Artificial intelligence (AI) is poised to revolutionise the global banking sector, potentially boosting its profit pool by $170 billion, a 9 percent increase, by 2028. This growth is expected to raise the sector’s profits from approximately $1.7 trillion to about $2 trillion, according to a Citi Group report.
The Citi TTS Client Survey reveals that 93 percent of financial institution respondents believe AI adoption could significantly enhance profitability over the next five years, driven by anticipated productivity gains.
“The pace of adoption and impact of Gen AI across industries has been astounding as it becomes clear that it has the potential to revolutionize the banking industry and improve profitability,” said David Griffiths, chief technology officer at Citi.
The report by Citi emphasises AI’s impending impact on the financial sector, promising to revamp existing operations, bolster security measures, and reshape the global intellectual property landscape. This transformation heralds a new era of efficiency and innovation in banking, driven by the power of AI. Also Read | Banks could boost revenues by 6% with Generative AI: Accenture report
Combatting Financial Fraud
AI-generated insights can help prevent real-time payment scams such as Authorized Push Payment (APP) fraud. In the United Kingdom, APP fraud accounts for 40 percent of UK bank fraud losses and estimates predict it could cost $5.25 billion in the US, the UK, and India alone by 2026.
AI Regulation in Finance
The European Union, China and Singapore are early movers in AI regulation in Finance while the USA on the other hand is taking its time.
So far, India has maintained a middle path to regulate AI. Initially, the Minister of Electronics and Information Technology (MeitY) in April 2023 spoke about not considering regulating AI. Then, last month, India swiftly pivoted to considering comprehensive AI laws by mid-2024. MeitY published an advisory requesting firms to seek government approval before publicly releasing any AI tools that is under trial or deemed to be unreliable.
Don't Miss | RBI deputy governor flags concerns surrounding financial institutions using AI
AI to Usher in New Era of Economic Growth?
AI may commoditize human intelligence, including analysis, decision making and content creation and so it stands at the threshold to usher in a new era of economic growth while simultaneously disrupting existing norms and industries.
Potential Pitfalls
As per the report, the banking industry will be the hardest hit by the deployment of AI, with 54 percent of roles at risk for AI-led job displacement.
Other high-risk sectors for job displacement include insurance (48 percent), energy (43 percent) and capital market (40 percent).
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
