Generative AI in Banking: Divergent Strategies and Rising Adoption Rates

Banks split on outcome-based strategies for GenAI

This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author. The report, titled "Intelligent banking in the Age of AI", has found that despite the growing adoption of GenAI technology in the banking industry, banks and financial institutions are split when it comes to outcome-based strategies - only half of banks (50%) see it as a tool for improving productivity and efficiency. Similarly, half (49%) believe it can be used for reducing operational IT spend. Transforming Banking Through GenAI GenAI is more disruptive than any previous advance in banking technology. It is less a question of if, but when banks embrace this technology, due to its transformative ability to embed intelligence at every layer of the banking ecosystem, from core banking to front-end systems. GenAI already making waves in the banking industry, with 6 in 10 organizations (58%) already fully embracing its transformative potential, an increase from 2023, when only 45% of organizations had fully embraced GenAI, according to NTT DATA's research. "Generative AI represents a pivotal moment for the banking industry," said Robb Rasmussen, Head of Global Marketing & Communications, NTT DATA. "While the potential benefits are enormous, the challenges of implementing GenAI are complex and varied, requiring careful navigation and a structured approach. Given the anticipated high spending on GenAI, achieving a return on investment is crucial. Many banks will be expecting GenAI to drive long-term savings by automating IT tasks, improving operational efficiency, and creating competitive advantages, but it's important to note that achieving meaningful ROI requires a clear strategy, tailored implementation, and robust governance at the same time." Financial constraints increasing pressure on ROI ROI has become a top priority for GenAI implementations, yet banking organizations are split in their opinions of which strategies are most important to them. Banks have long struggled with boosting productivity, and GenAI is poised to present a solution to this problem, but only half of banking leaders (50%) see it as a solution to current productivity woes. Cost optimization is another area where banks are split, with just under half (49%) are looking to reduce IT budgets accordingly. This disparity is highlighted on a global scale too - for example, almost 6 in 10 US banks (59%) are keen to reduce IT budgets and almost half (47%) want to cut operations budgets, while only 4 in 10 banks in Europe (43%) have IT budgets front of mind and just over a third (36%) are concerned with operations costs. Meanwhile productivity is the most important factor for European banks (46%), yet the US and APAC are placing even more emphasis on productivity themselves in comparison. Differing strategies across differing regions Strategies for realizing these benefits of GenAI differ vastly among organizations too. While around half of organizations are focusing on collaboration between humans and AI (51%) or a hybrid approach with existing systems (47%), over a quarter (28%) of banks are hoping to fully automate tasks and remove the need for manual input entirely. Fully automating tasks is an area which divides opinions worldwide as well, with a quarter of banks in the UK (25%) and Europe (24%) looking to fully automate the process, while almost a third of banks (32%) in the Americas and 35% of Japanese banks are looking to do the same. Robb Rasmussen, Head of Global Marketing & Communications, NTT DATA added: "It is clear that the ability to balance innovation with fiscal responsibility will define success for banks. However, many banks are lacking in maturity when it comes to this technology and are unsure where to start. Partnering with systems integrators can be a good starting point, allowing them to access the latest knowledge while ensuring compliance with industry regulations. By working with specialized providers, banks can ensure that GenAI implementations can deliver the desired ROI, while maintaining robust data protection measures and meeting both internal security standards and regulatory requirements."

IBM publishes study on uptake of GenAI in financial markets

This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author. Key Insights Gen AI adoption is set to soar. Only 8% of banks were developing generative AI systematically in 2024, and 78% had a tactical approach. As banks move from pilots to execution, more are redefining their strategic approach to service expansion, including agentic AI. Steady banking convergence is giving way to contrasting financial performance. Re-imagining the business model/processes and, importantly, execution will separate the winners from the rest. 60% of banking CEOs surveyed acknowledge they must accept some level of risk to harness automation advantages and enhance competitiveness.1 While over 16% of clients worldwide are comfortable with a branchless, fully digital bank as their primary banking relationship, competition is shifting from mass market digital offers to higher-value services, including embedded finance and advisory services to affluent investors and small and medium-size enterprises (SMEs). "We are seeing a significant shift in how generative AI is being deployed across the banking industry as institutions shift from broad experimentation to a strategic enterprise approach that prioritizes targeted applications of this powerful technology," said Shanker Ramamurthy, IBM Consulting's Global Managing Director Banking & Financial Markets. "As banks and other financial institutions around the world gear up for a pivotal year of investing in transformation, technology, and talent, we anticipate their efforts coalescing around initiatives using generative AI to level up customer experience, boost operational efficiency, reduce risks and modernize IT infrastructure." The report shares insights from analysis of industry C-suite leader sentiment, bank customer behavior and economic data from eight major markets -- the United States, Canada, European Union, United Kingdom, Japan, China, India, and Japan-and what financial institutions and their ecosystem partners can glean from the trends.

