to learn. It requires a high degree of technical expertise, making it difficult for businesses without a robust technical team to implement.
    2. High Costs: Implementing MLOps can be expensive, especially if you need to invest in new tools and infrastructure. The cost of training your team on MLOps can also be significant.
    3. Potential for Errors: MLOps relies on automation, which can increase the risk of errors. These errors can be challenging to identify and address, and they can have a significant impact on your ML models.
    4. Lack of Flexibility: MLOps can be rigid, making it challenging to make changes to your ML models once they are deployed. This can be a significant drawback for businesses that need to adapt quickly to changes in their market or industry.
    5. Security Risks: MLOps involves the storage and processing of large amounts of data, making it a potential target for cybercriminals. This can put your business at risk of data breaches and other security issues.

    Machine Learning Training and MLOps

    To maximize the benefits of MLOps, you must ensure that your team has the right machine learning training. Your team will need a range of technical skills, including programming, data analysis, and statistics. Additionally, your team will need strong communication and collaboration skills. MLOps relies on cross-functional collaboration between data scientists, engineers, and operations teams, as well as effective communication with business stakeholders.

    It is also essential to invest in the right tools and infrastructure to support MLOps. This may include investing in new hardware or software, as well as developing new processes and procedures for managing your ML projects.

    How AutoML can help overcome the cons of using MLOps in your business

    Overcoming the Steep Learning Curve

    One of the primary challenges of implementing MLOps is the steep learning curve involved in using the technology. AutoML can help overcome this challenge by automating many of the tasks involved in model development, from feature engineering to model selection and hyperparameter tuning.

    With AutoML, businesses can streamline the process of building and deploying ML models, enabling their teams to focus on high-value tasks that require human expertise. This can reduce the need for extensive technical training and enable non-experts to contribute to ML development.

    Reducing Costs

    Implementing MLOps can be expensive, with the need for specialized hardware and software, as well as the cost of training staff in its use. AutoML can help reduce costs by automating many of the tasks involved in model development, reducing the need for manual intervention and minimizing the time required for testing and validation.

    Moreover, with AutoML, businesses can leverage pre-built ML models and pre-trained models, reducing the need for costly infrastructure and specialized expertise.

    Reducing the Potential for Errors

    MLOps relies on automation, which can increase the risk of errors. AutoML can help overcome this challenge by automating many of the repetitive and low-value tasks involved in ML development, reducing the risk of human error.

    AutoML can also provide automatic quality checks and alerts, enabling businesses to quickly identify and address any issues that arise. This can reduce the risk of errors, increase the accuracy of models, and enhance the effectiveness of ML-based decision-making.

    Increasing Flexibility

    MLOps can be rigid, making it challenging to make changes to your ML models once they are deployed. AutoML can help overcome this challenge by automating the process of model updating and adaptation, enabling businesses to quickly adapt their models to changing business needs and market conditions.

    With AutoML, businesses can leverage the power of ML in a more flexible and responsive manner, enabling them to respond quickly to new opportunities and threats.

    Enhancing Security

    MLOps involves the storage and processing of large amounts of data, making it a potential target for cybercriminals. AutoML can help enhance security by automating data encryption, monitoring data access, and providing robust authentication and authorization controls.

    With AutoML, businesses can ensure that their data is secure and protected, reducing the risk of data breaches and other security issues.

    Conclusion

    In conclusion, automated model training and automated machine learning can help businesses overcome many of the challenges of implementing MLOps. By automating many of the low-value and repetitive tasks involved in model development, AutoML can reduce costs, increase flexibility, enhance security, and reduce the potential for errors. If you’re looking to implement MLOps in your business, AutoML is a powerful tool that can help you streamline the process and achieve better results.

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  • Exploring the Role of AI in Financial Services | AI in Finance

    Artificial intelligence (AI) and machine learning are used in the financial industry for a range of applications, including task automation, fraud detection, and chatbot assistants. According to a recent AI in Banking survey, the vast majority of banks (80%) are well aware of the potential benefits that AI may provide.

    The usage of artificial intelligence (AI) by financial institutions (FIs) will accelerate as technology progresses, consumer acceptance grows, and regulatory environments shift. By giving their customers access to their accounts and financial advising services around the clock, banks may greatly enhance the customer experience and minimise time-consuming operations.

    What is Artificial Intelligence (AI)?

    Artificial intelligence refers to systems or technologies that execute tasks by mimicking human intellect. AI is a very important economic asset since it is intended to significantly enhance human abilities and contributions.

    What is Artificial Intelligence in Finance?

    Artificial intelligence (AI) in finance is the application of technology such as machine learning (ML) to improve how financial organisations evaluate, manage, invest, and safeguard money.

    How is AI driving innovation in Finance?

    Financial operations have historically relied significantly on human labour, including data input, data collecting, data verification, consolidation, and reporting. The finance function tends to be expensive, time-consuming, and sluggish to change due to all of these manual tasks. At the same time, a lot of financial procedures are predictable and well-defined, which makes them excellent candidates for AI automation.

    Companies were able to concentrate and standardise their financial operations thanks to the development of ERP systems. Early automation using AI was rule-based, which meant that when a transaction or input was completed, it would be processed according to a set of preset rules. These systems automate financial activities, but they lack the agility of current AI-based automation, need a lot of human maintenance, and update slowly. In contrast to rule-based automation, AI can handle more complicated circumstances, such as the total automation of dull, manual tasks.

    Increasing automation equals greater accuracy in your financial procedures. With people, high-volume, boring operations like invoice input can cause weariness, burnout, and mistakes. Computers, on the other hand, are not bound by these limitations. They may also handle far more transactions in a particular time span. As a consequence, the finance team has better data to work with and more time to focus on putting that data to use.

    What are the uses of artificial intelligence in financial services?

    Examples of AI in finance

    Companies now use AI-driven technologies to help them stay up with the rapid pace of development. 85% of company leaders desire assistance from artificial intelligence, according to a 2021 survey.

