Advances in artificial intelligence (AI) and machine learning (ML) have led to increased adoption in the financial services sector. A prominent use for this technology is to assist in key compliance and risk functions, including the detection of fraud, money laundering, and other financial crimes and illicit finance, as well as trade manipulation — collectively referred to as “Risk AI/ML.” As the use of these models grows, so do questions about managing risks associated with the models. 

In particular, regulators, financial institutions, and technology service providers have been looking into whether existing Model Risk Management (MRM) guidance — which has traditionally been the regulatory regime applicable to managing model risk in the financial services industry — continues to be relevant for AI/ML models. And, if so, how should the guidance be interpreted and applied to this new technology?

As the financial sector increasingly adopts artificial intelligence and machine learning techniques, it is critical for regulators, financial companies and technology providers to work together to assure that there are clear rules of the road,” says Jo Ann Barefoot, AIR CEO and co-founder. “Updated guidelines on the responsible use of these models can help prevent novel technologies from causing harm, and can also open up better ways to combat risk in areas like money laundering, illicit finance, and fraud.

Our new white paper, written in partnership with the Alliance for Innovative Regulation (AIR), seeks to address that question, with the aim of fostering thought and dialogue among agencies, the financial services industry, risk model vendors, and entities interested in the performance, outputs, and compliance of models used to identify, mitigate, and combat risks in financial services. This white paper does not address issues that may arise with other applications of AI/ML in the financial services industry, such as consumer credit underwriting or models using generative AI or Large Language Models, which are better addressed iteratively. 

The paper argues that MRM guidance, given its broad, principles-based approach, continues to provide an appropriate framework for assessing financial institutions’ management of model risk, even for Risk AI/ML models. Working within an existing framework takes advantage of the knowledge and operational capabilities of institutions that already understand this framework, instead of having to create an entirely new approach, which generally takes longer to implement and make effective. Nonetheless, the paper recognizes that AI/ML models have unique traits and characteristics compared to conventional models, including their potential dynamism and pattern recognition capabilities. These distinctions must be in focus when considering how MRM guidance should be applied to Risk AI/ML models. 

Taking into account those unique aspects of AI/ML models, the paper offers specific observations and recommendations regarding the application of MRM guidance to Risk AI/ML models, including:

• Risk assessment: In assessing risk, it is important to recognize that AI/ML models are not inherently more risky than conventional models. A risk-tiering assessment must consider the targeted business application or process for which a model is used, as well as the model’s complexity and materiality. To assist in these assessments, regulators could clarify that the use of AI/ML alone does not place a model into a high-risk tier and publish further guidance to help set expectations regarding the materiality/risk ratings of AI/ML models as applied to common use cases.
• Safety and soundness: Due to the dynamic nature of Risk AI/ML models, reliance on extensive and ongoing testing focused on outcomes throughout the development and implementation stages of such models should be primary in satisfying regulatory expectations of soundness. To that end, the development of technical metrics and related testing benchmarks should be encouraged. Model “explainability,” while useful for purposes of understanding the specific outputs of AI/ML models, may be less effective or insufficient for establishing whether the model as a whole is sound and fit for purpose.
• Model documentation: The touchstone for the sufficiency of documentation should be what is needed for the bank to use and validate the model, and understand its design, theory, and logic. Disclosure of proprietary details, such as model code, is unnecessary and unhelpful in verifying the sufficiency of a model and would deter model builders from sharing best-in-class technology with financial institutions.
• Industry standards and best practices: Regulators should support the development of global standards and their use across the financial services and regulatory landscape by explicitly recognizing such standards as presumptive evidence of compliance with the MRM guidance and sound AI/ML risk mitigation practices. In addition, regulators should foster industry collaboration and training based on such standards.

Governance controls: Regulators should use guidance to advance the use of governance controls, including incremental rollouts and circuit breakers, as essential tools in mitigating risks associated with Risk AI/ML models.

