AI Technology Can Enhance Bank Efficiency But Brings Risks, Says Bank of America

According to CoinDesk, artificial intelligence (AI) technology has the potential to improve banks' efficiency, but it also brings risks, according to a research report by Bank of America. Greater automation, which is likely to be the first and most significant application of AI technology for banks, could improve productivity and enhance returns. However, there are vulnerabilities around the broad use of AI in banks, particularly in the highly regulated industry with access to sensitive data. Banks and supervisors will need to be comfortable with the risks accompanying the institutionalization of AI, and dialogue between the industry and regulators is ongoing. Concerns are likely to focus on security and the challenge of keeping client assets safe in a world of democratized AI, which has also lowered barriers to threat actors. The report also noted that technology and social media have likely sped up deposit withdrawals, as seen in the collapse of several U.S. banks earlier this year. It is less obvious that regulators have a clear solution to this new reality. AI is already being used cautiously by most major banks, and if the technology can deliver tangible efficiencies for European banks and boost returns, it is likely to be recognized with more stable to higher credit ratings and secure spreads. However, Bank of America says the revenue upside at this stage from the use of AI technology is less tangible.