    These are three typical ways businesses are utilising artificial intelligence.

    First, businesses are embracing artificial intelligence to offer smart categorization and smart recognition, automating manual procedures like accounts payable processes.

    Second, automated financial closure procedures allow businesses to refocus staff efforts from manual data gathering, reporting, and consolidation to analysis, strategy, and action. Scenario modelling and unbiased forecasting are key components of smart prediction.

    Lastly, businesses are introducing AI-guided digital assistants that facilitate content discovery and task completion wherever you are. Finance departments, for example, may use digital assistants to alert teams when spending is out of compliance or to automatically submit expense reports for speedier payment.

    With major economic benefits and demand from tech-savvy consumers in mind, let’s explore how FIs are using AI algorithms across all financial services:

    AI in Personal Finance

    Because customers are ravenous for financial independence, the ability to regulate one’s financial health is pushing the adoption of AI in personal finance. AI is a must-have for every financial institution that wants to be a market leader, whether it’s delivering natural language processing-powered chatbots with 24/7 financial advice or personalising insights for wealth management solutions.

    AI in Consumer Finance

    The ability of artificial intelligence to detect and prevent fraud and cyberattacks is one of the most critical business cases for artificial intelligence in banking. Customers need safe accounts from banks and other financial institutions, especially with online payment fraud losses anticipated to reach $48 billion per year by 2023, according to Insider Intelligence. AI has the capacity to examine and identify abnormalities in patterns that humans might otherwise miss.

    AI in Corporate Finance

    AI has a significant impact on corporate finance because it can more precisely detect and analyse credit risks. Machine learning and other artificial intelligence (AI) technology may improve loan underwriting and minimise financial risk for firms looking to increase their value. Although corporate accountants, analysts, treasurers, and investors aim for long-term growth, artificial intelligence (AI) may help minimise financial crime by improving fraud detection and detecting anomalous behaviour.

    What are the benefits of AI in Finance?

    Using AI in banking has enormous advantages for work automation, fraud detection, and providing individualised suggestions. The following are some of the ways AI use cases in the front and middle office can revolutionise the financial sector:

    Enabling seamless & round-the-clock Customer Engagements

    AI enables financial companies to speed up and automate formerly manual, time-consuming operations like market research.

    In order to estimate future performance and discover patterns, AI can swiftly analyse enormous amounts of data. This enables investors to track investment growth and assess possible risks.

    Minimising the need for tedious effort

    AI and ML may enhance the whole customer experience for banking consumers. The advent of online banking (contactless banking) reduces the need for face-to-face interactions, yet the move to the virtual world may increase endpoint vulnerabilities (e.g., on cell phones, computers, and mobile devices).

    Several fundamental banking transactions, such as payments, deposits, transfers, and customer support inquiries, may be automated using AI. AI can also handle credit card and loan application processes, including approval and denial, with near-instant answers.

    Reducing false positives and human error

    Personal data can be mined and utilised to decide coverage and premiums in the insurance industry.

    AI may also be utilised in cybersecurity, especially to detect fraudulent transactions. AI may highlight aberrant behaviour, automatically inform both the institution and the consumer to verify the purchase or transfer in real-time, and take action to fix it by continuously monitoring purchase behaviour and comparing it to previous data.

    Saving Revenue

    By 2025, North American banks may save $70 billion by automating middle-office functions using AI. In the coming years, the implementation of AI technology in banks is anticipated to yield significant cost savings. According to recent projections, the potential savings from AI applications in banks could reach an impressive $447 billion by 2023. Interestingly, the bulk of these savings, which is estimated to be around $416 billion, is expected to come from the front and middle offices of banks. These numbers reflect the tremendous potential for AI to revolutionize the way banks operate and serve their customers, leading to increased efficiency and profitability.

    What are the risks of not adopting artificial intelligence in finance?

    According to the previously cited “Money and Machines” survey, 87% of business leaders feel that firms that do not rethink finance procedures would face threats such as:

    • Losing ground to competitors by 44%
    • 36% of workers who are more stressed
    • 36% of reports are inaccurate.
    • 35% decrease in staff productivity

    Businesses that take their time using AI risk becoming less appealing to the next generation of financial experts. 83% of millennials and 79% of Generation Z respondents stated they would prefer a robot over their company’s financial personnel. Millennials are nearly four times as likely as Baby Boomers to want to work for a firm that uses artificial intelligence to handle money.

    What does the future of AI look like for the Finance and FinTech sectors?

    Due to increased client demand for digital goods and the threat of tech-savvy startups, financial institutions (FIs) are swiftly embracing digital services; by 2021, worldwide banks’ IT investment will climb to $297 billion.

    FIs are under pressure to increase their IT and AI expenses in order to meet increased digital needs as millennials and Gen Zers overtake baby boomers as the largest target customer group for banks in the United States. Because 78% of millennials avoid visiting a branch if possible, these younger clients favour internet banking alternatives.

    While the shift from traditional banking channels to online and mobile banking was already underway prior to the pandemic due to increased opportunity among digitally native consumers, the coronavirus dramatically accelerated the shift as stay-at-home orders were implemented across the country and consumers sought more self-service options. According to Insider Intelligence, internet and mobile banking penetration among US customers will climb to 72.8% and 58.1%, respectively, by 2024, making AI deployment important for FIs aiming to be successful and competitive in the developing sector.

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  • Telcos must do more than just shake off SMS fraud

    Telcos must do more than just shake off SMS fraud

    A telco we recently spoke to narrated how scam SMSes were creating trouble for its subscribers, but its risk team was able to ‘shake it off for now. Interesting choice of words: ‘shake it off, a phrase popularized by Grammy Award Winner, Taylor Swift, who has been busy shaking off other things like a record deal that turned sour last year, driving her to re-record her first 6 albums.

    Unfortunately, unlike the pain of past relationships, which is what the singer croons about in her chart-topping hit, SMS fraud isn’t something that can be easily shaken off by telcos.

