Financial Services Sector Hesitant to Adopt AI

Despite the potential cost-cutting benefits, financial services companies have been slow to embrace artificial intelligence (AI), mainly due to regulatory concerns and fears of job losses. The Financial Times (FT) reports that these issues are significant roadblocks for banks.

Tom Blomfield, co-founder of Monzo and group partner at Y Combinator, highlights this hesitation: “The big banks will definitely not adopt [the technology] as quickly as any of the FinTech.” Blomfield believes that generative AI will enhance efficiency and reduce costs for banks.

Supporting this view, a Capgemini study reveals that only 6% of retail banks are ready for widespread AI implementation. Nevertheless, McKinsey estimates AI could add $340 billion annually to the global banking sector, equivalent to 4.7% of industry revenues. Despite this potential, job loss fears remain prevalent.

Nasir Zubairi, CEO of Luxembourg House of Financial Technology, explains the misconception: “People don’t understand that it’s there as a productivity tool. They still genuinely believe it will take away their jobs.”

The apprehension extends beyond finance. The creative industry also fears AI’s impact on jobs. Recently, artists like Billie Eilish and Nicki Minaj signed an open letter seeking protections against unauthorized use of their work to train AI models, worried about devaluation and fair compensation.

Moreover, PYMNTS recently discussed generative AI’s potential to mitigate payments fraud. As this technology evolves, it could enhance fraud prevention strategies, improving accuracy, efficiency, and cost savings. Its ability to address traditional fraud detection limitations could significantly benefit banks and businesses.