Earlier this month the EU passed legislation to regulate artificial intelligence. The Artificial Intelligence Act takes a risk-based approach to ensure companies release products that comply with the law before they are made available to the public.
The EU is mostly concerned about AI hallucinations (when the models make errors and make things up), the viral dissemination of deepfakes and the automated manipulation of AI that could mislead voters in elections. But where does that leave financial services?
Recent research shows there is a lot of interest, but investments and project lifecycles are still in their early days.
Capgemini Research Institute’s World Retail Banking Report 2024 surveyed 250 global retail banks. The report found that 80 per cent of retail bank executives believe that generative AI represents a significant leap in advancing AI technology. However, while awareness of AI is high, progress and action on the ground is low. Only 6 per cent of retail banks are ready with a roadmap for enterprise-wide, AI-driven transformation at scale, while 3 per cent do not currently monitor AI key performance indicators at all.
It comes as no surprise that 61 per cent of bank customers were unhappy with chatbot resolutions, while 17 per cent simply distrusted chatbots and preferred human agents. However, bank customer service staff welcome GenAI “co-pilots”.
Bank employees were reported to be most enthusiastic about GenAI co-pilots’ potential to automate fraud detection, data visualisation and analytics, as well as drafting and sending personalised content to customers.
The report determined that banks could optimise up to 66 per cent of the time spent on operations, documentation, compliance and other onboarding-related activities through AI-powered intelligent transformation and GenAI co-pilots.
These findings are pretty much in line with the 2024 Digital Transformation and Next-Gen Technology Study from Broadridge Financial, which collated the responses from 500 global C-suite and senior executives across the buy side and sell side, regarding the industry’s technology modernisation.
Around 70 per cent of firms are prioritising investments in AI, while 44 per cent of leaders are making significant investments in GenAI. The report commented that while GenAI is “forcing firms to rethink their talent strategies” and commanding around 21 per cent of the investment in next-generation technologies, most banks are in the “early stages of the maturity curve in implementing these technologies”.
Focusing on Europe, the Broadridge report found that 93 per cent of companies are making some level of investment in AI, with 35 per cent of the European firms surveyed currently making a large investment.
However, only 4 per cent of European firms are making a large investment into GenAI and 38 per cent said they are making no investment at all.
Customer interaction remained the top function that European firms are prioritising for their AI investments, with 46 per cent of firms prioritising.
Despite the announcement of the EU AI Act, this study found that 31 per cent of European firms disagree that AI should be tightly regulated and 54 per cent believe that financial firms should be allowed to self-regulate their adoption of AI. However, 47 per cent said they are concerned about the data security and privacy risks posed by GenAI.
Liz is deputy editor of The Banker. You can connect with Liz on LinkedIn, or follow her on Bluesky.
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