    Sending the right message

    A text message from a friend is a person-to-person or P2P message. A message from your bank sharing an OTP is an application-to-person or A2P message. A2P SMS finds use in areas like two-factor authentication, sharing details about bookings, reminders for appointments and travel, updates about deliveries, notifications about discounts, sales, and promotions, etc., making it an indispensable information delivery channel. Since the pandemic, the number of A2P SMSes traveling across telecom networks has shot up. It is estimated that 3.5 trillion A2P messages will be sent in 2023, marking a 40% increase over 5 years. On the other hand, the flourishing of OTT apps providing free messages has put a dent in P2P messaging revenues. Nevertheless, subscribers consider SMS a safe channel of communication. A study on marketing channels reveals that the average open rate of a marketing SMS is 99% compared to 28-33% for marketing emails.

    What goes on behind that SMS

    Convenience is perhaps the best thing about sending a text message. It’s quick and does what it is supposed to. But there is a whole machinery at play to ensure that every ‘send’ button clicked on an SMS creates revenue for telecom operators and many, many intermediaries.

    The SMS ecosystem consists of numerous players supporting the business of P2P and A2P SMS. There are SMS resellers, SMS hubs, Rich Communication Service (RCS) providers, and SMS aggregators, to name a few. The infrastructure also comprises several components like SMS centers as well as software such as SMS gateways and SMS APIs. Each of these plays a role within authorized routes, allowing messages to be delivered from a business through an MNO to the right customer.

    SMS resellers provide software that allows quick broadcasting of business SMSes based on an agenda with pre-built templates. SMS hubs streamline the flow of international SMS through interoperable systems between telecom operators, enabling wider reach at a lower cost without complex agreements. SMS aggregators are niche telcos that act as intermediaries between many MNOs to send and receive SMS connecting brands to their customers. SMS gateway is a website that allows businesses to send bulk SMSes to their customers via telecom networks and supports international SMS. And finally, SMS API, a new addition to the market, is a piece of code that dispatches SMS via an SMS gateway and also supports text message communication between different web applications.

    Understanding ‘The Blank Space’ of fraud 

    Interactions between these nodes and players are complex and governed by numerous and verbose contracts outlining cost, frequency, carriers involved, interruptions, disputes, privacy, and much more. But fraudsters commit much time to find loopholes within networks and agreements that they can exploit, such as weaknesses within SS7 signaling protocols and grey routes. According to CFCA Fraud Loss Survey 2021, SMS fraud accounts for US $3.65 billion in losses.

    Here are some well-known fraud types:

    • SMS Spoofing – The location and identity of the sender are spoofed to mimic a known business
    • SMS Faking – Signaling parameters are manipulated to fake the operator’s details, causing customers to receive unsolicited SMS
    • SMS Spamming – SMS is embedded with a callback premium rate number, incurring high charges
    • SMS Malware – Hackers breach MNO systems to steal sensitive user information
    • SMS Bypass – Traffic is routed through alternate networks and grey routes, leading to a loss of revenue for telco
    • SIM Farms – A collection of SIM cards are used to issue business SMS to avoid paying enterprise SMS rates

    SMS fraud creates much harm. It leads to identity theft, financial theft, and network manipulation. It significantly erodes customer trust in the primary communication channel. For example, nearly 64% of customers worldwide are concerned that mobile messages could be from impersonators trying to steal their data, money, or identity.

    And they are right to be concerned. Today, a majority of SMS fraud remains undetected. It affects operators through the leakage of SMS revenue and negative brand image. Businesses cannot monetize their services as people become distrustful of promotions and sales discounts.

    Re-orienting fraud and security solutions for the new age 

    Telcos need a diverse ecosystem of SMS players to forge international connections between people and businesses. However, they ought to focus on transparency and weeding out misaligned players if they want to secure their SMS ecosystems and sustain revenues from A2P and P2P SMS.

    SMS firewalls are among the most popular approaches, but their efficacy is waning in light of emerging SMS threats due to new signaling protocols. Techniques such as real-time signaling analytics, heuristics, and advanced ML techniques give all parties – businesses, operators, and users – visibility into SMS interactions so operators can identify any SMS fraud. As operators re-orient their security systems to fight SMS fraud, it fosters customer confidence, secures access from businesses to their consumers, and creates a thriving ecosystem for genuine players.

    Perhaps it is time for telcos to move from merely ‘shaking off fraud’ to ‘knowing that it’s trouble’ and adopt a long-term view to combat it. They ought to upgrade their fraud management system to mitigate any form of risk proactively.

    Subex’s AI-first Fraud Management Solution provides a data analytics platform that helps CSPs engineer ML features, leverage a global honeypot network to spot anomalies faster, identify malware attacks in SMS, and ensure real-time SMS threat monitoring.

    To see how our signaling to fraud management solution telcos from SMS fraud

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  • 5 Ways MLOps can Save Your Company Money

    MLOps is a technique that makes use of automated model training techniques across the machine learning pipeline. MLOps is helpful in making the shift from manually running a few ML models to rapidly scaling ML models throughout the whole business process. In this post, we’ll go over some of the major ideas behind how MLOps may improve business workflow and increase revenue.

    What are the Benefits of MLOps?

    Productivity

    All activities in the ML lifecycle are more productive thanks to MLOps because:

    Creation of Automated Model Training Pipelines

    The ML lifecycle involves a lot of labour-intensive and repetitive procedures. For instance, about half of the time that the data scientists spent was preparing the data for the model. Manual data preparation and collecting are ineffective and might produce unsatisfactory results.

    MLOps stands for automating the whole ML model workflow. This includes each step in the modelling process, including data gathering, model construction, testing, retraining, and deployment. MLOps procedures help teams save time and reduce human error. Teams may then focus on activities that bring greater value rather than doing the same thing over and over again.

    Standardizing ML processes for effective teamwork

    Collaboration between IT and business personnel, as well as data scientists and engineers, is necessary for the company-wide adoption of ML models. Businesses can standardise ML operations and establish a shared language for all stakeholders thanks to MLOps principles. This reduces compatibility problems and quickens the overall model generation and deployment process.

