If you go and ask an LLM this is my data set
which features I should derive from?
You'll have I I dare say 80% of the value that
would be created by a team of professionals.
I'm not sure you you even need data, training data I mean.
I think that there's vendor fatigue.
Everyone has pressure or desire or motivation to build.
Whether to buy, I think that the real promise or square depends
on which side of the fence you're on is the new
Welcome to another episode of the Saturday Fraud Strategist.
With me today, Netanel Kabala.
Netanel, we've been uh we we've known each other for
17 years, I believe. Yeah.
Yeah. Okay, you said it. Yeah, that's true. That's true.
And you know we've known each other for a long time.
Uh funnily enough I I'll let you introduce yourself and tell you tell
a bit about uh your own journey in the fraud prevention uh space.
Uh but I'll say you know from my side uh that
our journeys are very very similar.
Uh maybe yours is a bit more successful.
Uh but yeah I'll I'll let you introduce yourself and
tell tell our audience a bit more about yourself.
I'm uh I started uh my fintech journey uh in
PayPal uh 17 years ago where I met Chen.
Um I started as a fraud uh analyst uh as part of uh PayPal's
Tel Aviv fraud science fraud sciences acquisition.
Joined briefly after the acquisition.
Uh I spend most of my time on seller side risk uh creating
uh different strategies models for uh PayPal's sellers.
Um and after five years where I became also a manager and
a group manager, I left PayPal to pursue the uh my uh founder
dreams and uh co-founded a company called Simplex.
Uh Simplex was basically the first crypto
on-ramp provider uh globally.
Um, we allowed different businesses in the crypto space, uh, most
notably exchanges and wallets to provide their customers with,
uh, uh, the option to purchase crypto via uh, uh, payment cards
and later on via other payment methods all with a full uh,
chargeback guarantee and the full end to end solution.
So I was in charge of everything related to
risk, compliance, data science and so on.
Uh um the company was acquired by Nuvei in 2021.
And I then spent uh three and a half years in charge
of Nuvei's AI and analytics department.
Um and after a small break and some uh consultancy I
recently uh co-founded a new company called Duly.
Duly is uh basically trying to help uh different businesses uh most
notably uh payment providers and uh FinTech to own their
decisioning stack uh and to build uh the capabilities that they
need to grow and and be as successful as top tier companies in that space.
Uh as I said, very similar to my own, a tiny bit more successful.
You know the reason why I wanted to bring you on the show and the
topic that uh we wanted to discuss today, also to an extent ties
uh to to what you guys are thinking of doing uh with Duly now,
but uh there's an arms race right in the vendor space.
And there was always an arms race in the vendor space.
It's it's it's forever the dynamic of the field.
Evidently like very obviously in the last year
uh it was all about AI in the last year.
And so vendors are all trying to develop
these new capabilities around AI.
And this is interesting because this is what I'm seeing uh
on the practitioner side on like in the teams themselves.
Uh and with uh we had uh Lilitha Rao uh from Imprint
uh just a few weeks ago here on the pod.
And and you know she described what they've built in
house which was you know very very impressive.
Uh a lot of the clients that you know I I meet and talked to today they
are doing much more building than they've been doing in the past.
And so I'm thinking to myself while you know vendors
are kind of like trying to reach for the frontier
this moving frontier uh ever moving frontier.
Um I'm thinking is the ground shifting beneath vendors fit here?
Um would we actually need vendors in one or two years?
Uh would they have their own uh place?
And you know of course the reason why I'm asking all of that is because
building software in general has become very cheap, very accessible.
Uh much smaller teams with much less budget can now um
you know like go after much more ambitious projects.
And fraud prevention was always an and still is an ambitious project.
I really wanted to you know bring you uh to the pod and
discuss you know where where is the industry going?
And are we going to see this shift?
So I'll start by asking like what's your view on
this change, and and and how do you see it?
The change is significant I I would say.
During the uh new company's ideation process I
talked to uh many people from many companies.
And the common thread was that everyone one has
pressure or desire or motivation to build.
Whether to uh than to buy.
It started as an external pressure I believe way before
AI was mature enough to actually perform these tasks.
But now the models have uh improved so much that
some of these things are actually useful.
Um so I I think that um there's vendor fatigue.
That's one thing uh that happened you know um.
And together with these AI capabilities people
are starting to ask can I build it myself?
Can I build part of it myself?
Uh and I think everyone is struggling with this.
Some of the most more successful attempted that
I've seen are uh mostly isolated I would say.
Usually a very strong team member did something
uh that only he or she could use.
