
The financial industry is witnessing a significant AI revolution, with banks and financial institutions embracing artificial intelligence technology and exploring its potential impact on business operations. Wall Street, in particular, has shown great interest in AI, with several banks actively recruiting AI-related talent and investing in the development of AI capabilities.
Among these banks, JPMorgan Chase & Co. is at the fore of the AI movement. In a global recruitment drive from February to April, JPMorgan advertised a staggering 3,651 AI-related roles, nearly double the number advertised by its closest competitors, Citigroup Inc. and Deutsche Bank. This surge in demand for AI talent is not limited to JPMorgan alone. Eigen Technologies Ltd., a company that assists firms like Goldman Sachs Group Inc. and ING with AI, reported a five-fold increase in inquiries from banks during the first quarter of 2023 compared to the same period last year.
The release of OpenAI's ChatGPT in November 2022 has heightened awareness among banking executives about the transformative potential of AI.
Investor enthusiasm has also propelled the stocks of AI-related companies, signalling the growing interest in this technology. However, recent market fluctuations have shown signs of cooling, with chipmaker Nvidia experiencing a decline in its stock price. This has had a knock-on effect on Asian suppliers in the AI industry.
The allure for businesses in adopting AI lies in the potential for increased efficiency and effectiveness in everyday tasks, as well as streamlined complex analysis and risk modelling. This appeal is especially strong in the banking sector, where data underpins intricate investment decisions. Nevertheless, concerns remain regarding the eventual capabilities of AI and the need for proper regulation.
Lawyers specialising in technology and regulatory issues have confirmed that the integration of AI into banking processes has already commenced. Deutsche Bank, for instance, utilises deep learning algorithms to evaluate whether international private banking clients are excessively invested in specific assets. It matches individual customers with suitable funds, bonds, or shares, and human advisers then validate the recommendations generated by AI. Likewise, JPMorgan has filed for a patent for a service similar to ChatGPT to assist investors in picking equities. Morgan Stanley is allowing various business units within the firm to experiment with open-source large language models for testing purposes. The bank has even patented a model that utilises AI and deep learning to interpret the sentiment of communications from the Federal Reserve, aiding in the detection of monetary policy direction.
Barclays is currently in the exploratory phase of studying AI implementation, with one potential application being the improvement of customer service agents' understanding of client finances. However, CEO CS Venkatakrishnan noted that integrating AI tools across the entire firm will likely take multiple years.
Wells Fargo is using large language models to assist in determining the information that clients must report to regulators and to identify areas for improving business processes. The bank has also developed a chatbot-based customer assistant using Dialogflow by Google Cloud.
Goldman Sachs analysts have released a report stating that approximately 300 million full-time jobs worldwide could be susceptible to automation through generative AI.
Bank of America's CEO, Brian Moynihan, expressed optimism about the potential of AI in April, highlighting its "extreme benefits" and its ability to reduce the need for human labour. However, he emphasised the importance of understanding how AI decisions are made, urging caution in the implementation of this technology. As bankers have a fiduciary duty not to trade based on unreliable information, the expanding use of AI poses challenges in ensuring the reliability and accuracy of AI-generated insights.
Furthermore, the adoption of AI comes with significant costs. Developing and operating AI systems can be expensive, particularly in the case of large language models. Estimates indicate that the cost of using such models to answer a single query can reach up to $14. This expense primarily stems from the substantial cloud computing resources required to process and analyse complex financial documents.
While the adoption of AI in the banking industry shows promise, some caution against potential risks. Transparency and effectiveness remain key concerns. Figures like billionaire investor Warren Buffett, Chairman and CEO of Berkshire Hathaway, express apprehension about the widespread adoption of complex AI systems, noting that once developed, they cannot be easily undone.
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