BANKING EDITION: Banks racing into Gen despite the risks and why being a top 20 GenAI leader matters less than you think! Real-time blockchain!
Richard Turrin
Helping you make sense of going Cashless | Best-selling author of "Cashless" and "Innovation Lab Excellence" | Consultant | Speaker | Top media source on China's CBDC, the digital yuan | China AI and tech
Artwork of the day: Detail from “The Lady with an Ermine,” Leonardo da Vinci. Dated to c.?1489–1491
Leonardo's Lady with an Ermine is one of the most important works in all of Western art.
In painting “The Lady with an Ermine”, da Vinci created the first modern portrait in the history of art, surpassing the traditions of the time. It was also one of just four portraits of women that Leonardo created in his lifetime, along with the Mona Lisa, Ginevra de Benci and the ‘Portrait of an unknown woman’.
Leonardo “In a sense freed from its frame the subject of the painting, who turned as she is in gaze and gesture beyond the field of vision, is not frozen, as was the custom of the time, in a stiff profile or three-quarter profile, yet is somehow alive.” (Marek Rostworowski)
I picked this painting today because her calm gaze captivated me and brought me inner peace. It is my gift to anyone in banking or financial services facing the pending disruption. Hopefully, it will help them to find peace!
THE TOP 20 BANKS LEADING IN AI AND WHY IT MATTERS LESS THAN YOU THINK
The AI race is so young that, for now, I don’t believe it really matters much who is leading. This is a 500-lap race, and we’re on lap 2!
Still, in a few years, it will be obvious that bank leadership in AI is more than a beauty contest. It directly indicates how future-proof the bank will be and sets winners apart from losers.
The “Evident AI Index” benchmarks banks and shows who the leaders are:
The full list of 50 banks from Evident Insights, Evident AI Index can be found: here
The “leadership report” used in my Takeaway section: here
In the “Leadership Report” Evident Insights summarizes its findings.
My comments, often sarcastic, follow each of the nine boxes:
Banks are future-proofing themselves with AI and its clear that banks that are advanced in AI are also leading in stock performance. While it is also true that the leaders are also large banks, that alone isn’t enough. Massive institutions like Deutsche Bank (#29) and NAB (#35) are big but are nearer the bottom of the 50 institutions examined.
AI is too new to proclaim a winner in the AI race. While it’s fair to say that larger banks with deeper pockets will likely win the race, there is no guarantee.
We’re likely to see smaller, more aggressive banks working with upstart AI companies, launching some of the AI services that will be the big award winners.
The reality of media coverage is that smaller banks simply don’t get in the media. This strengthens the case I made above! Even if a mid-tier bank does great work in AI, you won’t hear about it. Case in point: my former employer, Intesa-Sanpaolo, in Italy. They don’t make the press but are working hard on AI with good success.
Bank press releases on AI are the equivalent of showing off. None of these banks have enough real success with AI to make a big deal of it. That said, they do understand “innovation theater.” They signal to the world through press releases that they are being innovative and hope this somehow lifts their stock price or, at a minimum, the perception that they are innovative!
Well, isn’t that amusing! Glad to see LinkedIn included in the research! That the percentage of AI posts increased isn’t a surprise. The entire world has gone AI mad, and I think if you were to survey AI in media, you’d see a similar doubling of the amount of AI content. My own writing about AI on Linkedin has easily doubled. I would call this a societal macro trend more than banks’ love of AI.
Banks aren’t quantifying anything because their efforts with AI are so new that there is literally nothing to show! Kudos to the four banks, DBS, JPM, Paribas, and SocGen that do list their user cases, but for everyone else, there likely isn’t that much to list. Even worse, listing use cases is potentially dangerous. Remember, innovation requires failure, and investors won’t like reading that half of the AI use cases failed!
So, 15 of 50 bank CEOs discuss how their institutions deal with AI. This makes perfect sense since, in my view, 35 of the 50 barely know what AI is! While at IBM, I had the pleasure of meeting regularly with bank C-suite members, and I learned one thing. Keep it simple when discussing tech. Aside from the CTO or CIO, most in the C-suite are Luddites. So it shouldn’t surprise that CEOs don’t talk about AI!
