Lenders Need To Be Aware Of The Risks Associated With AI-Powered Tools In Banking

Before adopting ChatGPT and other AI-powered tools, American banks still have "some work to do," according to Brian Moynihan, CEO of Bank of America.

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Moynihan acknowledged the technology's value while speaking remotely at Sydney's AFR Business Summit, but he warned banks that external generative AI technology must be "used correctly," according to Trade Algo.

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Inaccuracy, a lack of data-based answers, and the possibility of cyberattacks, the CEO continued, presented difficulties for ChatGPT's usage in banking.

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Banks are cautious when using AI apps; Bank of America has already prohibited employees from using ChatGPT for commercial purposes. Other financial institutions, such as:

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• JPMorgan
• Citi
• Goldman Sachs
• Wells Fargo
• Deutsche Bank

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How can banks get ready for the rise of AI? Banks are making significant investments in the field despite reservations about employing third-party AI solutions. According to GlobalData study, retail banks would spend $4.9 billion on AI platforms by 2024, up 21.8% yearly compounded from 2019.

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Yet, it will take time for bankers to benefit fully from the tech's disruptive impact. Lenders can adopt generative AI in the following ways:

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• Educate the workforce. Banks should educate stakeholders on generative AI and how it affects the financial industry. The technology has the ground-breaking potential to generate data for a wide range of complex applications.

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• Update your technology. Banks must budget for and invest in generative AI, whether they are building the technology themselves or contracting it out to outside vendors.

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• Determine its functions. Several use case for generating AI, such as detecting fraud, virtual assistants, tailored offers, and wealth planning, should be tested and evaluated by lenders.

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• Make a plan of action. In order to successfully integrate generative AI into their business operations, banks must be forward-thinking and develop detailed plans that address implementation, governance, and risk management.

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• Expect regulation; be ready. Regulators are still recognizing the hazards associated with artificial intelligence (AI), a relatively new technology, as they decide how to manage the market. Financial institutions who are interested in tools driven by AI need to get ready for regulations that will probably change as AI becomes more widespread.