In an era where AI technology has the potential to revolutionize financial services, we acknowledge the foresight of our regulators in setting a solid foundation and blueprint for navigating the labyrinth of potential risks through the MRM guidance,” says Philip Moyer, Global VP, AI and Business Solutions at Google Cloud. “We believe there is room for greater coherence and precision, enhanced risk-mitigation approaches, and refined best practices surrounding AI and ML risk models. Whether it’s in capacity building or information sharing, our call to action is for greater collaboration between regulators and financial institutions. We’re confident that our collective efforts today will help shape a more robust and resilient future for financial services.

We invite a discussion of additional considerations, including the importance of examiner and industry training and collaboration, as well as openness by regulators to continue to refine the MRM guidance as AI/ML technologies develop and standards emerge. 

Implementing our recommendations would advance several goals. It would help regulators, financial institutions, and technology providers work together to better serve their shared purpose of protecting the safety and soundness of the financial system. At the same time, implementing the recommendations and continuing work in this space would promote the adoption of cutting-edge technologies in the industry, including those that combat such scourges as money laundering, illicit finance, and fraud.

You can read the full white paper here.

At Google I/O this year, we introduced Vertex AI to bring together all our ML offerings into a single environment that lets you build and manage the lifecycle of ML projects. In a previous post, we gave you an overview of Vertex AI, sharing how it supports your entire ML workflow—from data management all the way to predictions. Today, we’ll talk a little about how to manage ML datasets with Vertex AI.

Many enterprises want to use data to make meaningful predictions that can bolster their business or help them venture into new markets. This often requires using custom machine learning models—something not every business knows how to create or use. This is where Vertex AI can help. Vertex AI provides tools for every step of the machine learning workflow—from managing data sets to different ways of training the model, evaluating, deploying, and making predictions. It also supports varying levels of ML expertise, so you don’t need to be an ML expert to use Vertex AI.https://www.youtube.com/embed/CN2X6oIlnmI?enablejsapi=1&

Types of data you can use in Vertex AI

Datasets are the first step of the machine learning lifecycle—to get started you need data, and lots of it. Vertex AI currently supports managed datasets for four data types—image, tabular, text, and videos. 

Image

Image datasets let you do:

• Image classification—Identifying items within an image.
• Object detection—Identifying the location of an item in an image
• Image segmentation—Assigning labels to pixel level regions in an image.

To ensure your model performs well in production, use training images similar to what your users will send. For example, if users are likely to send low quality images, be sure to have blurry and low resolution images in your data set. Don’t forget to include different angles, backgrounds, and resolutions. We recommend you include at least 1,000 images per label (item you want to identify), but you can always get started with 10 per label. The more examples you provide, the better your model will be.

Tabular

Tabular datasets enable you to do:

• Regression—Predicting a numerical value.
• Classification—Predicting a category associated with a particular example.
• Forecasting—Predicting the likelihood of sudden events or demands.

Tabular data sets support hundreds of columns and millions of rows. 

Text

With text datasets, you can do:

• Classification—Assigning one or more labels to an entire document.
• Entity extraction—Identifying custom text entities within a document, like “too expensive” or “great value”.
• Sentiment analysis—Identifying the overall sentiment expressed in a block of text, for example, if a customer was happy or upset or frustrated.

Video

Video datasets enable:

• Classification—Labeling entire videos, shots, or frames.
• Action recognition—Identifying clips video clips where specific actions occur.
• Object tracking—Tracking specific objects in a video.

Creating and managing datasets in Vertex AI

Now that we’ve covered the different types of data you can use, let’s shift to creating and managing those datasets. In the Cloud Console, go to Vertex AI dashboard page and click Datasets, then click Create Project.

Say you want to classify items within a set of photos. Create an image dataset and select image classification. You can import files directly from your computer, which will be stored in Cloud Storage. Then, you’ll need to add the corresponding labels (items you want to identify) for your images. If you already have labels, you can use the Import File option to import a CSV with your image URLs and their labels. If your data is not labeled and you would like human help to label it, you can use the Vertex AI data labeling service. Once the files are uploaded, you can create labels and assign them to the images. You can also analyze the images in the data set, the number of images per label, and a few other properties. 

Depending on the type of data you use, your options might vary slightly. For example, if you want to use tabular data, you could upload a CSV file from your computer, use one from Cloud Storage, or select a table from BigQuery directly. Once you select the table, the data is available for analysis.

More to come

This concludes our overview of creating and managing datasets in Vertex AI. In a future installment, we’ll go over the next phase of the machine learning workflow: building and training ML models. 

If you enjoyed this post, keep an eye out for more AI Simplified episodes on YouTube. In the meantime, here’s where you can learn more about Vertex AI.

The ecommerce playing field has been hard to navigate for most retailers, and Cart.com is on a mission to change that. Traditionally, retailers needing to run their online store, order fulfillment, customer service, marketing, and other essential activities have had to cobble together systems to get the capabilities they need – much less having access to analytics across these functions. The result is costly, siloed ecommerce operations that are difficult to manage and scale.

It’s clearly not a formula for success, yet that’s the reality facing most retailers. Cart.com, in contrast, has set out to democratize ecommerce by giving brands of all sizes the full capabilities they need to take on the world’s largest online retailers. Our end-to-end environment empowers retailers to keep more of their revenue, set up proven strategies for managing all aspects of their business, and act on valuable insights from customer data every step of the way.

Together with our talented team, we’re building a unified ecommerce platform that already provides value to many leading or up and coming brands including Whataburger, GUESS, Dr. Scholl’s, Rowing Blazers, and Howler Bros. 

We’re excited about the opportunity ahead as we reimagine traditional approaches to online sales, fulfillment, marketing, accessing growth capital, providing a unified view of all ecommerce and marketing analytics, and other activities. Expectations for Cart.com are high, and we are building a company that can scale to $100B in revenue and beyond. Supported by the Startup Program by Google Cloud and Google Cloud solutions, we’re establishing a technology platform to transform all aspects of ecommerce for brands worldwide. 

Partner in disruption

At Cart.com, we’re currently targeting an underserved market. Our ideal customer is beyond demonstrating product-market-fit and is now at an inflection point seeking a growth opportunity. Typically, those companies are generating between $1M and $100M in annual revenue. We’ve seen an enthusiastic response from brands and retailers as well as investors, with backing from investors in just over a year totaling $143 million in three funding rounds.

Our strategy is to build an integrated ecommerce model that combines best-of-breed solutions, many of which we gain through acquisitions and then build upon to provide a streamlined and fully integrated experience for our brands. We’ve made seven acquisitions so far to round out our online store, order fulfillment, marketing services, customer service, and we have launched some integral partnerships including easy access to growth capital through our relationship with Clearco and product protection for customers on every purchase with Extend. Instead of acquiring a data company, we’re building our data platform on Google Cloud, across each operating function for a single-view for brands to harness actionable data. We see Google Cloud as the leader for data management, analytics, machine learning (ML) and artificial intelligence (AI).

Other reasons why we’re building our business on Google Cloud include scalability, excellence, security, reach, and data analytics that are far superior to other environments.

We also feel a cultural and mission alignment with Google Cloud and envision leaning into a long-term partnership of marketing, selling, and disrupting the disruptors together. Equally important to us are the investments Google Cloud is willing to make in early-stage companies like ours. The support through the Google Cloud for Startups program has been outstanding.

Built on Google Cloud

A wide range of Google Cloud solutions provide the foundation for our platform. For instance, Cloud Pub/Sub keeps our services communicating with one another. We rely on fully managed relational databases, like Cloud SQL and Cloud Spanner, to securely handle the huge volume of brand and shopper data generated every day.

Cloud Run allowed us to develop inside of containers before our Kubernetes infrastructure was ready to go. Now, we are taking advantage of all the capabilities in Google Kubernetes Engine. BigQuery integrates with all Google Cloud solutions and offers true data streaming natively out of the box, along with Dataflow for advanced analytics. We also use Container Registry to store and manage our Docker container images. Right now, we’re testing Cloud Composer to evaluate using it for data workflow orchestration instead of Apache Airflow.

The openness of the Google Cloud environment is further enabled by Anthos, which we may deploy soon to perform data integrations quickly as we acquire more companies over the next year. For example, if we acquire a company using Azure, we can easily align it with our Google Cloud ecosystem.

Enabling ecommerce 2.0

Recently, our team has been experimenting with Google Cloud Vertex AI and the fully managed services of AI deployment and ML operations. The capabilities would save us substantial time in the management of the ML lifecycle which allows us to focus more on developing proprietary AI that will transform commerce at scale.

Because Google Cloud is so far ahead in data science, our teams benefit from deep Google Cloud expertise as we look to provide brands with unmatched insights into customers to improve services and revenue. We’re also planning to test Recommendations AI among other tools to deploy customer product recommendations and personalization as turnkey productized offerings. Moving forward, we will likely use Bigtable to aid in serving machine learning to hundreds of thousands of brands due to its low latency and scalability.

Fanatical about brand success

We know that our work with Google Cloud for Startups and use of Google Cloud solutions for best-in-class data management, analytics, ML, and AI will enable us to offer even more transformative services to brands.

We also see the opportunity to use our platform and customer insights to break down barriers between brands, enabling retailers to share information and work better together when it’s in their best interests. What we’re building today on Google Cloud is fundamentally changing what’s possible for retailers of any size everywhere. 

As a startup, when recruiting talent or working with prospective customers, it helps to share our success with Google Cloud. We view them as an extension of the Cart.com team. It also validates our business as we continue building a more integrated, holistic approach to commerce that opens new opportunities and drives growth for brands worldwide.

For more details about Cart.com’s vision for unified ecommerce, check out our video.

If you want to learn more about how Google Cloud can help your startup, visit our page here to get more information about our program, and sign up for our communications to get a look at our community activities, digital events, special offers, and more.

In our conversations with technology leaders about data-driven transformation using Google Data Cloud –  industry’s leading unified data and AI solution – , one important topic is incorporating continuous intelligence to move from answering questions such as “What has happened? to questions like “What is happening?” and “What might happen?”. The core to this evolution is the need for an underlying data processing that not only provides powerful real-time capabilities for events happening close to origination, but also brings together existing data sources under one unified data platform to enable organizations to draw insights and take actions holistically. Dataflow, Google’s cloud-native data processing and streaming analytics platform, is a key component of any modern data and AI architecture and data transformation journey, along with BigQuery, Google’s internet-scale warehouse with built-in streaming, BI engine and ML; Pub/Sub, a global no-ops event delivery service; and Looker, a modern BI and embedded analytics platform. One of the key evaluation factors is potential economic value of Dataflow to their organization, particularly in the context of engaging other stakeholders is key for many of the leaders that we engage with. So we commissioned Forrester Consulting to conduct a comprehensive study on the impact that Dataflow had on their organization by interviewing actual customers . 

Today we’re excited to share our commissioned study conducted by Forrester Consulting, the Total Economic Impact™ of Google Cloud Dataflow, which allows data leaders to understand and quantify the benefits of Dataflow, and use cases it enables. Forrester conducted interviews with Dataflow customers to evaluate the benefits, costs, and risks of investing in Dataflow across an organization. Based on their interviews, Forrester identified major financial benefits across four different areas: business growth, infrastructure cost savings, data engineer productivity, and administration efficiency. In fact, Forrester found that customers adopting Dataflow can achieve a 55% boost in developer productivity and a 50% reduction in infrastructure costs. In fact, Forrester projects that customers adopting Dataflow can achieve a range of up to 171% Return on Investment (ROI) and a less than six months payback period. Customers can now use figures in the report to compute their own Return on Investment (ROI) and payback period.

