According to a study released on Monday by Bank of America (BAC), artificial intelligence (AI) technology has the potential to increase banks’ operational effectiveness. It carries risks as well.
“Whilst greater automation – likely to be the first and greatest application of AI technology for banks – has the potential to improve bank productivity and thereby enhance bank returns, we also see some vulnerabilities around broad use of AI in banks,” analysts led by Richard Thomas wrote.
The report stated that because the industry is heavily regulated and has access to a lot of sensitive data, banks and supervisors will need to be “comfortable about the risks that accompany the institutionalization of AI.” It also noted that ongoing discussions are taking place between the industry and regulators.
Concerns are likely to be focused on security and the “challenge of keeping client assets safe in a world of democratized AI which has also delivered lower barriers to threat actors,” the authors wrote.
“Technology and social media have likely sped up deposit withdrawals,” the note said, in reference to the collapse of a number of U.S. banks earlier this year, and it is “less obvious that regulators have a clear antidote to this new reality.”
The majority of big banks currently employ AI, but with caution. The survey also stated that if the technology can provide European banks with noticeable efficiencies and increase returns, “this is likely to be recognised with more stable to higher credit ratings and secure spreads.”
According to Bank of America, the potential revenue boost from using AI technology is currently “less tangible.”