Maybe some other power power users.
But it mostly improves or reduces the
handling time uh of different tasks.
Rather than uh replace a complete system.
Um so I think that's where the the market is is at right now.
Um you know that in in the past vendors were
uh offering the the complete package.
To this day many many of the vendors in the
space are offering an end to end solution.
Um which was mandatory uh until uh recently.
Uh give me a decision, give me a guarantee, give
me a a score, give me something that I could offload
the work to and and make a decision upon.
Um, and today what I'm hearing from companies is no,
we we we didn't have the expertise nor the bandwidth
to consume anything other than that in the past. But now we can.
If you give us something more granular, we can handle it.
Uh, and we can uh uh actually help it will
help us customize what we have in house.
Yeah, it's uh it's I I I see it as well where
there's a I don't want to say confusion.
Because it's not the right word, but I think the market
is still adjusting to understand who is supplying the
data and who's supplying the decisioning platform.
Um and I don't think, I I I think it used
to be relatively straightforward.
Where you know like uh uh businesses would supply their
own data, vendors would enrich it with their own kind of
like network data their their specialized features.
And provide the entire kind of like you know
like analytical uh decision layer.
Whether this is ML, whether this is a rule engine combination.
Um and today things are much more fluid and I would like I think
as you also said uh I also see the breakdown not between
like data and platform but sometimes between use cases.
Some use cases you know are maybe easier
to build, some use cases are less easy.
Um and so I see that there is like I would say a lack of uh real, I
would say doctrine or guidelines behind like for practitioners.
Uh living vendors aside, um as to how to approach it.
And how to decide whether to build or buy.
Uh and I think this is like in our conversation I'm guessing at the
end of it uh I'd like to for us to kind of like maybe suggest some
of these concepts for how to to manage these decisions now and
try to understand like what was the role that vendors played.
Uh from a practitioner's perspective in their platform,
and how do you think that has evolved?
I think that in the past uh vendors were expected
to provide a wholesome solution.
Uh an end to end solution that is uh I I would say a kind of a
replacement to old school uh uh consultancy or contractual work.
Um just you know provide me with a decision or provide
me with a score and I take it from there.
Depends on the companies or the the the customer's maturity
level and uh what they already have uh in place.
Today when I speak to uh potential customers they're uh
looking more at network effects and network data.
That's something that has become very important like I'm
using this vendor because I I I don't have the I can zoom
out and see where this customer has been before.
Uh they came to to me, uh for things like device intelligence
for very uh specific use cases that uh are now more I would
more interesting or more important to to customers.
Especially the you know the midsized and and large customers.
Uh and I think that still similar to the smaller ones,
like small customers still use vendors in very much the
same way it has happened over the last few years.
They still want this assurance, they still want the expertise,
they still want the the the the capabilities that they offer.
But the the bigger they are, the harder they look at which
specific uh end points could actually bring me value.
I agree with everything that you said.
Um but you you kind of like relate uh uh mainly to the backend
capabilities, the technological or analytical capabilities that vendors offer.
But uh some of what vendors give you as a as a as
a team as a practitioner team is uh is just UI.
And if you look at vendors and how like the more legacy
one started, um you see a pure SaaS UI plays, right?
Uh a cockpit to allow you to do manual review, a rule engine that
allows you to uh codify your heuristics uh in a like not so uh
technical environment like an SQL or or even like hardcoded uh uh rule engine.
Um how do you see these more UI elements and
how practitioner teams look at them today?
Um well let's separate between viewers
and uh actionable uh products. Okay.
So I think that viewers uh uh what to refer to as a
cockpit or you know manual review tool, uh more and
more companies are starting to build their own.
Uh and not because it necessarily looks better or performs
better, but it because it's more customizable.
Uh many customers have expressed frustration from the fact that
they want to change something, and then they have to ask, and wait
for it to get prioritized on the vendor's end, and so on.
So um and it's much easier to to codify using uh bite coding
or you know the coding is it's kind of obsolete on its own.
I think that it's actual coding these days.
Um So I I so so this is something that companies have
have already moved to sometimes it's a mess.
Like you know different team members have different
viewers, each one changing tweaking their own.
It's not necessarily a good thing it makes it harder to onboard
new members, uh to share results, to work together.
But um it is the direction that everyone one is going.
To things like rule engines for example are much more uh difficult.
I would say sometimes they're stuck deep within legacy systems.
Uh and I do think that companies need to untangle
it and eventually build their own.
Like at Simplex we had our own Python based rule
engine from the get-go uh 12 years ago, so.