    Reproducibility

    Automating ML workflows enables consistency and repeatability in a variety of processes, including the development, testing, and deployment of ML models. Because of this, continually trained models become dynamic and adapt to change:

    • Data versioning: MLOps makes care to save snapshots of various versions of data sets as well as various versions of data that were produced or modified at particular points in time.
    • Versioning the model with several hyperparameters and model types is a method of MLOps that involves establishing feature stores for various types of model characteristics.

    Reliability

    MLOps improves the dependability of ML pipelines by introducing CI/CD concepts from DevOps into the machine learning workflows. Automatic ML lifecycle reduces human error while providing businesses with accurate data and insights.

    Scaling an ML development project from a small model to a large production system is one of the toughest hurdles. For reliable scalability, MLOps simplifies model management procedures.

    Monitorability

    Models drift over time as the environment changes, therefore it is crucial to keep an eye on their behaviour and performance. Businesses may use MLOps to systematically evaluate model performance and get insights by:

    • Constantly retraining the model ML models are kept under surveillance and automatically retrained on a regular basis or following a specific incident. Retraining a model is done to make sure it continually produces the most accurate results.
    • Automated staff notifications in the event of model drift: MLOps provides the company with real-time data and model status updates and notifies the appropriate staff members when the model performance falls below a predetermined threshold. This makes it possible for you to intervene quickly to stop model deterioration.

    Cost Reduction

    Throughout the course of the full machine learning lifecycle, MLOps may drastically save costs:

    • Automation reduces the need for manual management of machine learning models. Employee time will be freed up as a result, and it may be put to better use.
    • It makes it possible for you to methodically identify and minimise mistakes. Reduced model management mistakes will also result in lower expenses.

    How MLOps can Save Your Company Money

    Machine learning operations (MLOps) are a critical component of modern businesses, enabling companies to leverage machine learning (ML) for critical decision-making and process automation. However, MLOps can also be resource-intensive and costly, with many businesses struggling to manage the costs associated with the technology. In this blog post, we will explore 5 ways that MLOps can save your company money while improving operational efficiency.

    Automated ML Model Development

    MLOps automates several tasks involved in ML model development, including data preprocessing, feature engineering, model training, and deployment, reducing the time and resources required for model development. Automated model training using automated machine learning (AutoML) solutions eliminates the need for expensive data scientists, enabling businesses to develop ML models faster and more efficiently.

    Reduction in Manual Labor Costs

    MLOps reduces the need for manual labour, reducing costs associated with hiring and training data scientists, and analysts. MLOps automates low-value and repetitive tasks, freeing staff to focus on high-value tasks, improving productivity and efficiency, and reducing labour costs.

    Improved Model Accuracy and Reduced Errors

    MLOps ensures model accuracy and reduces errors using automated testing and validation tools. By automating the testing process, businesses can identify errors and fix them quickly, reducing the risk of incorrect decisions and associated costs. Improved model accuracy can also reduce the cost of manual interventions required to correct errors in the model.

    Enhanced Resource Utilization

    MLOps optimizes resource allocation and utilization, ensuring efficient and effective use of resources. Businesses can save costs by using fewer infrastructure and computing resources, reducing the need for expensive hardware and software. By optimizing resource utilization, businesses can reduce operational costs and improve overall efficiency.

    Improved Business Agility

    MLOps improves business agility, enabling businesses to respond quickly to changing market conditions and emerging opportunities. Automated model development and deployment enable businesses to react faster and capitalize on market trends, reducing time to market, and increasing revenue. The ability to make data-driven decisions quickly enables businesses to maintain a competitive edge while saving costs associated with delays in decision-making.

    Conclusion

    In conclusion, MLOps can save your company money and improve operational efficiency. By automating tasks involved in ML model development, reducing manual labour costs, improving model accuracy, optimizing resource utilization, and enhancing business agility, businesses can reduce costs and gain a competitive edge. MLOps is an essential tool for businesses looking to leverage ML for critical decision-making and process automation while minimizing costs.

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  • Automating Model Training with MLOps: Best Practices and Strategies

    Preparing the data, analysing it, and then training the model is referred to as the MLOps cycle in the context of the model training pipeline. The MLOps pipeline’s model training is frequently automated using AutoML features built into this iterative or interactive model.

    What is MLOps pipeline automation?

    In an MLOps automated training model, pipeline automation entails the execution of model training continuously, and model retraining is triggered anytime fresh data becomes available. Steps for validating data and models are also included in this degree of automation.

    What is Automated Machine Learning?

    A major change in how businesses of all sizes handle machine learning and data science has been brought about by MLOps Automatic machine learning (AutoML). It takes a lot of time, resources, and effort to apply conventional machine-learning techniques to actual business challenges. It calls for specialists from a variety of fields, including data scientists, who are already among the most in-demand workers.

    By applying methodical operations to unstructured data and choosing models that extract the most pertinent information from the data—often referred to as “the signal in the noise”—automated machine learning alters this and makes it simpler to construct and utilise machine learning models in the real world. Automated machine learning applies the industry’s best practices for machine learning to create a successful MLOps Pipeline and increase data science accessibility throughout the enterprise. refers to the cycle of gathering data, analysing it, and then training an AI model. In order to automate model training across the MLOps pipeline, this iterative or interactive model frequently has AutoML features.

    Why is Automated Machine Learning Important?

    It is a lot to expect of one organisation, much alone one data scientist, to manually build a machine learning model because it is a multi-step process that calls for domain knowledge, mathematical experience, and computer science abilities (provided you can hire and retain one). In addition, there are several potentials for human error and prejudice, which reduces the model’s accuracy and diminishes whatever insights it may provide. Automatic machine learning enables businesses to exploit data scientists’ pre-built expertise without investing time and money in building those skills themselves, increasing the return on investment for data science programmes while shortening the time it takes to realise value.

