Banking software firm Temenos has acquired artificial intelligence (AI) platform Logical Glue for £12 million, as the industry responds to demand for “explainable” AI banking products.

Temenos said Logical Glue’s software-as-a-service (SaaS) platform would bolster its AI offering, giving banking clients enhanced transparency and explainability when it comes to automated decisions.

The XAI platform can be used for banking functions such as credit scoring models, as well augmenting existing core banking and digital front office processes with machine learning. Additional use cases include robo-advisor, intelligent pricing, product recommendation, real-time fraud detection and debt collection products.

Logical Glue’s platform addresses one of the key challenges for banks using AI applications, which is that they typically operate as ‘black boxes’, offering little if any discernible insight into how they reach their decisions.

Regulators globally are increasingly mandating that financial institutions should be able to explain to their customers the results of automated decisions that affect them, with the Financial Conduct Authority this week announcing a partnership with the Alan Turing Institute to investigate the practical challenges of transparency and explainability of AI in the financial sector.

The General Data Protection Regulation (GDPR) also includes ‘a right to explanation’ for all decisions made by AI algorithmic systems, while the US Equal Credit Opportunity Act compels creditors and lenders to provide specific reasons to borrowers when negative decisions have been taken.

Max Chuard, chief executive officer at Temenos, said: “Explainable AI is a game changer for our customers – it will give them greater transparency and explainability of AI automated decisions and recommendations helping them harness AI technology to create seamless customer journeys and automate manual processes while meeting the growing regulatory demands.”

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