NTT DATA Unveils Global Insights on GenAI Adoption in Banking: Divergent Strategies for Boosting Productivity vs. Cutting Costs

Research from NTT DATA finds that as GenAI adoption rises, new pressures on return of investment are at the forefront of the challenges facing the banking industry. NTT DATA, a global digital business and IT services leader, has today launched a new global research report uncovering the use of generative AI (GenAI) in the banking sector worldwide. The report, titled "Intelligent banking in the Age of AI", has found that despite the growing adoption of GenAI technology in the banking industry, banks and financial institutions are split when it comes to outcome-based strategies - only half of banks (50%) see it as a tool for improving productivity and efficiency. Similarly, half (49%) believe it can be used for reducing operational IT spend. Transforming Banking Through GenAI GenAI is more disruptive than any previous advance in banking technology. It is less a question of if, but when banks embrace this technology, due to its transformative ability to embed intelligence at every layer of the banking ecosystem, from core banking to front-end systems. GenAI already making waves in the banking industry, with 6 in 10 organizations (58%) already fully embracing its transformative potential, an increase from 2023, when only 45% of organizations had fully embraced GenAI, according to NTT DATA's research. "Generative AI represents a pivotal moment for the banking industry," said Robb Rasmussen, Head of Global Marketing & Communications, NTT DATA. "While the potential benefits are enormous, the challenges of implementing GenAI are complex and varied, requiring careful navigation and a structured approach. Given the anticipated high spending on GenAI, achieving a return on investment is crucial. Many banks will be expecting GenAI to drive long-term savings by automating IT tasks, improving operational efficiency, and creating competitive advantages, but it's important to note that achieving meaningful ROI requires a clear strategy, tailored implementation, and robust governance at the same time." Financial constraints increasing pressure on ROI ROI has become a top priority for GenAI implementations, yet banking organizations are split in their opinions of which strategies are most important to them. Banks have long struggled with boosting productivity, and GenAI is poised to present a solution to this problem, but only half of banking leaders (50%) see it as a solution to current productivity woes. Cost optimization is another area where banks are split, with just under half (49%) are looking to reduce IT budgets accordingly. This disparity is highlighted on a global scale too - for example, almost 6 in 10 US banks (59%) are keen to reduce IT budgets and almost half (47%) want to cut operations budgets, while only 4 in 10 banks in Europe (43%) have IT budgets front of mind and just over a third (36%) are concerned with operations costs. Meanwhile productivity is the most important factor for European banks (46%), yet the US and APAC are placing even more emphasis on productivity themselves in comparison. Key performance indicators (KPIs) that financial institutions are using or planning to use to evaluate the success of its Generative AI initiatives: EuropeUSAPACLATAMJapanImproved productivity/efficiency46%52%58%43%35%Competitive advantage42%48%57%48%40%Cutting costs/Reducing IT budget43%59%51%44%48%Cutting costs/ Reducing operations budget36%47%49%36%28%Accelerate speed to innovate37%34%50%41%35%Increased net promoter score29%25%31%26%40% Differing strategies across differing regions Strategies for realizing these benefits of GenAI differ vastly among organizations too. While around half of organizations are focusing on collaboration between humans and AI (51%) or a hybrid approach with existing systems (47%), over a quarter (28%) of banks are hoping to fully automate tasks and remove the need for manual input entirely. Fully automating tasks is an area which divides opinions worldwide as well, with a quarter of banks in the UK (25%) and Europe (24%) looking to fully automate the process, while almost a third of banks (32%) in the Americas and 35% of Japanese banks are looking to do the same. Robb Rasmussen, Head of Global Marketing & Communications, NTT DATA added: "It is clear that the ability to balance innovation with fiscal responsibility will define success for banks. However, many banks are lacking in maturity when it comes to this technology and are unsure where to start. Partnering with systems integrators can be a good starting point, allowing them to access the latest knowledge while ensuring compliance with industry regulations. By working with specialized providers, banks can ensure that GenAI implementations can deliver the desired ROI, while maintaining robust data protection measures and meeting both internal security standards and regulatory requirements." NTT DATA's research dives into specific areas of the banking industry, including Payments and Wealth Management, as well as Fraud Prevention. To read the full report, please go to "Intelligent banking in the Age of AI" -ENDS- ABOUT the Research NTT DATA's survey was carried out on 810 banking leaders, from all global banking markets, and provides a 360-degree perspective on the sector's journey towards innovation and GenAI adoption. This survey was led by NTT DATA Group's Global Industry Office, part of the Global Marketing & Communications Headquarters. Demographics of Respondents: Global Insights: Leaders from a broad geographic spectrum across Europe, United States, Latin America, APACBreakdown by region/country: Europe (300): UK (100), Germany (100), Spain (60), Italy (40); US (150); APAC (240): Thailand (40), Vietnam (40), Australia (40), India (40), Singapore (40), China (40); LATAM (80): Brazil (40), Mexico (40); Japan (40)Institutional Scope: A cross-section from multinational banks to local banking institutions.Expertise Range: Perspectives across IT, Operations, Innovation, and Strategy. About NTT DATA NTT DATA is a $30+ billion trusted global innovator of business and technology services. We serve 75% of the Fortune Global 100 and are committed to helping clients innovate, optimize and transform for long-term success. As a Global Top Employer, we have diverse experts in more than 50 countries and a robust partner ecosystem of established and start-up companies. Our services include business and technology consulting, data and artificial intelligence, industry solutions, as well as the development, implementation and management of applications, infrastructure and connectivity. We are also one of the leading providers of digital and AI infrastructure in the world. NTT DATA is part of NTT Group, which invests over $3.6 billion each year in R&D to help organizations and society move confidently and sustainably into the digital future. Visit us at nttdata.com

