A Deloitte study reveals how Artificial Intelligence is transforming the banking sector, boosting productivity, security, and personalization while reducing costs and operational risks.
The rapid adoption of Artificial Intelligence (AI), especially Generative AI (GenAI), is reshaping operations, driving efficiencies, and opening new fronts of innovation within the financial sector.
A recent Deloitte study, titled “Changing the Game: The Impact of AI on the Banking and Capital Markets Sector,” highlights the transformative role of AI in the banking and capital markets sectors. In this article, we bring you key insights from this study, demonstrating how AI is shaping the future of financial institutions. Take a look:
AI as a Strategic Pillar
AI, which initially played a supporting role, is now at the center of strategies for major financial institutions. Large banks are turning AI into a critical factor for long-term success, investing over $1 billion annually in their AI capabilities. This approach positions AI as a fundamental piece in defining strategies and enhancing banking operations, allowing adaptation in a competitive and ever-evolving landscape.
Operational and Financial Benefits
AI is delivering substantial improvements in operational efficiency. With its ability to automate repetitive tasks and analyze large volumes of data, financial institutions can achieve results without increasing their teams. Practical examples include:
- A 32% reduction in credit card delinquencies with the use of AI.
- A 90% decrease in fraud in account opening processes.
Moreover, the expected impacts in the coming years demonstrate the strategic value of AI in the sector:
- A 5-15% improvement in the cost-income ratio over the next 5-7 years.
- Potential personnel cost reductions of 0-15%, depending on the function.
- 10-20% savings in IT development and maintenance costs through automation.
These figures reinforce how AI not only optimizes costs but also enhances security and reduces operational risks.
Impact on Productivity and Automation
AI adoption has driven significant productivity increases, especially in areas such as insurance and investment banking. Some notable improvements include:
- A 113% increase in productivity in insurers using generative AI in underwriting processes.
- Projections indicate that AI adoption in investment banking could boost productivity by 27-35% by 2026.
Personalization and Revenue Growth
Another notable impact of AI in the financial sector is its ability to hyper-personalize products and services for customers. Some institutions are already using AI algorithms to suggest the “next best action” for their clients, improving retention and attracting new customers. Additionally:
- Risk-based pricing could generate a 2-3% growth in net interest income.
- A 5-10% increase in interest and commission revenues is expected, thanks to the hyper-personalization of marketing and offers.
Process Automation and Credit Granting
In the UK, banks are already fully automating the granting of loans up to $100,000 (and in some cases up to $250,000), showcasing the potential of AI to accelerate traditional processes.
Risk Reduction and Loss Prevention
In addition to operational benefits, AI also plays a crucial role in risk mitigation. Advanced AI models help in:
- Reducing credit loss provisions by 10-15%.
- Identifying fraud and financial crimes, lowering litigation costs and operational losses.
AI Integration Across the Value Chain
The implementation of AI in various operational areas is generating significant marginal gains for banks. From end-to-end process automation to improving customer experience with digital assistants, AI enables financial institutions to create more agile and efficient operations, providing faster and more accurate insights.
Risks and Ethical Considerations
While AI brings enormous benefits, it also presents challenges, such as cybersecurity risks, amplifying biases in models, and regulatory issues surrounding data sovereignty.
Deloitte’s report makes it clear that AI, especially Generative AI, will be a game-changer in the banking and capital markets sectors. Institutions that embrace this transformation and invest in a clear strategy for AI integration will be better positioned to lead the next wave of innovation in the financial market.
Here at N5, we have created the world’s first Fin Sky, a generation of hypervertical AIs for the financial industry, representing a paradigm shift in the use of this technology. They are not just an extension of what already exists but a new way of thinking about how technology can be used to increase security, optimize revenues, enhance customer satisfaction, and minimize costs and risks.
Talk to one of our specialists today and discover how our solutions can prepare your institution for the future. https://n5now.com/schedule-demo/