But but it proved to be pivotal because then you can
be much more flexible and build different strategies
and build auto switches that uh can uh switch between
different strategies on certain uh conditions.
And uh uh you know the sky the sky is the limit.
So uh, there I don't see uh the same movement yet.
I think it usually it it is perceived as part of the system,
for practitioners, unless the company you know as a as a
overall strategy decides to overhaul the the system.
And uh the the entire thing and then uh the engineering team will
will actually uh will lean towards a proprietary solution.
Yeah, I think it's an interesting point because
like I I I I like how you separate it.
Like viewers, Yeah, I mean basically you just pull
data from a data mart and you present it.
But a rule engine more than it is a UI like tool or UI uh uh product.
It's a you know it's it's a it's a backend engineering module that
needs to be real time, needs to be like high availability, needs to
like know how to access the data schema in a in an efficient way.
Uh needs testing and simulation capabilities.
Um and probably needs also to interface with a lot of other systems
as well, including the models the viewers themselves.
So yeah I I I I I get what you were saying and I also
I I like the the distinction that you made.
Uh that that definitely clarifies uh the RNRs.
Um I'm I'm I'm asking myself, like I don't
know how much uh how much you say it.
But when practitioners are thinking about
building, where do teams usually go?
Uh is it more to replace current capabilities that they are
you know receiving at the moment uh from their vendors,
or could receive from a vendor if they if they buy it?
Or is it more to cover some gaps that vendors just never gotten to?
Uh that or maybe because they couldn't.
Like is it new capabilities that they never had, um or
is it really to replace capabilities from vendors?
I could say unfortunately uh companies
are starting with the manual task.
Uh and how they can automate uh whatever specialists
or analysts have done in the past.
Uh so you might call it uh new capabilities because it it wasn't
possible to automate some of these uh things in the past.
Can you give an example just so so like what
do you mean by an analytical process?
I mean uh uh reviewing a payment um going and you
know logging into different data sources.
Or you know things that need pulling different
uh files, screenshots, whatever.
Um in order to make a decision or to
to document a decision or audit.
So that's something that has already gone agentic to some extent.
Um, I treat it as new capabilities because it hadn't added a new
layer of data, but it allowed us to automate this layer of data.
Uh other than that, I see many companies don't necessarily want
to replace vendors, whether they're afraid to do so or they
need these uh unique uh capabilities that we've discussed,
like network data, or you know data is is king today.
Uh but in terms of uh algorithms, maybe
I can build a better one for me.
Not necessarily a better one than the vendor's algorithm,
but maybe it suited it suits my business,
my way of thought, my uh risk appetite.
So uh most of the companies try to blend in right now.
Try to see okay maybe I have different segments
or pockets where I don't need this the vendor.
The classic example is returning users.
Like I already know something about this user.
I have to verify, it's not account take over, but maybe
I can do it, maybe I can do it in another way, maybe
with another vendor with different economics.
Uh but the blanket solution is already starting
to you know to unravel at this point.
I like this example and and the algorithms
um is definitely a juicy point.
Because this is like a very want to believe a very kind of like
core rudimentary capability that everybody can relate to.
When you buy a rule engine from a vendor, that's what you buy.
You you buy a rule engine, you don't buy the rules, you
don't buy the capability for producing your rules.
Now, you might, I don't know, some vendors might give you like managed
services or you might have in-house uh an in-house team that does
it or uh a consultant a consultant team that does that.
But the point is that the the product
that you buy, is the engine itself.
And researching rules, monitoring rules, fixing, tweaking,
deprecating rules, all of these are processes um that
a require expertise, b require access to data.
But I'm trying to understand whether teams would
that be the next thing that they go after?
Like being able to conduct these analytical processes,
inhouse, because no one is offering them.
Or would they really go after replacing the
the kind of like the software itself?
I think that most if not all practitioners today are being
assisted by AI to make these uh uh these decisions or
these processes, even if it's an offline process.
Like consulting with my favorite uh chat uh and
coming back with the the rule syntax or the decision
or the policy or the tweak or whatever.
Um so the market is kind of ready for it.
Um I think that there's a tension for for employees between
uh building these uh the systems that uh replace them rather
than being assisted by them and getting time back.
So I don't see a rush to completely replace
uh this decisioning system. That's the truth.
But but I would say that what what I do see happen is
uh what we see happen everywhere, which is AI slop.
Um and it already happens in fraud and risk as well.
Uh multiple rules, tons of them that
you couldn't produce in the past.
Tons of models which was unheard of in the past.