Banking on (Artificial) Intelligence: By Prashant Jajodia

Adoption of Artificial Intelligence (AI) in financial services is expected to drive significant growth and productivity in the industry. Though some of the hype around Generative AI (Gen AI) is cooling down, the business opportunities are real. According to research conducted by PWC, AI will add a 14% increase to global GDP by 2030, equivalent to a growth of $15.7 trillion! AI adoption has risen rapidly driven by early adopters. Based on the Global AI adoption Index published by IBM, about 42% of enterprise-scale companies (> 1,000 employees) report having actively deployed AI in their business. Gen AI is being applied across several areas of financial services. The top 3 use cases of Gen AI are in customer service, risk management, and software development. Large Language Models (LLMs) can perform tasks such as summarisation, content generation, classification, semantic search, code generation, and extraction, with estimates suggesting a 40% productivity gain in many of these areas. IBM has built AI Virtual Agents for 7 of the top 10 UK banks, that support over 30 million customer chats per annum. Over the last 2 years, we have used Gen AI in these virtual agents to improve customer experience and provide a better service. For example, REDI a virtual agent created by IBM consulting in partnership with Microsoft has a higher Net Promoter Score (NPS) than human agents by 39%. Generative AI can have a big impact on fraud detection. By analysing massive amounts of transaction data, AI can identify unusual activity and flag potential fraud before it becomes a bigger problem. Language models (LLMs) are especially good at working with text data, which means they can help financial institutions analyse customer feedback, review documents quickly, and protect sensitive information. Banks and Insurance companies have several old legacy core transaction processing platforms. Many of these platforms were developed 30-40 years back in archaic programming languages that a very few people have skills in. IBM is successfully using Gen AI to reverse engineer and modernise these legacy platforms. For a building society in UK, we are modernising the core mortgage platform. Gen AI is helping our software developers by reading the code of the mortgage platform and generating business logic, translating the code to modern languages and testing the application. In many cases, this can reduce the time and cost of modernising legacy platforms by over 50%, thus improving the ROI on such programs. While AI has the potential to transform customer interactions, and business operations in financial services, adoption of this technology comes with its challenges. Given the industry is highly regulated the question of how to safely exploit AI is as important as where you are going to apply it. There are several considerations for building trusted AI, including data privacy, IP, transparency and explainability, compute and carbon cost, skills scarcity and, most important of all, governance. Strong governance is central to building trusted AI, especially in financial services. It is crucially important to understand what AI models the organisation has, the data that the organisation tunes and applies those models to, the models' intended uses, and their compliance with regulations. At least five countries have AI regulations, and two-thirds of the world's countries have privacy and data governance laws. Promontory (an IBM subsidiary specialising in regulations) is supporting many banks and insurance companies in the UK to develop strong AI governance and compliance to regulations. Generative AI is all about people, so the industry needs to invest in training people on AI. Putting this technology into the hands of users, across all functions and lines of business -- not just technology users -- allows everyone to understand how transformative it can be to their role and the workflows around them. IBM is driving AI-first skilling across its enterprise, intending to train 2 million learners in AI by the end of 2026. We are also making AI skills content available externally via the Coursera platform. As AI continues to transform the financial services industry, the challenge lies in upskilling people many of whose jobs will dramatically change.

