Big Banks Place Their Bets on AI
JPMorgan is bullish on artificial intelligence.
The banking giant, for the second year in a row, has topped Evident AI’s Index of how banks are embracing AI – leading its rivals in innovation (consisting of both research and patents) and transparency and ranking second in talent and leadership in public communication.
Capital One took the runner up spot, with Royal Bank of Canada coming in third. All totaled, six of the 10 highest-rated banks were based in North America. Last year, U.S. and Canadian banks published 80% of the research on AI and funded 60% of the AI investments in the financial services sector. And the payoff could be tremendous.
A 2020 report from McKinsey estimates AI technologies could be worth up to $1 trillion for global banks, taking over and improving on mundane tasks, such as high-frequency trades, marketing and fraud detection.
“To remain competitive, incumbent banks must become ‘AI first’ in vision and execution,” the report reads. “If fully integrated, these capabilities can strengthen engagement significantly, supporting customers’ financial activities across diverse online and physical contexts with intelligent, highly personalized solutions delivered through an interface that is intuitive, seamless, and fast.”
JPMorgan is capitalizing on its interest in AI, advertising earlier this year for more than 3,600 AI-related jobs, almost twice as many as Citigroup, which had the second highest number of listings at 2,100. Deutsche Bank and BNP Paribas both posted for a little over 1,000 AI positions.
One of the tools JPMorgan is working on is a ChatGPT-like service, which helps customers choose potential investments. The company, in May, trademarked IndexGPT, saying it would tap “cloud computing software using artificial intelligence” for “analyzing and selecting securities tailored to customer needs.” To secure the trademark, JPMorgan will need to launch IndexGPT within about three years.
Goldman Sachs and Morgan Stanley, meanwhile, have begun testing AI for internal use, but have not yet discussed how the technology will interface with customers.
The increased focus on AI comes as more experts say a wave of consolidation seems set to hit the banking industry. Having a strong AI system in place could help larger financial institutions do more with less. Alternatively, smaller banks (and credit unions), which have relied on customer service as their differentiator, are increasingly falling behind in AI development, which could come back to haunt them, especially if this forecast consolidation does occur. And the U.S. market, at present, is bifurcated, Evident reports.
“While 8 of the 15 US banks we cover rank in the top 20, 7 banks rank 30th or lower,” the report reads. “In an increasingly competitive market, the lagging (typically smaller, regional) U.S. banks have work ahead of them.”
Building out AI isn’t easy, though. Tech firms are just as eager, if not moreso, to hire AI talent, and generally offer much more lucrative packages. On average, reports Business Insider, for every employee banks have hired in the past two years, they’ve lost one, with 70% of those departing employees leaving the finance industry altogether.
The problem is … well, the problem itself: Banks aren’t creating an interface that can double as human or teaching a car to drive itself. And the challenge of solving those problems is often more appealing to AI programmers.
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