    Automated machine learning makes it possible for companies in every industry to use machine learning and AI technology, which was previously only accessible to businesses with enormous resources. These industries include healthcare, financial markets, fintech, banking, the public sector, marketing, retail, sports, manufacturing, and more. Automated machine learning enables business users to easily apply machine learning solutions, freeing up an organization’s data scientists to work on more challenging challenges by automating the majority of the modelling processes required to construct and deploy machine learning models.

    What are the steps involved in Automated Model Training?

    Following the establishment of the success criteria and the business use case definition in any MLOps project, the following stages are involved in getting an ML model into production. These actions can be carried out manually or automatically using a pipeline.

    • Extraction of data For the ML work, you choose and incorporate the pertinent data from several data sources.
    • Data analysis: To comprehend the data that is accessible for creating the ML model, you undertake exploratory data analysis (EDA). The results of this method are as follows:
    • Recognizing the data structure and the traits the model anticipates by determining the feature engineering and data preparation required for the model.
    • The data is ready for the ML job after being prepped. Data cleaning, which entails dividing the data into training, validation, and test sets, is a part of this preparation. Also, you incorporate feature engineering and data transformations into the model that completes the intended job. The data split in the ready-to-use format is the step’s output.
    • Model training: Using the given data and numerous techniques, the data scientist trains several ML models. To acquire the best-performing ML model, you also subject the implemented algorithms to hyperparameter adjustment. This phase results in a trained model.
    • Evaluation of the model: The model’s quality is assessed using a holdout test set. A set of measures for evaluating the model’s quality are the result of this stage.
    • Model validation verifies that the model is suitable for deployment and that its prediction performance exceeds a predetermined baseline.
    • Serving the model: To provide predictions, the verified model is delivered to a target environment. There are several possible deployments for this one:
      1. Online forecasts are served via microservices with a REST API.
      2. a mobile or edge device with an integrated model.
      3. a component of the batch prediction system.
    • Model monitoring: To possibly start a new iteration of the ML process, the model’s predicted performance is tracked.

    The degree of automation of these phases determines the ML process’ maturity, which is a reflection of how quickly new models can be trained using new data or with iterative implementations.

    How do you leverage MLOps and the power of automation for model training in 2023?

    The road for today’s data-driven businesses starts with strategic knowledge and implementation of AI/ML. Before beginning the MLOps journey, company executives must assess the organisational infrastructures, goals, and pain areas. Companies can use the step-by-step instructions in the accompanying document to successfully automate MLOps.

    • Using experimental coding to build a practical model: Most of the development and deployment phases of the ML model will initially remain manual after the successful adoption of ML and application to the current use cases. Engineers and data scientists start building the model, which will later be used as a prediction service. The data professionals first manually control script-driven and interactive procedures, evaluating, analysing, and building experimental codes to produce a practical model. At this point, performance evaluation and CI/CD are not given much attention. The use of a trained model as a prediction service is the main topic.
    • Automation of the data pipeline comes into focus as the MLOps journey develops and a model is built. As data collection, analysis, and validation are currently automated, continuous model training leads to continuous delivery. With the scope of implementing their results in the production setting, experiments move more quickly. The unification of DevOps and the modularization of pipelines’ and components’ codes make them repeatable and independent in the runtime environment. Prediction services for new models are continuously delivered since model deployment is automated. The deployed training pipeline as a whole automatically and constantly provides the trained model. Data and model validation, a library of features, metadata management, and ML pipeline triggers are some further elements of this MLOps level.
    • Transforming the pipeline into a production setting: The CI/CD system must be smoothly automated in order for the ML pipeline to be applied to the production environment with dependable and continuous updates. The creation, testing, and deployment of new pipeline components in production may be completed quickly and easily with the help of a lightning-fast and automated CI/CD system that allows data professionals to generate newer ideas about model design, feature development, and hyperparameters. Continuous experimentation with the ML algorithms is made possible by the automated CI/CD of the ML pipeline, which later helps with the creation of source codes. New components are offered through continuous pipeline integration and delivery in the production environment, ensuring newer installations. Automatic triggers aid in putting the pipeline into production and continuously implementing the environment’s taught model. The model’s real-time performance is then tracked, and incremental measures may be performed based on data-driven insights.

    MLOps will be a crucial facilitator of businesses’ future efforts in data analytics. As they work to unlock commercial value at scale, strategic AI/ML initiatives, the hiring of talented and imaginative data scientists and ML engineers, and innovation-mindedness will be fundamental elements of their journeys.

    MLOps: A Guide For Your Enterprise AI Strategy

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  • How CSPs Are Prioritizing Sustainability with On-Site Renewable Energy Solutions

    How CSPs Are Prioritizing Sustainability with On-Site Renewable Energy Solutions

    As the telecommunications sector expands, so will its energy usage. According to Ericsson, mobile networks consume 0.6% of the world’s electricity, with estimates indicating that operators spend more than $25 billion on energy expenditures each year. As a result, for Communication Service Providers, energy efficiency and sustainability are becoming more essential problems (CSPs).

    Many CSPs are investigating on-site renewable energy options to solve these problems. By 2025, 60% of CSPs are expected to prioritise on-site renewable energy, up from less than 10% in 2022. Cell sites, data centres, and other energy-intensive places can be powered by on-site renewables, decreasing CSPs’ dependency on non-renewable energy sources.

    Several CSPs have already begun to investigate on-site renewables, with Deutsche Telekom working with Ericsson to explore solar and wind-powered cell sites, Telenor Group investigating solar and wind-based energy solutions for cell sites, and Telefónica implementing a Smart Site model for mobile site design that incorporates renewable energy sources.

    In addition to lowering the carbon footprint of CSPs, on-site renewables can assist to lower energy prices. As energy prices rise, CSPs are focusing more on energy efficiency to save money. CSPs can minimise their dependency on nonrenewable energy sources and cut their energy expenses by installing on-site renewables and energy efficiency efforts.

