Banks have joined the artificial intelligence race, and they’re making rapid progress to turn the burgeoning technology into a mainstay in their business practices.
Financial institutions are introducing generative AI chatbots, hiring AI-focused executives, and adopting hundreds upon hundreds of new use cases with still more in development — all at a breakneck speed.
Alexandra Mousavizadeh, CEO and founder of AI adoption research firm Evident, said generative AI technology will play at least a part in every function carried out by the banking sector in the not-so-distant future.
“There’s going to be a couple of years before we reach that tipping point,” she said. “The long game is that AI is going to be in every nook and cranny of the bank.”
Evident’s AI Index ranks the progress of the world’s 50 largest banks as they incorporate and advance AI, using four metrics: talent, innovation, leadership, and transparency. JPMorgan Chase, which hired its head of AI research back in 2018 and has pioneered the use cutting-edge AI use within the banking sector, has topped the rankings twice in a row.
While the multi-billion dollar investments the biggest banks are making in developing AI today likely won’t start reaping returns for years to come, in the last several quarters banking executives have made it clear that their institutions are serious about AI development — and are competitive with their peers. Mousavizadeh said banks’ implementation of AI will revolutionize how they carry out basic functions.
“It’s not that they’re going to do different things,” she said. “They’re just going to do them based on AI completely.”
Read more: AI is becoming a big deal for big banks. What the CEOs of JPMorgan, Goldman Sachs and more are saying
To be sure, machine learning at banks is nothing new. Financial institutions have used these tools for data structuring and analysis for the better part of the last two decades. At the end of 2022, machine learning in banking, financial services, and insurance accounted for about 18% of the total market, according to S&P Global.
But the growing power of AI technologies has helped banks use it for a wider array of functions, including interacting directly with clients. JPMorgan, for example, has more than 400 use cases in production in marketing, fraud, and risk, and is exploring further use of generative AI in its software engineering and customer service practices. Bank of America’s AI financial assistant, Erica, has become central to its client-facing strategy.
And the more banks use AI, the more shareholders seem to be nodding their heads in approval. Preliminary research by Evident shows that the banks ranking highest on its AI Index — JPMorgan, Capital One, Royal Bank of Canada, Wells Fargo and UBS — saw an almost 34% year-over-year increase in their share prices. The top 10 banks on the index saw a 26% jump and the top 25 an almost 18% increase, while the sector’s median yearly growth was 10%.
Mousavizadeh expects those lopsided gains to continue as leading institutions widen the gap between themselves and those that haven’t embraced the tech.
“The banks that are just not doing anything AI,” she said, “they’re going to probably end up, two, three, four years from now really seeing that on their bottom line and in their stock price.”…Read more by Rocio Fabbro
