Traditional Banks in Europe are Slow to Adopt AI
From Mridutpal Bhattacharyya, Chief Policy Advisor
Financial Services Slow to Adopt AI Despite Clear Benefits
Financial services are lagging in successfully implementing artificial intelligence (AI), despite the evident productivity and cost-saving benefits the technology offers. This hesitation is primarily due to job loss fears, regulatory concerns, and institutional inertia, according to European fintech executives. This analysis is provided as per a Financial Times article published recently.
Key Points:
Hesitancy Among Big Banks:
Tom Blomfield, co-founder of Monzo, emphasized that traditional banks are slow to adopt AI compared to fintech startups.
Generative AI can make banks more efficient and reduce costs, but only 6% of retail banks are prepared to implement AI at scale.
Potential Value:
McKinsey estimates that AI could add up to $340 billion in value annually to the global banking sector, equivalent to 4.7% of total industry revenues.
Job Loss Concerns:
Many in the industry fear that AI will lead to job losses. Nasir Zubairi, chief executive of the Luxembourg House of Financial Technology, highlighted that AI should be seen as a productivity tool rather than a job threat.
AI in Practice:
AI's potential to improve efficiency is significant, with applications ranging from answering queries to analyzing vast amounts of text and numerical data.
Wong from NatWest and Klarna’s AI initiatives show how AI can enhance customer service by handling queries and tasks that previously required human intervention.
Regulatory and Compliance Challenges:
Banks must carefully navigate AI implementation to adhere to strict compliance rules and regulatory environments.
Successful examples include NatWest and N26, which have integrated AI while working closely with regulators to ensure compliance and improve their anti-money laundering controls.
Real-World Impact:
Swedish fintech Klarna reported that its AI assistant could handle the workload of 700 customer service workers, resolving queries in under two minutes, significantly reducing costs.
N26's AI model has reduced instances of criminal activities on its platform by 90%, showcasing the effectiveness of AI in enhancing security measures.
What do you think? Can banks and fintechs in India really be that fast to adopt internal purpose AI? Well, there are examples, but still, let’s discuss forward.