According to European banking executives, the rise in artificial intelligence will make banks more reliant on large US tech companies, posing new threats to the sector.

Since the release of OpenAI’s popular chatbot ChatGPT in late 2022, banks have been exploring methods to implement generative AI, which has sparked a great deal of excitement about the application of artificial intelligence (AI) in financial services. AI is already widely utilised for identifying fraud and money-laundering.

However, several raised worries that banks will become even more dependent on a limited number of tech suppliers due to the amount of processing power required to build AI capabilities during a meeting of fintech executives this week in Amsterdam.

Bahadir Yilmaz, the chief analytics officer of ING and head of the Dutch bank’s artificial intelligence efforts, told Reuters that he anticipated relying “more and more going forward” on Big Tech firms for equipment and infrastructure.

“You will always require them since these technologies occasionally require extremely high machine power. Additionally, building this technology is not really viable for a bank,” he stated.

According to ING’s Yilmaz, banks’ reliance on a limited number of IT firms is “one of the biggest risks.” He emphasised that European banks in particular needed to make sure they could switch between alternative tech suppliers and prevent “vendor lock-in.”

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Last year, the British government suggested regulations to control how much financial corporations depend on outside technology giants like Amazon, Microsoft, Google, IBM, and IBM. Authorities are concerned that issues at one cloud computing provider can possibly cause several financial institutions’ systems to go down.

“AI demands enormous computational capacity, and the only reasonable source for that capacity is Big Tech,” Joanne Hannaford, head of technology strategy at Deutsche Bank’s corporate bank, stated to attendees at the Money20/20 conference earlier this week.

According to Hannaford, the bank must inform authorities when data is moved to the cloud. This notification process might get considerably more intricate as cloud computing usage grows.

She said that banks would also have to explain to authorities the potential cost of not taking use of cloud computing’s capabilities.

The main topic of discussion during the Amsterdam conference was AI.

There are “synergies” between Mistral AI’s GenAI products and financial services, according to the CEO of the French AI firm, which is regarded as France’s equivalent of OpenAI.

“We see a lot of opportunities in creating analysis and monitoring information … which is really something that bankers like to do,” Arthur Mensch stated.

ING is in the process of developing an AI chatbot that handles 2.5 percent of incoming customer support discussions. In response to a question about when the chatbot will be able to handle at least 50% of customer support calls, Yilmaz predicted within a year.

The European Union’s securities watchdog released its first statement on artificial intelligence (AI) last week, asserting that banks and financial institutions are legally obligated to protect clients when adopting AI and cannot avoid boardroom responsibilities. It forewarned that the protection of retail investors will probably be significantly impacted by technology.

(Adapted from ThePrint.in)

Categories: Economy & Finance, Regulations & Legal, Strategy, Uncategorized