IBM Study: Gen AI Will Elevate Financial Performance of Banks in 2025 - IBM (NYSE:IBM)

Initiatives are maturing from pilots and proofs of concept to targeted, enterprise-wide strategies ARMONK, N.Y., Feb. 5, 2025 /PRNewswire/ -- IBM IBM today released its annual expectations for technology and transformation in the global financial services industry in the year ahead in the IBM Institute for Business Value 2025 Outlook for Banking and Financial Markets. Key Insights Gen AI adoption is set to soar. Only 8% of banks were developing generative AI systematically in 2024, and 78% had a tactical approach. As banks move from pilots to execution, more are redefining their strategic approach to service expansion, including agentic AI. Steady banking convergence is giving way to contrasting financial performance. Re-imagining the business model/processes and, importantly, execution will separate the winners from the rest.60% of banking CEOs surveyed acknowledge they must accept some level of risk to harness automation advantages and enhance competitiveness.1 While over 16% of clients worldwide are comfortable with a branchless, fully digital bank as their primary banking relationship, competition is shifting from mass market digital offers to higher-value services, including embedded finance and advisory services to affluent investors and small and medium-size enterprises (SMEs). "We are seeing a significant shift in how generative AI is being deployed across the banking industry as institutions shift from broad experimentation to a strategic enterprise approach that prioritizes targeted applications of this powerful technology," said Shanker Ramamurthy, IBM Consulting's Global Managing Director Banking & Financial Markets. "As banks and other financial institutions around the world gear up for a pivotal year of investing in transformation, technology, and talent, we anticipate their efforts coalescing around initiatives using generative AI to level up customer experience, boost operational efficiency, reduce risks and modernize IT infrastructure." The report shares insights from analysis of industry C-suite leader sentiment, bank customer behavior and economic data from eight major markets -- the United States, Canada, European Union, United Kingdom, Japan, China, India, and Japan--and what financial institutions and their ecosystem partners can glean from the trends. For additional perspective and to download the full report, visit https://ibm.co/2025-banking-financial-markets-outlook. 1. 6 Hard Truths CEOs Must Face: How to Leap Forward with Courage and Conviction in the Generative AI Era. IBM Institute for Business Value. May 2024. https://ibm.co/c-suite-study-ceo IBM is a leading provider of enterprise AI, hybrid cloud architecture, security and ESG insights to the global financial services sector. Its deep industry expertise, extensive portfolio of services and solutions, and its robust ecosystem of fintech partners, empower collaboration, innovation, and creation with clients. As a trusted partner to banks, insurers, capital markets and payments providers, IBM guides financial institutions on all stages of their digital transformation journeys through IBM Consulting and delivers the proven infrastructure, software, and services they need through IBM Technology. For more information, visit www.ibm.com/industries/banking-financial-markets. The IBM Institute for Business Value, IBM's thought leadership think tank, combines global research and performance data with expertise from industry thinkers and leading academics to deliver insights that make business leaders smarter. For more world-class thought leadership, visit www.ibm.com/ibv. About IBM IBM is a leading provider of global hybrid cloud and AI, and consulting expertise. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Thousands of government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM's hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM's breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and consulting deliver open and flexible options to our clients. All of this is backed by IBM's long-standing commitment to trust, transparency, responsibility, inclusivity and service. Visit www.ibm.com for more information. Media Contact Mary Ellen Higgins IBM Global Financial Services Industry External Communications [email protected] 781.789.1911 View original content to download multimedia:https://www.prnewswire.com/news-releases/ibm-study-gen-ai-will-elevate-financial-performance-of-banks-in-2025-302368234.html SOURCE IBM IBMInternational Business Machines Corp$264.490.01%Overview Rating:Speculative37.5%Technicals Analysis660100Financials Analysis200100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs