McKinsey finds that a strategic mindset is key to successful AI implementation by banks

The findings: McKinsey’s new report “Extracting value from AI in banking” emphasizes that it’s time for financial institutions (FIs) to move past generative AI (genAI) experimentation. It identifies some common characteristics among FIs in this stage, including:

• A broad, strategic vision for genAI: FIs must view AI as more than just a tool for cost cutting and instead as one that can drive revenues while improving customer and employee satisfaction.
• Comprehensive business transformation: Instead of implementing isolated AI tools like standalone chatbots, FIs should aim to reengineer entire processes or customer journeys. Their tools should be capable of working together to handle more complex tasks.
• Strong governance and cross-functional teams: FIs must create centralized control over AI implementation, ensuring proper risk management. This team should standardize AI tools across the bank and ensure collaboration across various departments.

That doesn’t come cheap: According to Forbes, some FIs are rapidly expanding their tech workforce—a crucial step in maintaining the innovative edge on competitors. 

• For example, Citigroup expanded its workforce by 8,000 tech professionals from 2022 to 2023.

But FIs with smaller budgets can still compete: Here’s what small FIs are doing to keep up with their larger counterparts, per American Banker:

• Partnering with AI vendors and deploying the technology selectively where it delivers clear benefits, like in lending and loan processing.
• Leveraging genAI to analyze internal data more effectively, which improves fraud detection, decision-making, and operational efficiency while freeing up staff to focus on customer relationships.
• Focusing on specialized AI applications to enhance service and combat fraud, maintaining a proactive approach despite limited resources.

Our take: The next stage of genAI implementation will continue to widen the gap—not necessarily between the big and small FIs, but between those who see this technology as a cost-saver versus those who want to embrace its full potential. It’s not just about budgets: A strategic mindset and a willingness to collaborate with partners will be key to achieving technological goals and advancing to the next stage.

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