Evolution of Voice Communications Technology is a Boon for Pioneers of Finance

Radar gets the lowdown on how the voice market has changed in the last decade, and why it’s suddenly the best time to invest.

Communications technology is undergoing a sea change in financial services, as a perfect storm of regulatory pressure, data access and advanced analytics combine to offer a new dimension in voice capture and optimization.

For Robert Powell, director of compliance at voice communication leader IPC Systems, the change is long overdue.

“The reality is that at least 85 percent of the market is using legacy technology with regards to voice estates,” he told Radar. While the reluctance to spend, on the back of the 2008 financial crisis, has held them back, it may turn out for the best.

“By luck, this has actually served the industry well because if they had decided to invest before now, they would have done it poorly,” he said. “Now there are much more advanced solutions available.”

The last 10 years has also brought about a number of new communication methods that have emerged around voice. Mobile phones are obvious; in financial markets, they were severely restricted until the advent of MiFID II which detailed requirements for recording them.

The size of the voice file is key; an average mobile phone call is about 30 meg of data an hour. “If you want anything bigger or better in terms of quality, you’re up to 60 meg an hour, compared to an average size for emails of a few hundred k even with attachments,” he said.

Another difference between now and 10 years ago is that smarter communication technology can be an enabler for the business, rather than a simple compliance cost that must be consumed. While the misdeeds of the past have laid the foundation for today’s compliance culture, he says there is little reason to support the mindset that there is zero wider benefit to doing compliance better.

“There are very few businesses at the moment that leverage their voice estates or derive any kind of intelligence or marketing/data-driven exercise of value. “They want to lower their costs, have better quality and have increased ease of use; it’s very difficult for a compliance team to have a full understanding of their voice estate and how many records they have.”

He said IPC has encountered some customers that hold digital tapes with records going back years.

“Some of them have transferred them over for use in new projects, but generally speaking, there is a lot of tape out there,” he said. “That tape is degrading all the time and will be useless in three or four years time.”

This is where cloud computing has immediate value, providing easier, cheaper storage, and he predicts the movement of financial services firms to the cloud will continue to soar as they realise how much time and money they can save.

“One of the key considerations is that these communications take up a lot of space and if you want to do something with them like analytics, then you need better quality, and better quality means bigger files,” he said. “We are typically talking about 10 or 12 times the amount of storage for voice that you would require for email or Bloomberg chat. That’s a very different level of storage”.

For the majority of firms, keeping the data in-house is unnecessary and more an emotional attachment than anything logical. “We’ve got a system now that encrypts data using new standards that are uncrackable,” said Powell. “There’s no reason not to put data in the cloud, and you can put enough protections around your personal data to work that out.”

Storing in the cloud also enables stereo and very high-output recording, exploiting wideband codecs, all of which helps transcription.

“The technology that is sitting in the banks’ data centres shouldn’t be there. They’re not technology companies, they should stick to what they are good at, which is finance and money,” Powell said.

In terms of innovation, there are numerous projects on the radar, such as real-time transcription of calls to produce trade tickets.

“Imagine you and I are talking and we engage through a normal market dialogue that results in a ticket in almost real time,” he said. “So there’s a conversation about 20-25 at 104.55 in 10m. We’ve got demonstrations now that can show that being picked up and put into a ticket with the right product, the right price. That’s going to only get better, and we have that for six markets at the moment.”

It involves the firm combining its dealer board and turret technology with its partner at GreenKey, who offer the transcription capability.

The banks hope it can reconcile what traders say and do during the day with what they actually book into the systems. “We’ve all been aware of cases where traders have done transactions but not booked them,” said Powell. “This has been something that we have been trying to solve for years; deciphering a chat log or e-mail discussion to work out whether the transactions took place using text analytics. We’re starting to do that with speech to text and voice communications as well.”

The second innovation relates to analytics in the surveillance space, combating common problems like insider trading, front-running, gifts and entertainments or expense issues.

“We’re starting to see organizations coming to us with ideas about proofs of concept for how they can discover this taking place inside their phone conversations rather than what they currently do inside their text and email dialogue,” said Powell.

There are also examples from the HR world, where a company is trying to identify sexual language, harassment and aggressive communication taking place over its network. “There is such a big move towards looking after your employees, their well-being and the general health of employees,” he said. “They want insight into whether this employee is doing okay, or working out if any might be saying things which could indicate that they are under severe stress or strain.”

“If you look through history, you can deduce that many of the people who have done utterly stupid things inside the financial markets have either been blatantly criminal, or they are compromised in another way, such as going through a life event, which causes them to make poor choices,” he said. “We’re starting to see some organizations trying to spot that behaviour that looks like it might lead to some of those compromising situations taking place.”

“I think the market still finds voice, an element of what we do every day, to be the great unknown,” he said. “I think they genuinely are scared about some of the things that their employees say on calls. I certainly speak to compliance officers who think they literally have got no idea what goes on in some of the calls.”

As for the regulators, they are not technologists and are focused on very specific things, he said, of which the voice market is not an immediate priority. “They’re not expecting this uncrackable nut to yield a whole load of information and there are probably people in the industry lobbying against it in terms of that technology being used. Some of the speech technology is not as accurate as it could be.”

But that is changing as more money gets pumped in, Powell said. “We’ll definitely see more high-value, better solutions being rolled out across multiple organizations,” he said. “I think we’ll see that data will start flowing more freely between organizations and their service providers. At the moment this data is hugely siloed but the way that we’re designing systems, it’s very much around our customers owning their data and having the ability to move it around, such as via an API.”