Like uh you see companies that you know that have a
new fraud problem, and suddenly 20 new models uh are
built overnight and and released to production.
Uh which creates latency problems, which most aren't aware of.
Like vendors take so much time uh trying to optimize this
and uh that's something that is usually not on the practitioners
or the data uh data scientists uh radar at all.
Yeah, I mean also monitoring drift across 20 models is a
different task than doing it for one to three models.
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This is really like where I'm where my head
is at in the last couple of weeks.
Uh both because we had um you know a lot of uh PR.
Or no I don't want to call it PR because it's like it it is research
right um around foundation models for financial risk.
And you know we've seen I mean of course at Sardine we
had uh we've published one Revolute published a very interesting
uh research uh Plaid had um released one.
Uh I'm sure that I'm forgetting a couple of others.
Uh but I I would say these are like the three kind
of like main cases that that come to my mind.
And one of the things that I'm like I'm thinking about is
that to me one of the main things that foundation models do,
and I think maybe how they can be a threat to vendors, is
the fact that they replace the feature layer right.
I mean the the advantage of vendors uh traditionally
was that they are specialists.
They they are experts in fraud prevention.
And that spec specialization doesn't necessarily
um manifest as better algorithms.
It manifests as better data and better data means
better features in how you calculate velocity.
You know the simplest example uh in how you do uh IP piercing,
in how you do device ID, but also like how do you
how do you um look at identity cohesiveness.
How do you look at you know boguseness, um or synthetic ID.
So there are a lot of like features like that are
very complex and that need a lot of research.
And so far they have been handcrafted by specialists
mostly on the vendor side mostly not only.
Now you have foundation models that build features for free.
Uh no one understands what they mean, but
they are there and they are free.
Um so is that like are we going to see foundation models replacing,
not vendors, but maybe the need or the let's say the the gap.
Uh maybe bridging the gap in terms of uh SME, or
kind of like fraud knowledge domain knowledge, that
sometimes practitioner uh teams don't have.
I remember that two years ago we discussed uh whether
LLMs could uh replace fraud models entirely.
Yes. And by the way I must say you you reminded me this conversation.
You, I must say that you said I don't know if the
scoring part but probably the features part.
And I said yeah I don't know what you mean by that.
But two years later now I know what you mean by that. Oh yeah,
I think that actually the features layer was replaced not by uh
transaction foundation models necessarily, but by standard LLMs.
Like if you go and ask an LLM this is my data set which features
I should derive from, you'll have I I dare say 80% of the value
that would be created by a team of professionals these days.
And uh I think that in a year or so, the some models would
be powerful enough to provide 95% of the value.
Um which makes it a question of economics at this point.
And how you actually you know get the data engineer these
features but that's that's easier, that's even cheaper.
Um I think that the value of foundation models in the space is
not necessarily that they saved the feature engineering, but
it's basically a highly advanced anomaly detection engine.
The ones the one that we always dreamed of.
It's uh we always tried, and I'm sure you tried it in
the past in your company as well, to to bring unsupervised
learning to the level of supervised learning.
Uh and uh now it's almost doable, if you have enough data.
Um uh whether this new transaction without any other context
or labels, makes sense within uh uh this time series.
Uh so I I would say that's the the real value.
Um I don't know where it will go.
I I I think that the real uh uh promise, or threat
depends on which side of the fence you're on,
is the new uh semideterministic models like
Yes. Yes. Yes. Yes. Yes. That was my next point. Yes. Okay. Go go go.
That's, I, when we had the discussion on whether LLMs could replace
fraud models, this is the was this was the missing piece.
Um a model that is actually um dedicated to a decision, uh that is
forced to make a decision at the end but uses an LLM to to make
judgment, uh will probably at some point will be uh the new XG
boost or the new uh gold standard for uh fraud models I would say.
That's uh imagine that you can, you know we grew
up on the fraud sciences story based approach.
Uh and then we kind of moved from it as a industry,
but maybe we'll go back to stories.
Well I I think I think we can spend like
three hours discussing this topic.
Uh because there there are so many aspects to it.
Um, I'll say first regarding foundation models,
I I I I I completely agree with what you say.
I'll just say that the anomaly detection part is re like as far as I've
seen so far, Um, and we've seen it again both in the Sardine research,
in Revolute research, and it in Plaid's research, it's an anomaly
detection within a known entity, an entity that I have history on.
Um and whether the new event, you know, makes sense is consistent
uh with how this entity usually acts and behaves.
I haven't seen it yet on, you know, like I I would
call it like horizontal horizontal data problems.