    CSPs and tower companies should bear in mind that various sites may require different solutions based on weather conditions and power demands as they investigate on-site renewable energy alternatives. Because of the number of bands, urban cell sites may require more power than rural or suburban sites, and solar power may not be possible in these places with today’s methods.

    CSPs should create a roadmap including network planning and operations, sustainability teams, procurement, and finance to successfully integrate on-site renewables into their networks. They should also work with vendor partners to harmonise roadmaps and objectives/targets for renewable energy usage.

    AI has the potential to significantly assist CSPs in optimising their energy use and reducing their dependency on nonrenewable energy sources. AI can help by offering predictive analytics and real-time monitoring of energy consumption. This can assist CSPs in identifying areas where energy consumption can be lowered and optimising operations to be more energy-efficient.

    Moreover, AI-powered algorithms can assist CSPs in optimising renewable energy systems such as solar panels or wind turbines to maximise energy output. AI, for example, may evaluate meteorological data to forecast the quantity of solar radiation or wind speed, which can assist CSPs in determining the best position for renewable energy systems and adjusting their output accordingly.

    Furthermore, AI may assist CSPs in identifying prospective places for on-site renewables installation by identifying sites with high energy demand and high potential for renewable energy solutions using data-driven insights. CSPs may simulate numerous scenarios and decide the most efficient solution for a specific location using AI-powered simulations, taking into consideration aspects such as weather patterns, power consumption, and cost-effectiveness.

    Another method AI may assist CSPs in reducing their carbon footprint is through optimization of Radio Access Network (RAN) operations. The RAN is the component of the mobile network in charge of connecting user devices to the network and handling data transfer. RAN is a substantial contribution to mobile network energy usage, and improving RAN operations may result in considerable savings in power consumption and carbon emissions.

    Real-time RAN data may be analysed by AI-powered algorithms to discover locations where power consumption can be lowered without affecting network performance. For example, AI may monitor traffic patterns and alter the power settings of RAN equipment in real-time to decrease power consumption while satisfying performance requirements.

    AI may also be used to improve RAN equipment placement, ensuring that the equipment is placed in the most energy-efficient areas and eliminating the need for more equipment. CSPs may dramatically cut their power usage, lower their carbon footprint, and increase network performance by improving RAN operations.

    Overall, artificial intelligence may assist CSPs in making educated decisions about energy use and the installation of renewable energy solutions. CSPs may lower their carbon footprint and contribute to a more sustainable future by employing AI to optimise their energy use and maximise the use of renewable energy.

    Finally, on-site renewable energy solutions provide various advantages for CSPs, including a lower carbon footprint, cheaper energy costs, and enhanced dependability during extreme weather events. CSPs may progress towards a more sustainable and lucrative future by emphasising on-site renewables and adopting energy efficiency programmes.

    Telco Sector Can Be a Gamechanger for Sustainability using AI/ML

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  • Explaining a Machine Learning Model using XAI Methods

    Understanding the Factors Behind Airline Passenger Satisfaction through XAI Approaches

    Explaining a Machine Learning Model using XAI Methods

    Introduction

    Explainable Artificial Intelligence (XAI) aims to provide understandable explanations of AI models and their predictions to individuals without a strong background in AI. In recent years, XAI has become a highly sought-after area of research due to the growing demand for transparency in AI systems. The three key principles of XAI are: transparency, which refers to making the inner workings of a model easily accessible; interpretability, which involves the ability to comprehend the model’s decisions; and explainability, which pertains to the provision of clear, human-understandable explanations of the model’s outputs.

    Interpretable machine learning can be achieved through two approaches. One approach involves designing a predictive model that inherently provides interpretable results, such as linear regression or decision trees. The other option involves using a black-box model and applying a post-training explanation method, referred to as agnostic methods. I will outline some of these methods and provide illustrations using a binary classification model as a context.

    In this article, we explore the application of XAI methods to enhance the understanding of a machine learning model designed to predict airline passenger satisfaction. Through the use of XAI techniques, we aim to uncover the key factors that contribute to passenger satisfaction and provide a clear, human-understandable explanation of the model’s predictions.

    Airline Passenger Satisfaction Dataset

    This dataset contains an airline passenger satisfaction survey. Here, the goal is to predict passenger satisfaction. The data was made public by Klein TJ in Kaggle, and the columns are:

    • Gender (male or female).
    • Customer type (loyal or disloyal customer).
    • Age.
    • Type of travel (personal or business travel).
    • Flight class (business, eco, or eco plus).
    • Flight distance.
    • Arrival delay in minutes.
    • Airline satisfaction level (satisfaction, or neutral or dissatisfaction).
    • Satisfaction level among the following services, rated from 0 to 5, 0=not applicable, 5=most satisfaction:
    Inflight wifi service Departure/arrival time Ease online booking Gate location
    Food and drink Online boarding Seat comfort Inflight entertainment
    On-board service Leg room service Baggage handling Check-in service
    Inflight service Cleanliness

     

    Global Model-Agnostic Methods

    In XAI, we refer to global methods to algorithms that give a comprehensive explanation of the entire data set.

    Permutation Feature Importance

    • Permutation feature importance measures the increase in the prediction error–or decrease in model score–after permutating the feature values.
    • The permutation breaks the relationship between feature and target. Increase in prediction error is an indicative of the model dependence on the feature.
    • We obtain the importance of the features with the following expression.

    Explaining a Machine Learning Model using XAI Methods

    ij = importance of feature j
    s = fitted model score on training or validation dataset
    K = number of different permutations
    skj = model score on permutated dataset.

    Example

    We observe, in Figure 1, that after randomly shuffling the features Personal travel and Inflight wifi service there is a decrease in the recall by 0.193 and 0.189. The decrease in the score means that the ML model depends heavily on these features to predict passenger satisfaction.

    Figure 1. Permutation Feature Importance Plot.

    Explaining a Machine Learning Model using XAI Methods
    Figure 1. Permutation Feature Importance Plot.

