Financial institutions are increasingly using advanced technology to deliver services and manage their operations, often as a competitive differentiator, and banks were among the early adopters of the first technology wave.
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Drawing on a recent Citi Treasury and Trade Solutions (TTS) client survey, the report finds a clear consensus on the use and applicability of AI: 93% of financial institution respondents said that AI adoption has the potential to increase profitability over the next five years through improved productivity.
Applying these findings to Citi's global banking division's pooled profit projections suggests that AI could increase overall banking industry profits by 9% ($170 billion) in 2028, from just over $1.8 trillion to nearly $2 trillion.
AI has the potential to drive productivity gains in banks by automating routine tasks, streamlining operations, and allowing employees to focus on higher-value activities. GenAI can have a significant impact on internal facing tasks such as content and information management, coding, and software development.
“Our AI-enabled approach in treasury and trade solutions focuses on the importance of data organization and accessibility. Creating high-quality, reliable data sources enables our teams to bring innovative products to market and improve customer experiences. Through initiatives like Citi Payment Insights and Citi Payment Outlier Detection, we leverage data and cutting-edge technology to drive risk mitigation and operational efficiency for our customers,” said Thuy Lai, head of treasury and trade solutions, Citi Vietnam.
The integration of AI-powered bots into retail and corporate banking has the potential to be hugely transformative, providing benefits such as automated decision-making and finding the best offers for customers, and improved operational efficiency for banks.
But the transition to a bot-driven world also raises concerns about data security, regulatory compliance and ethical considerations.
AI models are known to hallucinate and create information that doesn’t exist, so organizations run the risk of AI chatbots becoming fully autonomous, which could have a negative financial or reputational impact on their business.
AI-enabled clients are likely to intensify price competition in the financial sector, especially retail financial services.
AI is likely to be adopted more quickly by digitally native, cloud-based companies such as FinTechs and BigTechs, with agile incumbents soon to follow. Many incumbents, weighed down by technology and cultural debt, will likely lag behind in AI adoption and lose market share.
Every technology goes through cycles of hype, disillusionment, and mass adoption. Expectations for AI are rising from Q2 2023 onwards.
The gap between hype and mass production remains large for now as financial institutions work to move from “wow” to “how.” Many of the big technology companies are in a fierce race to become the AI provider of choice for banks and enterprises.
AI in finance is still in the proof-of-concept stage, but it’s moving fast.
Citi's report outlines use cases that are likely to emerge in 2024-2025 and beyond. The technology adoption strategy of most incumbents is to add technology to existing products or use new technology to improve productivity. In contrast, startups use new technology to decouple incumbent operations.
Finance is likely to face sweeping changes in a world of AI-powered agents, bots, etc. By 2030, AI-powered bots will play a key role in banking and finance.
“Citi's latest GPS report outlines the revolutionary potential of Gen AI in financial services, given its access to rich data, increased efficiency and ability to improve decision-making. The integration of GenAI will drive innovation, significantly enhance customer experience and reshape the competitive landscape,” said Ramachandran AS, Country Officer and Head of Banking, Citi Vietnam.
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