Um an acquirer, right, or a merchant that doesn't
necessarily have accounts, right?
So, we just see users coming in and and transacting.
And then anomaly detection would be much more not on how a single user
uh acts, but how you know like a cluster of users uh that might be
relatively small within the context of my volume, how they behave.
Uh but yeah I I I definitely agree with your with your
point that for the first use case, uh foundation models
are extremely powerful, extremely powerful.
As as as we go to the kind of like decision models right,
that's uh that's an interesting naming convention, um I think
what is interesting for me is not only the fact that they
are much more fit uh like fit for purpose here.
And and this is not only their accuracy,
this is also the latency, right?
And the cost, uh which to me were always kind
of like the the the real pain points, right?
Even with foundation models, foundation models
don't do the scoring themselves.
And a lot of what you want to do there needs to happen offline
because you don't necessarily you can't necessarily
run all of these anomaly detection in real time.
And the session models solve all of that.
But I think what came to my mind in the last week or so
is that actually the most powerful thing that decision
models give you, is that anyone can roll them out.
You don't need to have a data science team.
You don't need to have a data science infrastructure to run
like all of these simulations and all of this data.
I'm not sure you you even need data the training data. I mean,
You can open a a a shop on Shopify tomorrow.
And as a as as a as the seller, like as a single person
seller, you can deploy a pretty decent real time fraud
model uh that doesn't cost you almost anything.
It's it's it's pretty it's pretty insane.
So I'm like I'm thinking what, yes vendors would probably
be the like first ones to capitalize on this.
But I'm trying to think like a year or
two ahead, how would that change?
How practitioner teams, uh build internally
and what they buy externally.
In order for that to happen, it will need to
be assimulated by the large LLM providers.
And it already happens like OpenAI released something
very similar, a decision model of their own.
I assume that entropic will do the same.
And then when you write to ChatGPT solve my fraud
problem, it will probably create uh this new uh decision
model endpoint, and say here run this.
Uh or it's already baked into your app.
Um and I think that will happen s sooner rather than later.
And then it depends what you fill it with.
Uh and to my earlier point, uh vendors are um you know it
will crystallize the importance of external data points.
Um and large uh data pools and network data.
Um it will also uh require more feature stores of the sort.
Because um let's say that you want to include the history
of a you know a lengthy history of a merchant or a customer
within these models, uh that obviously the SLA will
be affected, or it will be just too many tokens.
Uh so the economics won't work.
So you need to pre-calculate uh like we're
doing for the past two decades.
Uh but in in a more efficient and um I would say LLM friendly way.
I uh yeah I I I tend to agree.
Maybe I I would say that uh you know maybe maybe I was
very, it sounded uh very uh kind of like um deterministic,
uh and and and convinced what I said about Jev.
It's indeed the experience that I've uh seen, um you know were
based on data that you know like enriched data right.
Um you don't necessarily need to train it right so you
don't need like the like millions of consortium rows.
Um but you like I think the feature, uh sorry the
features themselves, like basically being able to
extend uh the data that you have per event.
That is probably that that would become the the
main point here, the main performance driver.
But but I would al also say that um it's it's still not enough.
It might might be enough for this uh Shopify uh merchant.
But for more more complex uh multi-party um businesses,
uh decisioning is still a challenge.
Let's say you have a perfect decision for every merchant,
every transaction, every uh onboarding. Uh what do you do with it?
Uh it's the same of, you know, getting the ingredients to
a chef's meal and trying to cooking it on your own.
You won't get get the same uh results
even if you have AI assisting you.
What what what why do you think that's the case?
Like what what would the chef, in this example,
uh have uh that that you wouldn't necessarily?
Is it the interoperability between like the different
components of the of the platform? How like what is it?
The know how of what to do in case things go unexpectedly.
Um um that's the to to to chef's point.
What happens if it boils a minute before it's supposed to boil?
What if I uh to to to uh compare our uh industry uh what do I do
if the charge back rate is higher than expected this month?
What do I do if I have a fraud attack that
wasn't expected in the simulation?
Because I I it's the first to to the point of you know building
a fraud prevention system without any expertise.
This is the first time I've ever experienced it.
Um, how do I perform um stepups or challenges?
Um, how do I retrain? How do I monitor drift?
Uh, how do I ultimately make a decision
that makes sense for my business?
I think that's the next uh phase that everyone that tries
to uh build these uh decision models or computation models
depends of the size will have to go through.
So I I I tend to agree that I think there are two elements here, right?
