On Monday, Bank of America (BAC) published a research report highlighting the potential benefits and risks of implementing Artificial Intelligence (AI) technology in the banking industry. According to Richard Thomas, an analyst at BAC, the most likely application of AI technology in banks will be automation. This can help enhance bank productivity and returns, leading to greater efficiency and profitability.
However, there are concerns surrounding the use of AI in banks due to their highly regulated nature and access to sensitive data. Banks and supervisors must be comfortable with the risks associated with implementing AI technology. Ongoing dialogue between the industry and regulators is necessary to address these concerns.
The report warns that security of client assets is likely to be a major focus for regulators due to the democratization of AI, which has reduced barriers for threat actors. The collapse of several US banks earlier this year was linked to deposit withdrawals accelerated by technology and social media. It remains unclear if regulators have a clear solution to this new reality.
While many major banks are already using AI cautiously, there is potential for significant revenue upside if tangible efficiencies can be delivered for European banks through AI technology. This could lead to higher credit ratings and secure spreads, indicating greater stability in the banking sector. However, BAC notes that at this stage, the revenue upside from implementing AI technology is less tangible than expected.
Overall, while there are both benefits and risks associated with implementing AI technology in the banking industry, it is clear that ongoing dialogue between banks and regulators is necessary to address these concerns and ensure that any implementation is done responsibly and effectively.