     

    Partial Dependence Plot

    • The partial dependence plot (PDP) shows the marginal effect of a set of features on the outcome.
    • This helps to discover the nature of the relationship between the features and the target (e.g., linear, non-linear).
    • For regression, the partial dependence function is defined by:

    Explaining a Machine Learning Model using XAI Methods

    where,
    S= set of features of interest
    C= set of other features
    xS= features of interest
    xC= other features
    f ̂s= partial function
    f ̂= ml model

    • In practice, we estimate the function using the following expression:
      Explaining a Machine Learning Model using XAI Methods
    • Given values of the features in , the partial function shows:
      • The average marginal prediction effect, for regression.
      • The average target class probability, for classification.

    Disadvantages

    • The PDP assumes that the features in and  are not
    • A correlation between features can bias the estimated effect due to unlikely data points generated in the computation of the PDP.
    • PDP also hidden heterogeneous effects – since it is the mean of change in marginal effects.

    Example

    On average, the passenger satisfaction probability when it is a business travel is 0.54. For inflight wifi service, no service and 5 rating reach equal or more than 0.70. Loyal customers have 0.48 probability of satisfaction (Fig. 2).

    Explaining a Machine Learning Model using XAI Methods
    Figure 2. PDP for most important features (first row).

     

    We can see some strong correlations between features in the training data (Figure 3). For example, the feature of interest  inflight wifi service plotted above is strongly correlated with ease of online booking. In this case we should trust more the ALE (Accumulated Local Effect) plots, which are not affected by strong correlations.

    Explaining a Machine Learning Model using XAI Methods
    Figure 3. Strong correlations in training data.

     

    Accumulated Local Effect (ALE) Plot

    Intuition

    • ALE plots describe how the features influence the predictions, on average.
    • ALE plots calculate differences in predictions in small windows around the feature value.

    Estimation

    1. Divide the feature in intervals.
    2. Compute differences in predictions for each instance inside the intervals.
    3. Average the difference in predictions for each interval.
    4. Accumulate average across all intervals.
      Explaining a Machine Learning Model using XAI Methods
      Nj(k): neighborhood defined by the k-th interval of feature xj
      nj(k): size of neighborhood (number of instances)
      kj(x): number of intervals of feature xj
      xj(i): i-th instance of j-th column
      zkj: grid value
    5. Center the effect so the mean is zero.
      Explaining a Machine Learning Model using XAI Methods

    Interpretation

    • The value of the ALE can be interpreted as the main effect that a feature has at certain value compared to the average prediction of the data.
    • Example: = -2 (  = 3) then the prediction is lower by 2 compared to the average prediction.
    • The grid intervals can be specified with the feature quantiles.

    Advantages

    • Works when features are correlated.
    • Easy interpretation.

    Example

    We see that a passenger with no service of inflight wifi service has 0.55 more probability of satisfaction that the average passenger. The personal travel plot shows that a passenger on a personal travel has 0.21 less probability of satisfaction than the average passenger, while passengers on a business travel, has 0.21 more probability (Figure 4).

    Explaining a Machine Learning Model using XAI Methods
    Figure 4. ALE plots

     

    Feature Interaction

    • When features interact with others, the sum of the independent feature effects does not fully express the prediction, since the feature effect depends on values of other features.
    • One method to measure the effect between features is the Partial Dependence Variance method.
    • The intuition is that weak interaction effect between two features and  on the response Y suggest that the importance has little variance when one of the features varies and the other is left constant.

     Estimation

    1. Construct the PD (Partial Dependence) function
    2. Compute the feature importance of while  is constant, for all values of .
    3. Take the standard deviation of the resulting importance scores across all values of .
    4. Similarly, we compute the same standard deviation across all values of
    5. Compute the feature interaction averaging the two results.

    There are some interactions detected, such as disloyal customer and personal travel; personal travel and inflight wifi service; or disloyal customer and inflight wifi service (Figure 5).

    Explaining a Machine Learning Model using XAI Methods
    Figure 5. Feature interaction plot.

     

    Local Model-Agnostic Methods

    Local model-agnostic methods aim to explain individual predictions.

    Individual Conditional Expectation

    • Individual conditional expectation (ICE) plots are the PDP equivalent for individual data instances.
    • An ICE plot shows the prediction dependence of all instances, while PDP averages them.
    • The average relationship between feature and the predicted value – PDP output – works when there is a weak interaction between set S and set C.
    • ICE plots provide more insights when there are interactions.

    Example

    We see (Figure 6) that the ICE for type of travel gives us additional information. ICE lines for disloyal customers are flat while loyal customers show a decrease of dependence when it is personal travel. We observe similar patterns for the interaction between inflight wifi service and personal travel or disloyal customers: personal travels and disloyal customers have a low probability for values 1 to 4, while if it is a business travel or a loyal customer, the probability is higher and, in some cases, remains flat at 80%.

    Explaining a Machine Learning Model using XAI Methods
    Figure 6. ICE plots of a sample of randomly selected observations from the training data. It is also displayed the mean prediction at each value of the x-axis. Lines are colored by the interaction feature value. The first part of each title corresponds to the feature mapped by the PD function, while the second part of each title is the one mapped to add color. From left to right: a) blue are loyal customers, b) blue are business travel, and in c) blue are also loyal customers.

     

    Counterfactual Explanations

    • Counterfactual explanations express a causal situation in the form: “if X (causes) hadn’t occurred, then Y (event) wouldn’t have occurred.”
    • In the ML context, Y is the model prediction and X are the feature values.
    • Counterfactual thinking requires imagining a hypothetical situation that contradicts the observed facts.
    • The goal of counterfactuals Is to provide actionable guidance, in the form of steps that a consumer might take to achieve a different output in the future.

     Example

    Here I found three counterfactual explanations for a dissatisfied random passenger. The XGB model predicts dissatisfaction with a probability of 18%. The first counterfactual explanation says that by receiving a better inflight wifi service the passenger is predicted to be satisfied with 71% probability. Similarly, by the second counterfactual, the passenger would have been satisfied if the cleanliness service were a bit better.