One is is just the expertise itself, and that is probably something
that vendors would anyways not be able to uh to impart on you.
Uh but one of that is just you know generally
speaking like a high engineering bar. Uh and to make sure that, Yeah.
And and and I think what vendors have here that you as a practitioner
would never have, they they have a portfolio of clients.
They've seen a lot of things go wrong uh both mechanically,
like technically in the system, but also uh in terms of
you know like weird fraud patterns and and so on.
And so they probably already smoothed out a lot of wrinkles in
their system that it will take you like years of bumping into
them again again until you understand, um a what you need to
do and b that you also like you get the uh the resource.
Because usually these things are not like uh easy to fix.
It's usually like as I said it's like there's a high standard
engineering effort that is required and it's not something that
you can like easily easily conduct on your own many times.
Um you know to be the devil's advocate, at some point
LLM will absorb some of it and we'll figure it out.
I think that we're, we don't want to sound
like uh designers from two years ago.
That said no that LLM can do my my job.
So I I I do think I I do want to be
you know uh transparent about it.
But yeah, I think that eventually uh you understand your business.
Even if it's you know your Claude agent that understands your
business at some point and have the contact has the context.
But um but it means that you can't uh
take a one-size-fits-all solution.
You need to figure out uh your path and how you do things.
And u whether it will work in terms
of latency or not that we'll see.
So we mentioned uh different use cases, different components,
different uh views on each component. Are we looking at the UI?
Are we looking at the analytical components?
Are we looking at the uh the software itself and the
architecture like from a technical perspective?
Let's try and kind of like now package it to a more
coherent um I don't want to say guidelines, because
I I don't think that we can be pres prescriptive.
Uh I mean we want to be prescriptive but I
think I think it's too early to do that.
But how do you suggest teams today, uh that
are thinking about building more.
I think everybody is building already,
they're thinking about building more.
What would be In your mind, the first few areas?
You would say to them, look, you you want to probably look
uh around these areas, and maybe where not to look at.
One thing that we constantly see is uh um
everything related to segmentation.
Um I think uh many many of the many customers
miss the importance of segmentation.
And the first thing I would advise them is try to
think of the different segments that behave completely
uh differently within your uh system.
The obvious example is new versus returning user,
or any tenure based uh uh segmentation.
But there are so many of them you know. Geo products, so on.
Payment methods, business versus uh consumer accounts.
Yeah there there are so many yeah
Try to find pockets that are either underperforming, or are
uh the economics don't work as well as in other segments.
And try to think of, okay what can I do here.
Uh um maybe I can not necessarily build it in house, but maybe
change uh something maybe uh experiment with other vendors, with
AI, with both, with uh custom solutions, with hiring someone, whatever.
But that's something that many are are missing.
I would also uh suggest to look at uh um how pivotal
is risk and fraud for your business. Let's say you're a merchant.
And for an e-commerce merchant, it could determine the fate of the
business, but it's it's still a sub function, I would say.
Uh the growth usually comes from other places.
And for all these table stakes you have to take care
of it and increase the approval rate, and so on.
That opposed to other businesses for example fintechs uh
that fraud and risk are are very uh core uh functions.
Um and if you're offloading a core function Ask
yourself, is this the right thing to do?
Maybe it is, maybe it's not, maybe
it's right for some of the cases.
And the best way to do it practically is to look at the road map
from the last 6 months or 12 months, and ask yourself how many
things were either delayed or deprioritized because it would
be too difficult to perform given our current risk setup.
You have to have this flexibility as
a as a business in order to grow.
And and so for for for such cases for such businesses,
you would suggest to build more or to buy more?
Today, to build more. Definitely.
Uh to build the foundations uh whatever it is you
you offloaded uh to a vendor in the past.
Try to think of the atomic units of the decision
that needs to be made, and whether you can produce
these atomic units yourselves or buy them.
Uh and build everything around it.
And have full flexibility, more complexity definitely,
u but assuming that we see the trajectory of AI uh for
coding and where it's headed, assuming you can handle
it with roughly the same headcount in the future.
Uh increase the complexity because it will provide you
more flexibility, more growth opportunities uh uh and
you can cater the business needs uh much better.
What do you what do you, from a team size or not team size but from
a team perspective, whether it's the size whether it is the domain
expertise whether it is the talent the skill set that you have.
What do you think are the prerequisites for a team to
actually start building in this you know this space?
Which is very you know it is very demanding uh both
technically and from a from uh theme perspective.
Um what are the prerequisites?
What like how should a leader look at their team and how should
they know if they are ready to start building themselves?