“Dataflow is integral to accelerating time-to-market, decreasing time-to-production, reducing time to figure out how to use data for use cases, focusing time on value-add tasks, streamlining ingestion, and reducing total cost of ownership.” – Lead technical architect, CPG

Let’s take a deeper look at the ways that Forrester found that Dataflow can help you achieve your goals and unlock your business potential. 

Benefit #1: Increase data engineer productivity by 55%

Developers can choose among a variety of programming languages to define and execute data workflows. Dataflow also seamlessly integrates with other Google Cloud Platform and open source technologies to maximize value and applicability to a wide variety of use cases. Dataflow streamlined workflows with code reusability,dynamic templates, and the simplicity of a managed service. Engineers trusted pipelines to run correctly and adhere to governance. Data engineers avoided laborious issue-monitoring and remediation tasks that were common in the legacy environments such as poor performance, lack of availability, and failed jobs. Teams valued the language flexibility and open source base.

“Dataflow provided us with ETL replacement that opened limitless potential use cases and enabled us to do smarter data enhancement while data remains in motion.” — Director of data projects, financial services

Benefit #2: Reduce infrastructure costs by up-to 50% for batch and streaming workloads 

Dataflow’s serverless autoscaling and discrete control of job needs, scheduling, and regions eliminated overhead and optimized technology spending. Consolidating global data processing solutions to Dataflow further eliminated excess costs while ensuring performance, resilience, and governance across environments. Dataflow’s unified streaming and batch data platform gives organizations the flexibility to define either workload in the same programming model, run it on the same infrastructure, and manage it from a single operational management tool. 

“Our costs with our cloud data platform using Dataflow are just a fraction of the costs we faced before. Now we only pay for cloud infrastructure consumption because the open source base helps us avoid licensing costs. We spend about $120,000 per year with Dataflow, but we’d be spending millions with our old technologies.” – Lead technical architect, CPG

Benefit #3: Increase top-line revenue by improving customer experience and retention with payback time of < 6 months

Streaming analytics is an essential capability in today’s digital world to gain real-time actionable insights. Likewise, organizations must also have flexible, high- performance batch environments to analyze historical data for building machine learning models, business intelligence, and advanced analytics. Dataflow enabled real-time streaming use cases, improved data enrichment, encouraged data exploration,improved performance and resiliency, reduced errors, increased trust, and eliminated barriers to scale. As a result, organizations provided customers with more accurate, relevant, and in-the-moment data-backed services and insights — boosting customer experience, creating new revenue streams, and improving acquisition, retention, and enrichment.

“It’s already been proven that we are getting more business [with Dataflow] because we can turn around results faster for customers.” – VP of technology, financial services technology

“When we provide data to our customers and partners with Dataflow, we are much more confident in those numbers and can provide accurate data within a minute. Our customers and partners have taken note and commented on this. It’s reduced complaints and prevented churn.” – Senior software engineer, media

Other benefits 

Eliminated administrative overhead and toil

As a cloud-native managed service, all administration tasks such as provisioning, scaling, and updates are automatically handled by Google Cloud. Teams no longer need to manage servers and related software for legacy data processing solutions. Admins also streamlined processes for setting up data sources, adding pipelines, and enforcing governance.

Saved business operations costs for support teams and data end users

Dataflow improved the speed, quality, reliability, and ease of access to data for insights for general business users, saving time and empowering users to drive better data-backed outcomes. It also reduced support inquiry volume while automating manual job creation.

What’s next?

Download the Forrester Total Economic Impact study today to dive deep into the economic impact Dataflow can deliver your organization. We would love to partner with you to explore the potential Dataflow can unlock in your teams. Please reach out to our sales team to start a conversation about your data transformation with Google Cloud.