In a research report on Monday, Bank of America (BAC) announced that artificial intelligence (AI) technology has the potential to revolutionize banks’ efficiency. According to analysts led by Richard Thomas, banks should focus on automation as the first and greatest application of AI technology in order to improve productivity and enhance returns. However, there are also vulnerabilities associated with the widespread use of AI in banking.
The report highlighted that AI poses significant risks for banks due to their highly regulated nature and access to large amounts of sensitive data. As such, banks and regulators must be comfortable with these risks before institutionalizing AI technology on a larger scale. The ongoing dialogue between the industry and regulators is essential to address these concerns.
The report also raised concerns about the security of client assets in a world where democratized AI has reduced barriers to threat actors. The collapse of several US banks earlier this year was linked to deposit withdrawals accelerated by technology and social media. It is less clear whether regulators have a clear solution to this new reality.
Despite these challenges, most major banks are already cautiously using AI technology. If AI can deliver tangible efficiencies for European banks, it could lead to more stable credit ratings and secure spreads. However, Bank of America noted that the revenue upside from using AI at this stage is “less tangible.”