Most of the risk leaders that I know have uh
very high trust in their uh in their team.
Uh and I know it's it's sometimes a blind spot, but I would
actually advise to look elsewhere to look at the organization and
ask yourself, do does the organization have the the proper
capabilities and expertise to help me build what I want to be?
Uh uh what about the product engineering?
Uh will the uh sea level uh exact uh uh
support what I I want to achieve here?
Uh obviously it will cost more in the beginning,
until we reach uh economic benefit.
Uh does the the organization have the tolerance to do it?
Um second thing I would say, um access to risk talent.
Um even though AI allows us to do uh more with less, we would still
need these core members to to actually uh make it happen.
So, it's not only and assuming we're looking for years
ahead, it's not only who I have right now, but can
I get uh uh the right people continuously?
Uh can I fill up the ranks?
Um it depends on location, on the size of the company,
on the industry that you're operating in.
Um um usually for for companies that
don't work remote, location is key.
Uh that's something that I hear from from many
Yeah, I you said some uh some you got some very good points there.
Uh but since we are uh rounding up, and coming to the takeaways uh
section, I I I I I want to kind of like go go at it uh in order.
Uh I'll say first Netanel, super interesting conversation.
I think that you know a lot of it is very uh how
should I say, uh very exploratory in nature.
And you know I think that two years ago when AI started
to come out, I was much more or I'd say differently.
I was much less uh um imaginative uh in how I saw the future.
And I try today not to fall into the same into the same trap.
Um because things are changing, and it's very very hard to keep
up with the with the changes, and it's very very hard to you
know like think about how the future might be in two years uh
when we don't know how it would look like in two months.
Um but I think there are a few things that uh I really liked um in in
what you said that already kind of like present a couple of trends here.
Um, I'll start by saying that, you know, we've opened
the conversation with a question of, you know,
whether we will need vendors in the future.
And if you expected a yes or no answer, then, you know,
you probably didn't uh listen to my previous podcast
or ever uh read what I what I'm usually writing.
I think reality is a bit more complex than that.
Um, and so of course the the answer is no, not a yes or a no.
It's more about how the relationship between
uh vendors and businesses uh would change.
Uh I think it also you know going to one of your last points right
now is, um that the change and the relationship would probably also
look different, uh dependent on um in which industry you work.
But I would say I think one of the first points that you touched upon
is the shift between who's considered to be the data provider,
and who's considered to be the uh the main platform builder.
And while I am not sure that in two years time we
would not see any vendor platforms and we would see
only kind of like in-house built platforms.
I actually don't think that's the case.
I think that it would be a bit more balanced.
Uh but I think uh a lot of the uh kind of like core engineering
uh components that need like a lot of reliability, uh especially
the real-time ones, I think you know they the mostly
vendors would still end up servicing these.
But still the the uh the balance between who's a data provider
and who actually builds part of the platform it would change.
And it would be uh I I I think vendors would be seen more and more as
data providers, uh rather than um you know like capability enablers.
Um there would be core capabilities that
they would probably forever enable.
Uh but a lot of other capabilities would be um would
be relegated to to the to the to the business side.
Um also I I I think another point that you touched on,
and I think this will also be very interesting to see
how it would how it would uh develop, is you know when
we say data provider what data do we mean by that?
And I think there are two dimensions to that that that you mentioned.
One is you know the features themselves, and is it ever
going to be replaced by for example foundation models. Yes or no.
On one hand it's very cheap on the other hand how should
you use uh like foundation model uh features in rules.
Uh like a human cannot understand them.
Or how would you use these features in in manual review?
Um even an agent cannot really make sense of them, like an AI agent.
Um so I think this would be like this would be very
interesting to see how that would develop.
Uh on the flip side there's also the the breadth
of the data, uh like the consortium data.
Um But uh like h the all the patterns and all the intelligence that
you get from um outside of your own little box as a as a business.
And I think this is something that unless you're like incredibly
big, unless you're like top 10 in your in your uh vertical,
um you're likely to see much less data and patterns
um than you know most vendors out there.
Um, so I I really like how yeah, how how you how you
kind of like phrase the the data part there.
When it comes to what to build, Um, so yeah, of course, I mean,
if it's a core function, you want to invest more in that.
So you it's not only about, you know, building it.
It's also because building is like the easy part. It's the maintenance.
It's, you know, it's like servicing uh all of that.
Um, and that's, you know, something that hopefully,
uh, isn't something that your risk team is doing.
