By Nicholas Larsen, International Banker
The Rise of Generative AI in Banking
Few technological breakthroughs have captured the world’s imagination as much as generative artificial intelligence (GenAI) in the last 18 months. The launch of ChatGPT in late 2022 marked a new era for AI, with applications now widely utilizing the technology to deliver superior results across various business use cases. The banking industry is no exception, with GenAI seen as a powerful tool for improving customer-facing performance, boosting operational efficiency, and positively impacting bottom lines.
Transformative Capabilities of GenAI
GenAI’s ability to harness substantial volumes of data, including text, image, video, and code, allows banks to develop models for a broad variety of functionalities. Whether it’s an AI-powered virtual assistant resolving customer queries, personalized product offerings, or advanced fraud-detection systems, GenAI has the potential to modernize and even upend existing business models in the banking industry.
“While banks have rightly focused on productivity in their initial gen AI pilots due to the broader pressure on banking economics, the technology could greatly alter how some jobs are done and how customers interact with banks,” McKinsey & Company wrote in a December 2023 piece. “It might even lead to entirely new business models.”
Early Adopters and Success Stories
Standard Chartered’s Trade AI Engine, developed with IBM, is an example of AI driving automation in banking. The tool reviews unstructured data, identifies and classifies documents, and learns from its performance. Morgan Stanley is another early adopter, launching its GenAI solution, AI @ Morgan Stanley Assistant, in September 2023. This tool provides financial advisors with convenient access to the bank’s intellectual capital, saving time and enhancing client interactions.
According to Jeff McMillan, head of analytics, data, and innovation at Morgan Stanley Wealth Management, the assistant uses large language models (LLMs) to create human-sounding responses to questions. “The traditional way in which you would solve those things is you would write code. In the new world, you give examples of what ‘good’ looks like, and the system learns what good is,” McMillan explained.
Future Prospects and Industry Impact
Morgan Stanley plans to introduce more AI tools, including an AI pilot program called Debrief, which summarizes client meetings and generates follow-up emails. Other banking giants like JPMorgan Chase, Citigroup, and Goldman Sachs are also developing their own AI models. The McKinsey Banking & Securities Gen AI Forum in September 2023 found that two-thirds of senior digital and analytics leaders believe GenAI will fundamentally change the way they do business.
AI’s potential in banking is vast. According to Polaris Market Research, the market size of AI in banking was valued at $19.84 billion in 2023 and is estimated to grow to $236.70 billion by 2032. AI tools will be crucial for meeting the growing demand for specialized solutions as the banking industry becomes more complex and competitive.
Conclusion
AI is set to revolutionize the banking sector, offering significant productivity gains and transforming customer interactions. While the uptake of GenAI by lenders is still tepid, the potential for AI to reshape banking is immense. As major financial institutions continue to invest in AI technology, the future of banking looks promising.
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