The news: Despite their wariness around using third-party artificial intelligence (AI) tech, 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.
The AI arms race: The release of Open AI’s ChatGPT in November 2022 started what’s being described as an AI arms race, per Bloomberg.
Banks are betting the tech will help personalize their interactions with customers and simplify and speed up complex risk analysis and modeling. Here’s a look at how some large financial institutions (FIs) are exploring the efficiencies that AI promises, per Bloomberg
Within the US:
Outside the US:
The risk/reward calculation: Bankers can’t afford to disregard their fiduciary duty not to trade on unreliable information. And unfortunately, that’s still a good description of what AI provides. OpenAI’s interface for ChatGPT includes a disclaimer: “ChatGPT may produce inaccurate information about people, places, or facts.”
In a report, OpenAI’s researchers further elaborated on this warning. “Even state-of-the-art models are prone to producing falsehoods—they exhibit a tendency to invent facts in moments of uncertainty,” they wrote. “These hallucinations are particularly problematic in domains that require multistep reasoning, since a single logical error is enough to derail a much larger solution.”
Banks that are identifying areas where AI can create efficiencies and investing in hiring and training staff will also need to redesign risk frameworks to deal with this danger. They’ll also need to look into intellectual property considerations and continue tracking the still-evolving AI regulatory environment.
Dig into what the technology could mean for banking in our report, ChatGPT and Generative AI in Banking.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
One Liberty Plaza9th FloorNew York, NY 100061-800-405-0844