deal-handshake

Toronto-Dominion Bank is acquiring artificial intelligence startup Layer 6 AI for an undisclosed amount, as financial services companies increasingly look to tap the technology’s potential.

Canada’s largest bank by assets has been looking to build up its capabilities in AI for some time, says Michael Rhodes, group head of innovation, technology and shared services.

“The mass amounts of data with increases in computing power really give rise to the ability for machine learning, or artificial intelligence, to really play a much more prominent role,” he says.

Read: Expect clients to adopt financial apps in 2018

Toronto-based Layer 6, which launched in late 2016, uses AI in its platform to analyze various forms of data to learn and anticipate an individual customer’s needs.

Layer 6 will retain its brand name and separate office in Toronto’s Yorkville area, but TD will become its sole client and customer, says Rhodes.

TD’s acquisition comes after it announced in October 2017 an agreement with U.S.-based Kasisto to integrate its KAI Banking chatbot platform into the bank’s mobile app.

This also comes as corporate interest in AI and its potential continues to mount.

Canadian AI companies saw record funding in the first three quarters of 2017, receiving $191 million across 22 deals, according to PwC Canada.

More details on AI

Royal Bank of Canada has been investing in AI research, setting up labs in Toronto and Edmonton, as well as one in Montreal in November 2017. RBC, Canada’s largest bank by market capitalization, also last January tapped AI pioneer Dr. Richard S. Sutton as an academic adviser.

Read: OSC seeks applicants for Fintech Advisory Committee

Meanwhile, the federal and Ontario governments have doubled down on AI, collectively investing $100 million in a Toronto-based research institute. The Vector Institute, which opened in March 2017, was also set to receive $80 million from more than 30 private sector companies.

Both TD and RBC are Vector Institute partners, while Layer 6 founders Jordan Jacobs and Tomi Poutanen are Vector Institute founders.

Jacobs says after the startup’s launch in late 2016, it began doing work for various clients, including TD, last spring.

After Layer 6 won an international competition last August for the best recommendation system — called the RecSys Challenge — and as it began looking to raise more money from venture capital that fall, the startup began getting acquisition approaches, he says. Jacobs would not specify which companies, but adds the interest came from a variety “both inside and outside of Canada.”

He notes the startup, which now employs 17 people, was at an “inflection point” and needed to raise money to grow and meet demand. Its decision was guided by its aim to “build a global AI ecosystem in Canada.”

Read: An algorithm may decide your next compliance review

Jacobs says, “If we go and we raised a ton of money from foreign investors, at some point along the way we essentially stop being a Canadian company even if we’re located here. And for us, this was an opportunity to build inside a global company that is Canadian, TD, and to help them leap to the front of the pack around the world in adopting AI.”

While neither firm would detail exactly how the technology would be applied at TD, Rhodes says this could include detecting certain spending patterns that indicate a customer may be buying a house and offer a mortgage. Or, in the future, applications could include the ability to analyze call centre audio and identify disgruntled customers who make multiple calls, and offer additional measures to address their issues.

Given the growing number of ways customers interact with their banks, such as via smartphone apps, online, social media as well as through call centres and branches, it has become much more difficult to monitor customer needs, he notes.

“What we hope to gather from AI is the ability to kind of know and understand our customers, in the same way that store managers knew back in the 1970s,” Rhodes says.

Originally published on Advisor.ca
Add a comment

Have your say on this topic! Comments are moderated and may be edited or removed by
site admin as per our Comment Policy. Thanks!