According to European banking executives, the surge in artificial intelligence will amplify banks’ reliance on major US tech companies, consequently introducing novel risks to the industry.
The fascination surrounding the utilization of artificial intelligence (AI) in financial services – already extensively applied for identifying fraud and money-laundering – has surged since the viral debut of OpenAI’s chatbot ChatGPT in late 2022 as banks explore methods to implement generative AI.
However, during a recent gathering of fintech executives in Amsterdam, some voiced worries regarding the substantial computing power necessary to foster AI capabilities, which would result in banks relying even more on a limited number of technology providers.
Chief analytics officer of ING, Bahadir Yilmaz, overseeing the AI initiatives of the Dutch bank, shared with Reuters his anticipation of heightened dependency on major technology corporations moving forward, specifically for infrastructure and machinery.
Yilmaz emphasized, “You will continually require them since the machine power demanded by these technologies is substantial. It is also not entirely pragmatic for a bank to construct this technology internally.”
Yilmaz highlighted that banks’ reliance on a select number of tech firms posed significant risks, underscoring that European banks especially needed to establish the ability to transition between various tech providers to avoid what he referred to as “vendor lock-in”.
Last year, Britain proposed regulations aimed at overseeing financial institutions’ heavy reliance on external tech firms such as Microsoft, Google, IBM, and Amazon. Regulators are concerned that issues at a single cloud computing company could potentially disrupt services across numerous financial entities.
“AI necessitates extensive computational power and the only practical approach to accessing that power is through major technology companies,” stated Joanne Hannaford, responsible for technology strategy at Deutsche Bank’s corporate bank, addressing an audience at the recent Money20/20 conference.
Hannaford mentioned that there are protocols for notifying regulators when transferring data to the cloud, a process that could become significantly challenging as cloud computing adoption rises.
Furthermore, banks must articulate to regulators the risks associated with not leveraging the power of cloud computing, which would translate to a missed opportunity, added Hannaford.
AI was a central topic of discussion at the Amsterdam conference.
CEO of the French AI startup Mistral AI, recognized as France’s counterpart to OpenAI, unveiled that there existed “synergies” between its GenAI offerings and financial services.
“We discern a plethora of prospects in developing analytical and monitoring solutions … which are aspects that appeal greatly to bankers,” shared Arthur Mensch.
ING is currently piloting an AI chatbot for 2.5% of incoming customer service conversations. When asked how soon the chatbot could manage over half of customer service interactions, Yilmaz suggested within a year.
Last week, the European Union’s securities watchdog released its first statement regarding AI, stipulating that banks and investment firms cannot evade boardroom accountability and have a legal duty to safeguard customers when implementing AI. It cautioned that the technology is likely to have a considerable impact on retail investor protection.
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