According to a research report released by Bank of America (BAC) on Monday, AI technology has the potential to revolutionize the banking industry. The use of AI can greatly enhance bank efficiency and productivity, ultimately leading to increased returns for banks. However, the implementation of AI technology in banks also poses certain risks and challenges that must be addressed.
One of the main concerns surrounding the use of AI in banking is security. With access to a large amount of sensitive data, banks and regulators must be cautious about the potential risks associated with institutionalizing AI. Ongoing dialogue between the industry and regulators is necessary to ensure that these concerns are adequately addressed.
Another concern raised in the report was the challenge of keeping client assets safe in a world where AI has reduced barriers to threat actors. The collapse of several US banks earlier this year was linked to accelerated deposit withdrawals facilitated by technology and social media, highlighting the need for greater security measures in place. While there may not be a clear antidote to this new reality, it is important for banks to continue exploring ways to mitigate these risks.
Despite these challenges, many major banks have already begun using AI technology cautiously. If they can deliver tangible efficiencies while boosting returns, European banks may see more stable credit ratings and secure spreads. However, Bank of America notes that at this stage, the revenue upside from using AI technology is less tangible than other areas such as fintech or digital transformation initiatives. Nonetheless, it remains an area worth exploring as it has the potential to transform banking operations and improve customer experiences in meaningful ways.