In a research report released on Monday, Bank of America (BAC) announced that AI technology has the potential to enhance the efficiency of banks. Led by analysts Richard Thomas, the report stated that automation is likely to be the initial and greatest application of AI technology in banks. The use of AI can significantly improve bank productivity and enhance returns.
However, there are also risks associated with the widespread adoption of AI technology in banks. These risks stem from the highly regulated nature of the industry and its access to large amounts of sensitive data. Banks and regulators must work together to address these concerns and ensure that they are comfortable with the risks associated with institutionalizing AI.
One concern raised by the report is security threats to client assets. With democratized AI reducing barriers for threat actors, it is less clear how regulators will respond to this new reality. The recent collapse of several U.S. banks earlier in the year was linked to deposit withdrawals accelerated by technology and social media, highlighting the need for a clear antidote from regulators.
While major banks are already using AI cautiously, if tangible efficiencies can be achieved through its use, European banks could see recognition with more stable credit ratings and secure spreads. However, Bank of America noted that at this stage, revenue growth from AI technology may not be as obvious as expected.