According to a Citi report, AI could boost global banking, helping boost profits by 9% or $170 billion from just over $1.8 trillion to close to $2 trillion. AI is expected to be the General-Purpose Technology (GPT) of the 2020s-2030s and will revolutionize finance by changing operations and security and creating new concepts of intellectual property protection worldwide.
Also Read: Experts Highlight AI’s Role in Guiding Financial Decisions in Next-Gen Banking
AI-generated insights are vital in combating real-time payment scams, such as authorized push payment (APP) fraud. APP fraud is responsible for 40% of banking fraud losses in the UK; the total cost is expected to be $5. 25 billion in the US, UK, and India by 2026 if left unmitigated.
Global AI policies diverge as the EU, China, and Singapore lead
While some countries, such as the European Union, China, and Singapore, have set policies on AI in finance, the United States has been slow and passive. India had followed a policy of non-interference at the beginning of 2023. However, by mid-2024, due to the changing directives and advisories, the country had planned to introduce comprehensive laws for AI.
AI can provide a significant increase in development productivity, with productivity improvement ranging from 10% to 50%. This could mean potential annual cost reductions of between $2 billion to $16 billion within the US banking sector. These efficiency improvements are attributed to the new age AI-based software applications that automate tasks that were earlier managed by technological personnel.
The report expands on the roles of AI and compares it to the steam engine of the industrial revolution and the internet. As a result of improving analytical capacities, decision-making, and content, AI will be able to create a new economic model and challenge current conventions.
Generative AI advances from proof of concept to transformational change
Thus, the application of GenAI in finance is still in the PoC phase. However, that is a subject of change and transformational shifts that are happening quickly. The Citi GPS report outlines current and near-future applications of AI in the financial industry and provides future trends based on the opinions of industry professionals.
Also Read: AI Integration in Banking Sector in Focus at Lagos Summit, Experts Discuss Impact
Traditional players are integrating AI in their products to increase efficiency, while start-ups are using AI to disintermediate traditional players. This shift in approach points to the fact that AI is already revolutionizing the finance industry in its approach. These include AI-powered agents, bots, and autonomous systems that are expected to revolutionize financial systems by reducing the role of people in financial transactions.
Leaders embrace AI, expecting profit boost
The report states that 93% of finance sector leaders believe that AI-based productivity improvements will boost profits. However, there are concerns about the timing of implementation, cost of talent, competition, rising client expectations, and higher expenses in relation to AI.
Also Read: Apple delays launch of 3 key AI features in Europe due to EU rules
AI-based clients may increase price pressure in the finance sector, which may alter the power dynamics. It is also expected that digital native, cloud based firms such as FinTechs and BigTechs will likely implement AI faster followed by agile incumbent banks. Traditional institutions that are still using traditional technology and culture may lag behind in the adoption of AI technology and may lose market share.
Cryptopolitan Reporting By Brenda Kanana