What is amazing to me is that CEOs are now recommended to take to LinkedIn to get their message out. A few brief years ago, they all would have laughed at writing a post (we all know that they are written for them) on LinkedIn, but now it is recommended practice! Can you see the CEO’s face when his media department comes in with a schedule of LinkedIn posts? Oh, how the times have changed!
Love the concept of a CAIO or CDAO. These are disciplines worthy of C-level promotions. At the very least CEOs should want these positions filled as any failure of an AI, and you know there will be spectacular failures can be blamed on another C-suite member! I know that is harsh, but some of the AI failures we will witness in coming years will be epic!
??STRAIGHT TALK??
No bank has yet cracked AI use, and the expectation that they will in the near future is frankly absurd.
We are way too early in the “AI race” to predict or show the exact impact of AI on banks or their balance sheets. The race is long, and it is unfair to rule banks in or out of contention. All may be winners, and I would watch smaller banks very carefully!
Our latest AI tech will take YEARS to make it into production on a scale that would impact a bank. In fact, the best analysis of this was from S&P Global, who claimed that AI will be an “incremental game changer.” My article on this is in my special edition newsletter on banking AI. (below)
In closing, here’s what S&P said in its analysis, which I believe to be true and does a lot to cool the AI hype:
?? “It remains to be seen to what extent banks that successfully deploy AI strategies materially outperform those that are AI laggards.”
?? “It remains to be seen at what speed and to what extent, it makes business sense for banks to invest in transformational AI strategies.”
?? “Notable changes due to the application of generative AI in banking are unlikely to be immediate.”
?? "The bulk of banks' near-term use cases will likely focus on offering incremental innovation (i.e., small efficiency gains and other improvements across business units)."
The SEVEN Key Risks of Generative AI for Banks
Executive Summary Emerging Risks And Opportunities Of Generative AI for Banks 1.58MB ? PDF file, Download
This executive summary by Singapore’s MAS reads like a comic book, and that’s not a bad way to learn the seven big risks banks will be taking with Generative AI (GenAI).This executive summary by Singapore’s MAS reads like a comic book, and that’s not a bad way to learn the seven big risks banks will be taking with Generative AI (GenAI).
??TAKEAWAYS: GenAI “risk dimensions.”
The GenAI feedback loop is designed to ensure continuous improvements throughout the lifecycle of the system.
??STRAIGHT TALK??
We can all look forward to MAS’s complete white paper on GenAI risks in banking, but this executive summary is more than most need to know about AI risks.
Bankers across the globe, and most definitely consultants producing GenAI papers, are grossly underestimating GenAI’s most significant problem, “explainability.”
MAS Points out how Singapore already has guidance for algorithms and digital systems through the Fairness, Ethics, Accountability and Transparency (FEAT) Principles.
The problem is that FEAT principals are best suited to algorithmic systems. With traditional algorithms, you can test them to prove or disprove bias. GenAI will make the input and output bias and prejudice impossible to track.
领英推荐
While algorithms are fixed, GenAI will actually change its answers over time and cannot explain how it arrives at its answers. Let’s leave GenAI’s ability to hallucinate aside for a moment, but how will the FEAT principles be modified?
I’m sorry, but the scenario of being denied a loan by a bank and then having the bank say that they can’t explain why is not comforting or acceptable! Clearly, it’s not just loans; a bank’s most lowly bank customer chatbot will have the same issue.
Anyone thinking that GenAI adoption in banking will be quick is in for a rude awakening.
A GenAI roadmap for financial services: who needs humans anyway?
Read this carefully to see why humans get in the way!
“GenAI performs best when humans act as complementors of GenAI output, taking over tasks that fall outside AI’s domain of expertise (as in the predictive AI example of credit scoring). But when humans act as enhancers—taking the output and trying to make it better—they can significantly diminish the value of using AI.”
