AI-powered tools can reshape banking but lenders need to be aware of the risks

Article by Will Paige | Mar 8, 2023

The news: US banks have “some work to do” before they can embrace AI-powered tools like ChatGPT, according to Bank of America CEO Brian Moynihan.

Speaking virtually at Sydney's AFR Business Summit, Moynihan acknowledged the technology’s usefulness but cautioned banks that external generative AI tech must be “applied correctly,” per Bloomberg.
The CEO added that inaccuracy, a dearth of data-based responses, and the risk of cyber attacks presented challenges for ChatGPT’s use in banking.

Banks approach AI apps with caution: Bank of America has already banned staff from business use of ChatGPT. Other banks have done the same, including:

JPMorgan
Citi
Goldman Sachs
Wells Fargo
Deutsche Bank

How can banks prepare for AI’s rise? Despite wariness around using third-party AI technologies, banks are investing heavily in the space. Retail banks are forecast to spend $4.9 billion on AI platforms by 2024, growing 21.8% compounded annually from 2019, per GlobalData research.

However, it will take time for banks to fully benefit from the tech’s disruptive impact. Here’s how lenders can embrace generative AI:

Educate employees. Banks should familiarize stakeholders with generative AI and its impact on banking. The tech has the revolutionary potential to create data for a variety of sophisticated applications.
Keep tech up to date. Whether they’re building tech in-house or outsourcing from third parties, banks need to invest in and budget for generative AI.
Work out its uses. Lenders should test and evaluate different use cases for generative AI, such as fraud detection, virtual assistants, personalized offers, and wealth planning.
Develop a strategy. Banks need to be forward-thinking, building clear plans for integrating generative AI into their operations, including implementation, governance, and risk management planning.
Brace for regulation. AI is a relatively new technology and it comes with risks that regulators are still identifying as they determine how to oversee the space. Financial institutions interested in AI-powered tools must prepare for regulations that will likely evolve as AI becomes more commonplace.