A research report released by Bank of America (BAC) on Monday revealed that Artificial Intelligence (AI) technology has the potential to significantly enhance the efficiency of banks. According to analysts led by Richard Thomas, the first and greatest application of AI technology in banks is likely to be greater automation. By leveraging AI, banks can increase their productivity and ultimately improve their returns. However, there are also risks associated with the widespread use of AI in banking, as it poses potential vulnerabilities due to the industry’s highly regulated nature and access to sensitive data.
The report emphasized that ongoing dialogue between the industry and regulators is crucial to address these concerns and ensure that AI technology is used responsibly in banking. The security of client assets was highlighted as a major concern, particularly in a world where democratized AI has reduced barriers for threat actors. The collapse of several U.S. banks earlier this year was linked to deposit withdrawals accelerated by technology and social media, highlighting the need for regulators to have a clear antidote to this new reality.
While many major banks are already using AI cautiously, if it can deliver tangible efficiencies for European banks and boost returns, it could result in more stable credit ratings and secure spreads. However, Bank of America noted that at this stage, the revenue upside from using AI technology is less tangible. Despite these challenges, BAC believes that AI technology has significant potential to transform the banking industry and improve its efficiency in the long term.