BCG GenAI Roadmap For Finserv 3.72MB ? PDF file, Download
??TAKEAWAYS:
The hype and confusion surrounding “generative AI” (GenAI) have caused many executives to question their existing “predictive AI” strategies. The two complement each other and should run in parallel.
Understand the dividing line between jobs better suited to humans and AI. Don’t think that humans can help! (see chart above)
Companies see greater impact and capture more value when they holistically reimagine entire processes end-to-end and with AI. Redesigning processes from the ground up.
The big wins from AI consistently come from broad transformations that involve rethinking how an entire process works within an AI landscape.
Although numerous constellations of AI use are possible, many big opportunities marry predictive AI and GenAI in complementary ways—following basic patterns.
Rapid advances in AI make it all too easy to become fixated on the technology. However, softer success factors, such as people, organizational structure, and talent, are all deciding factors.
Only when a strong AI governance framework's safeguards are in place will it be possible to gain acceptance of and trust for AI solutions.
??STRAIGHT TALK??
So BCG makes it very clear that if you think that humans will be what is commonly referred to as a “copilot” for AI, you better think again. GenAI does the specific jobs assigned to it better than humans!
If that isn’t a shocker, nothing is! Yes, humans will still be required to do jobs that require skills that GenAI or Predictive AI can’t master, but humans are not necessary and are not advised to participate in jobs GenAI can do well. Humans get in the way!
BCG does very well in this report by focusing on AI's transformational nature. This requires companies to reevaluate their processes, discard the old ones, and build new ones suitable for AI.
Many managers will find it challenging to adopt this mindset. Most will want to integrate AI into their existing workflow, something they’ve likely spent years perfecting. Instead, a new workflow needs to be integrated into AI!
In my book “Innovation Lab Excellence, " I wrote that digital transformation is about people, not technology. I’m glad to see that BCG holds the same opinion about AI!
It is far too easy to be absorbed by the tech and forget that, even with GenAI at work, banks, and other financial institutions are, at least for now, still run by and for people.
What is clear is that all financial institutions will need fewer people sooner than we thought!
Blockchain is transforming banking, please stop telling me it's failing.
Not a day goes by when I don’t read that blockchain is failing. I don’t buy it, and you shouldn’t either. This short and sweet paper by Accenture does an excellent job of putting things in perspective.
??TAKEAWAYS:
-90% of banks are exploring blockchain tech, but this does not mean they are actively building.
-The number one use case is intra-bank cross-border transfers, which leads us to JPM and Citibank….
......Finish this article on Substack here
Asia's supercharged financial block in the center of the world's "New Monetary Order."
Asia's future split between globalization and fintech.
Asia’s future is a play on the impact of globalization and fintech on Asia’s domestic champion banks.
In short, they will face challenges from new “non-bank financial institutions (NBFIs), the Grabs and Alipays of the world, and larger global banks looking to elbow into their territory. Which will win? Let’s look at the four scenarios!
Read the rest of this article on a "rising Asia" on Substack here
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Lead Future Tech with Human Impact| CEO & Founder, Top 100 Women of the Future | Award winning Fintech and Future Tech Influencer| Educator| Keynote Speaker | Advisor| Responsible AI, VR, Metaverse Web3
1 年Number one today never means you will stay number 1- in particular not with emerging tech like AI changing an entire society. Thanks for this great walk through so many hot topics! Leonardo Da Vinci is always an inspiration!
Consultative Sales & Partnerships | Integrated fintech | Embedded payments | SaaS | Ecommerce | Business finance | Alternative finance | Digital currency | Cryptocurrency | Blockchain | Web3 |
1 年Thank you for sharing, Richard. This is extremely interesting to read and very topical, especially the points that technology should be about people, that innovation doesn’t come without failure and, the value add of blockchain technology.
Product Lead driving business innovation with MBA expertise | Fintech | Payments | Innovation
1 年Richard Turrin the content is ?? as always ??