PYMNTS MonitorEdge May 2024

Financial Services Sector Shows Reluctance to Embrace AI

Artificial intelligence (AI) may cut costs, but financial services companies have reportedly been slow to embrace it.

That’s according to a report Sunday (June 30) by the Financial Times (FT), which said that regulatory concerns and worries about job losses have kept banks from adopting AI products.

“The big banks will definitely not adopt [the technology] as quickly as any of the FinTech,” said Tom Blomfield, co-founder of neobank Monzo and group partner at Silicon Valley startup incubator Y Combinator

He added that generative AI will “make banks more efficient and able to provide the same products at a cheaper cost.”

The report cited a study by Capgemini showing that just 6% of retail banks are ready for widespread AI implementation. 

However, the FT also pointed to an estimate by McKinsey that AI could add up to $340 billion in value per year to the global banking sector, which comes out to around 4.7% of industry revenues. Despite this windfall, the report said, there are fears that the change will cost people their jobs.

“People don’t understand that it’s there as a productivity tool,” said Nasir Zubairi, chief executive of FinTech accelerator Luxembourg House of Financial Technology. “They still genuinely believe it will take away their jobs.”

It’s not just the finance sector where professionals feel threatened by AI. As covered here recently, there are also concerns about its impact on jobs in the creative industries.

In anticipation of AI’s potential impact, some figures in the music industry, including artists like Billie Eilish and Nicki Minaj, have signed an open letter asking for protections against the unauthorized use of their songs to train AI models, expressing concerns that unchecked AI could devalue their work and bar artists from fair compensation.

Meanwhile, PYMNTS wrote last week about the potential of generative AI to reduce the expensive burden of payments fraud.

“As this technology continues to mature and its adoption gains traction, it could become a cornerstone of modern payments fraud prevention strategies, promising improvements in accuracy, efficiency and cost savings,” that report said.

The excitement is due in large part to the technology’s potential to overcome the limitations of traditional fraud detection tools. Its capabilities could supplement current methods with real-time identification and neutralization of payments fraud, which could protect the purchasing experience and improve banks and businesses’ bottom lines.

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