A recent study has found that only 25% of financial institutions are effectively leveraging AI to enhance their competitive position, while the remaining 75% are merely experimenting at the periphery, missing out on significant strategic opportunities. According to a Boston Consulting Group (BCG) report, AI, particularly generative, predictive, and agentic forms, is rapidly transforming the banking sector, challenging traditional advantages and introducing new risks and opportunities.
BCG emphasises the necessity for banks to integrate AI strategies into their core business plans, prioritising high-return use cases and ensuring alignment between investments and outcomes.
Investment in AI is on the rise, with one in three companies planning to allocate over $25m to AI initiatives by 2025. Despite this, many banks lack clear financial performance indicators to track the impact of their AI investments. Without these metrics, institutions risk not achieving the necessary return on investment.
BCG’s AI Radar indicates that while some companies are making significant investments, much of the funding is directed towards isolated productivity improvements rather than comprehensive transformation.
Generative AI is expanding rapidly into core financial workflows, supporting autonomous chat agents, real-time loan approvals, and automated document processing, according to the report. As AI shifts control to digital platforms, traditional banking profit models are under pressure. AI-driven underwriting and credit risk assessments are also reported to be increasing transparency, squeezing margins on loans, and disrupting advisory models. Fee-based services are additionally at risk as AI-powered payment networks pull volume away from traditional banking frameworks.
Two-thirds of banks struggle to hire AI talent
Organisational readiness remains a challenge, with two-thirds of financial institutions reporting difficulties in hiring AI talent. Fewer than a third have upskilled even 25% of their workforce. Decision-makers need the skills to assess and apply AI outputs effectively. Some banks are addressing this through training initiatives and AI tools, but comprehensive efforts are necessary to prepare for the shifts AI will bring.
Recently, US lender JP Morgan Chase announced plans to enhance its use of AI to boost efficiency while also indicating a slowdown in hiring. At a meeting in New York, the bank’s CFO, Jeremy Barnum, informed investors that recruitment would decelerate following the hiring of 60,000 employees over the past five years, marking a 23% increase in headcount. “We’re asking people to resist headcount growth where possible and increase their focus on efficiency,” said Barnum, as reported by Business Insider.
In the US banking sector, manual processes remain prevalent for regulatory compliance, with 42% of professionals frequently using such methods, according to a study in December last year. Wolter Kluwer’s 2024 Regulatory & Risk Management Indicator survey further reveals that 31% of respondents occasionally rely on traditional compliance methods.
Read more: Automation adoption lags in US banking compliance, despite growing investments