    Feature Values
    Gender Female
    Customer type Loyal
    Type of travel Business travel
    Class Business
    Age 33
    Flight Distance 325
    Inflight wifi service 2 5 3
    Departure/Arrival time 5
    Ease of Online booking 5
    Gate location 5
    Food and Drink 1
    Online Boarding 3 5
    Seat comfort 4
    Inflight entertainment 2
    On-board service 2
    Leg room service 2
    Baggage handling 2
    Check-in service 3
    Inflight service 2
    Cleanliness 4 5
    Arrive Delay in Minutes 7
    Satisfied 0 1 1 1
    Probability 0.18 0.71 0.53 0.64
    Table 1. Counterfactual Explanations, only changes on features are displayed.

     

    Conclusion

    In this article, we present various agnostic methods, both global and local, to enhance our understanding of the XGBoost model used for binary classification in the context of airline passenger satisfaction. These XAI techniques provide a way to fulfill the right to explanation of machine learning models and provide insights into the key factors that influence passenger satisfaction. Through the application of these methods, we aim to provide a clear, human-understandable explanation of the XGBoost model’s predictions and contribute to the field of Explainable Artificial Intelligence.

    If you found this article on using XAI methods to explain a machine learning model informative, it’s time to take the next step with HyperSense. As a leader in the AI and machine learning space, HyperSense AI provides a comprehensive platform for building, deploying, and explaining models. With HyperSense AI, you can leverage cutting-edge XAI techniques to gain a deeper understanding of your models and make data-driven decisions with confidence. So why wait?

    Start unlocking the full potential of your data.

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    References

    1. Molnar, C. (2022). Interpretable Machine Learning: A Guide for Making Black Box Models Explainable (2nd). christophm.github.io/interpretable-ml-book/
    2. L, Breiman, “Random Forests”, Machine Learning, 45(1), 5-32, 2001.
    3. Goldstein, A. Kapelner, J. Bleich, and E. Pitkin, “Peeking Inside the Black Box: Visualizing Statistical Learning with Plots of Individual Conditional Expectation” Journal of Computational and Graphical Statistics, 24(1): 44-65, Springer, 2015.
    4. Ramavirind K. Mothilal, Amit Sharma, and Chenhao Tan (2020). Explaining machine learning classifiers through diverse counterfactual explanations. Proceedings of the 2020 Conference on Fairness, Accountability, and Transparency.
  • Overcoming Challenges in IoT and M2M Settlements in a B2B2X Scenario

    Overcoming Challenges in IoT and M2M Settlements in a B2B2X Scenario

    The growth of IoT and M2M technology has brought about significant opportunities for businesses across industries. However, the complexity of managing the data and transactions involved in this technology has made it challenging for companies to settle accounts in a B2B2X scenario. In this blog post, we will discuss the key challenges that telecom companies encounter in settling transactions related to Internet of Things (IoT) and Machine to Machine (M2M) technology. We’ll also explore strategies to overcome these obstacles and help companies achieve their goals.

    Challenges in IoT and M2M Settlements

    One of the primary challenges that telecom companies face in IoT and M2M settlements is the complexity of the settlement process. Unlike traditional telecom services, which involve a single service provider and customer, IoT and M2M services involve multiple providers and customers. This makes it difficult to manage the transactions and data involved in settling accounts.

    However, settling B2B2X transactions can be challenging due to several factors. One of the significant obstacles is the intricate nature of the ecosystem, which entails the involvement of multiple parties with distinct roles and responsibilities in the settlement process. Unfortunately, this complexity can lead to a lack of transparency that makes it challenging to track and reconcile transactions.

    On top of that, the lack of standardization in the industry poses another challenge that companies must overcome. Different operators and vendors may have their own unique settlement systems, which can make it difficult to integrate and standardize settlement processes across the industry. These challenges can cause setbacks and prolong the settlement process, leading to inefficiencies and delays.

    Moreover, to ensure the integrity of transactions and safeguard against fraud, robust security measures are crucial. With more parties involved in the settlement process, the risk of fraudulent activities and security breaches heightens. These risks can ultimately result in financial losses and tarnish the reputation of the parties involved.

    Overcoming Challenges in IoT and M2M Settlements

    To tackle these hurdles, telecom operators and vendors are exploring advanced settlement solutions. These cutting-edge solutions rely on groundbreaking technologies like artificial intelligence (AI) and machine learning (ML) to enhance the accuracy and efficiency of the settlement procedures.

    AI and ML can help automate settlement processes, reducing the need for manual intervention and improving the speed and accuracy of settlement. Furthermore, these technologies can aid in the detection and flagging of questionable transactions. By doing so, they can assist in mitigating the risks of fraudulent activities and security breaches.

    In addition to AI/ML, industry-wide standardization efforts are underway to improve the efficiency and transparency of settlement processes. The GSMA, for example, has launched a B2B IoT Roaming Guidelines initiative to help standardize settlement processes for IoT roaming.

    Overall, settling B2B2X transactions in the telecom industry can be complex and challenging. However, with the help of advanced settlement solutions and industry-wide standardization efforts, telecom operators and vendors can improve the efficiency and accuracy of settlement processes while reducing the risk of fraud and security breaches.

    If you’re keen to know more about B2B2X settlement in the telecom industry, we’ve got you covered! You can catch our recent webinar on the topic and gain valuable insights. During the webinar, we dive deep into the challenges and solutions surrounding B2B2X settlement, as well as real-world examples and case studies. To access the webinar recording, simply click here.

    In conclusion, settling B2B2X transactions in the telecom industry requires careful consideration of the challenges involved, including the complexity of the ecosystem, the lack of standardization, and the need for robust security measures. By leveraging advanced settlement solutions and making standardization efforts across the industry, telecom operators and vendors can enhance the efficiency and accuracy of settlement processes. This can lead to better business outcomes for everyone involved, helping to streamline operations and reduce errors.

    Explore real-world use cases and get a comprehensive understanding of IoT/M2M solutions!

    Watch the webinar recording!