In a research report published on Monday, Bank of America (BAC) stated that Artificial intelligence (AI) technology has the potential to revolutionize the banking industry. According to analysts led by Richard Thomas, greater automation is likely to be the first and greatest application of AI technology for banks. The use of AI can improve bank productivity and thereby enhance bank returns. However, there are also risks surrounding the widespread adoption of AI in banks that must be addressed.
One major concern is the security of client assets 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 deposit withdrawals, which were accelerated by technology and social media. It remains unclear whether regulators have a clear solution to this new reality.
Despite these concerns, most major banks are already using AI cautiously, and if it can deliver tangible efficiencies for European banks and boost returns, there will likely be recognition with more stable to higher credit ratings and secure spreads. However, Bank of America noted that the revenue upside from the use of AI technology at this stage is “less tangible.”
To address these challenges, ongoing dialogue between the banking industry and regulators is necessary. This includes developing clear guidelines around data privacy and security in an increasingly digitized world, as well as ensuring that regulatory frameworks remain flexible enough to adapt to new technologies as they emerge.