Um, but I think what I like the point that you made that I really
liked, because I absolutely agree with, is that where you want to
focus on in terms of building is not necessarily the your biggest
pain point or your biggest kind of like uh loss driver.
But it is really to look at your population as segments and understands
understand which ones are underserved by your vendor.
And in many cases, especially if you're a bigger business,
you probably have a very particular segment that is very
unique to you and how you run your specific business.
And that means that it will have a very particular behavior.
Uh both for the good users and the bad users.
And also a very particular data signature.
Uh and this is something that vendors will, you know
these are all like vendors would never solve.
And able to solve it on your own now is maybe a more important
thing than servicing you know like a more standard use case,
like stolen credit cards, that you know there are enough
vendors that know how to solve stolen credit cards.
Is that how you want to spend your time and effort? Right.
Um also by the way let's let's take it like one one step
below that in terms of you know rudimentary use cases.
Sanction screening, or KYC, is that something
that you want now to build?
Uh because that's that is very generic and kind of like
very table stakes and and and and you you can like easily
buy it right and you can also easily build it.
And that's that is I think the trap that
you want to kind of like avoid.
And that's why I really like the fact that you kind of
like you talked about how to recognize or identify these
niches that are unique to you and are understood.
And lastly, I think we also talked a bit about prerequisites and how
how do you know whether you're ready to to to build uh these
components, especially these more advanced complex whatever you want to call them.
Um and from a team perspective, and I think the
team is the only thing that matters here.
Uh it really it really is the only thing that matters.
I to, like I I really liked what you said and that the fact that most
leaders and I think I think it's not only about risk leaders.
Most leaders are very confident maybe even overconfident about
their own uh capabilities and their own team's capabilities.
Uh and what they fail to see in such uh like efforts
in like when you when you take such a big commitment
is that it is never about your team only.
Um and especially when it comes down to delivering code, in the end.
Uh and and that's something that you know came up in my conversation
with Lalitha in my conversation with uh Brian Davis.
Um I I think the biggest the biggest uh pitfall that I see teams uh you
know fall into, is they start building hectically without a road map.
But even worse, without any alignment
with the organization around them.
How they support their uh how they support them building it, but even
more importantly, how they support them in maintaining it afterwards.
Uh if your analyst is now building something that's
great and it will take them you know a week.
Um but if they constantly maintain it and fix bugs, and you know like
also like take in new uh requirements and they are now the product
manager and the devops engineer and the backend engineer and the
UX engineer, all in one they are not an analyst anymore.
And this is this is a trap that I see a lot of teams uh fall into.
And what happens by the way is not really that the analysts would stop
doing their job, it's that they would stop maintaining their project.
Um, and and I think this is kind of like your
point is like super super important here.
And on top of that, of course, if you need all of this support,
the first thing that you need is actually leadership
buy in and to make sure that you actually get it.
And I think that getting this buy in is much more difficult and
requires a different skill set than erecting a POC in two days.
And the the build trap that we see uh in
AI doesn't uh doesn't skip risk teams.
And I think that a lot of the teams that I see try
to avoid uh the hard part, which is the the sell.
The internal sell, uh the convincing, uh the alignment, uh
both upwards and and horizontally, believing that if they
just build it um it will it will just happen and they would
show the the proof and and they will get what they.
And usually that's not the case. Uh many times.
Yeah, Netanel, Uh super interesting.
I uh I would watch this episode two years from now,
uh just for the you know laughs and giggles.
Uh I'm sure I'm sure I would uh find myself very naive uh in its time.
I would just look at how much gray hair I had back then and now.
I just want to say that you know to to summarize uh
fraud prevention has been an area where machine learning
was, you know we were a very early adopters.
Because so complex so much data, these are the same qualities that
uh cause it to be one of the uh laggards in AI adoption.
Um but I do think that we will catch up with uh the
other use cases that are already adopting AI more.
Um and we need to see how we do it uh in
a in an efficient and smart manner.
And I must say I mean I already said a year ago nobody
talked about building like AI powered capabilities.
People were talking about deep fakes and uh whatever, right?
Um and now I see the conversation shifting and I
see teams are in a very different mind space.
So I I already see it uh and I'm glad for it.
Uh because that was what was interesting for me all all along. Yeah.
Anyway, Netanel, uh really appreciate you joining the pod today.
Really appreciating having this conversation.
Uh um no, we we finished with a lot more question marks than ex
exclamation marks, but I think that's uh you know, the topic warrants it.
So, I'm I'm I'm not uh I'm not upset about it.
Uh yeah, I'll I'll say thank you one more time,
and I'll see you all next Saturday.