In a recent report, Bank of America (BAC) announced that artificial intelligence (AI) technology has the potential to improve banks’ efficiency. According to a team of analysts led by Richard Thomas, the most likely application of AI technology in banks is automation. The use of AI can increase bank productivity and ultimately enhance returns. However, there are also risks associated with the widespread adoption of AI in banks.
The report pointed out that AI poses potential risks for banks due to the industry’s highly regulated nature and access to sensitive data. This requires both banks and supervisors to be comfortable with the risks associated with implementing AI technology. Ongoing dialogue between the industry and regulators is necessary to address these concerns.
One concern raised in the report was the security of client assets and the challenge of keeping them safe in a world where democratized AI has reduced barriers to threat actors. The collapse of several U.S. banks earlier this year was linked to accelerated deposit withdrawals facilitated by technology and social media. Regulators may struggle to find a clear antidote to this new reality, as it is less obvious how they can respond effectively to these threats.
Despite these challenges, many major banks are already using AI cautiously, and if it delivers tangible efficiencies for European banks, it could lead to recognition with more stable credit ratings and secure spreads. However, Bank of America noted that the revenue upside from using AI technology at this stage is “less tangible.”