AI Hype in Banking Cools as Skepticism Grows
Bankers are starting to approach AI tools with a healthy dose of skepticism — with some experts suggesting the hype surrounding the technology is cooling. But AI tools still hold immense potential to shape the industry in the future.
By Caroline Hronrich
Corporate leaders are placing big bets on AI. An overwhelming 99% of executives plan to invest in the technology within the next year, and 97% report feeling a strong sense of urgency to incorporate AI in business operations, according to a recent Slack survey.
AI has been a hot topic in banking for years. High-profile executives like JPMorgan’s Jamie Dimon and Goldman Sachs’ David Solomon have been outspoken about the technology’s potential for financial services. Many banks are already leveraging AI — or actively developing their own tools — to enhance everything from fraud detection to customer service.
But despite the increasing drive to integrate AI into business operations, many employees remain unsure about how to apply the technology in their daily work, the Slack report shows. Concerns about the inaccuracies of generative AI tools like ChatGPT have contributed to tempering excitement surrounding the technology.
"I think more people are rightfully skeptical about the use of AI, they’ve had it around that they see the challenges and the pitfalls of it, whether it’s inaccurate information or unnatural biases that come into play," says Angela Petulla, director of Online Marketing at altLINE by The Southern Bank. "I think people are a little more hesitant to use it."
So is AI hype cooling? Some experts think so.
"I think the banking world and industry as a whole is learning it’s a little bit of the Wild West in the world of AI," says David Becker, CEO of First Internet Bank. "I think the excitement is there but there is also an air of caution that wasn’t there 12 months ago."
The Hype Cycle
AI, like many technologies, is currently navigating a "hype cycle." This term refers to the fluctuating stages of excitement around a technology, emphasizing the gap between what is commercially viable and the lofty promises made by companies. The Gartner Hype Cycle visually represents this journey, with an initial peak of high expectations, followed by a steep decline and a phase of disillusionment.
Generative AI tools have passed the peak of inflated expectations, but the tool is still poised to have tremendous business impacts, Afraz Jaffri, senior director analyst, KI leader at Gartner, wrote in an article.
"The hype surrounding GenAI can cause AI leaders to struggle to identify strong use cases, unnecessarily increasing complexity and the potential for failure," Jaffri wrote. "Organizations looking for worthy AI investments must consider a wider range of AI innovation."
While we may not have reached total disillusionment, bankers are approaching AI tools — especially generative AI — with caution.
"We’re going to continue to improve the AI capabilities, in the next 5-10 years we’re going to see some big leaps and bounds as the technology gets more advanced" Petulla says. "I think people have developed a healthy level of skepticism, but are excited for the future of it."
Dig deeper into understanding AI in banking:
- AI and Automation Are Different Tools. Misunderstanding the Difference Will Hit Your Wallet
- Chase’s AI Chief Explains Why the Biggest Banks Will Win the AI Race (Probably)
- What Do FDIC Examiners Think About AI? To Find Out, I Asked One
Cutting Through the Noise
Some of the concerns around AI adoption arise from a fundamental misunderstanding of the technology. While generative AI tools like ChatGPT are still relatively new, AI encompasses a wide range of technologies, some of which banks have been utilizing for years. For example, some banks used AI tools in 2020 during the Paycheck Protection Program to manage the high volume of data entry required for processing applications, says Charles Potts, executive vice president and chief innovation officer for the Independent Community Bankers of America (ICBA).
"You have to level set the whole term artificial intelligence," Potts says. "Artificial intelligence really is an umbrella term for a lot of different things, much of which has been around since the beginning of banking."
Instead of focusing solely on how you can implement AI tools, Potts advises leaders to first identify their specific challenges and goals, then seek out technology that can effectively address those needs.
"I suggest we start talking about the functional problems we’re trying to solve. That’s where we’re going to see continued momentum and movement through to 2025," Potts says. "I’ll go find the right tool, it may contain some artificial intelligence capabilities, but let’s focus on what banks need to do to generate revenue and maintain their costs."
Where AI is Already Making an Impact
While the hype surrounding AI may be slowing, its adoption continues to grow — and the fintech industry is taking notice. The potential value of AI and analytics for global banking could reach up to $1 trillion, according to McKinsey.
Many banks are already integrating AI tools across various functions to enhance team efficiency and, in some cases, cut costs related to talent. For example, Grasshopper Bank, a digital business bank, utilizes AI in its financial crimes and fraud team in several ways. One key application, according to Alena Robertson, BSA manager at Grasshopper Bank, is using AI to conduct open-source research, scanning the internet for information that can assist in financial investigations. In some instances, AI even takes on tasks typically handled by junior analysts.
"We don’t have to do as much of the legwork," she says. "We’re able to use our human insights to supplement investigations."
On bank marketing teams, generative AI can be a valuable tool for brainstorming creative ideas for campaigns and content. It also provides useful feedback on projects when team members are unavailable.
"We don’t have to do as much of the legwork. We’re able to use our human insights to supplement investigations."
— Alena Robertson, Grasshopper Bank
"I think as marketers we often find ourselves in a little bit of a slump sometimes and it’s nice to have another perspective," Petulla says. "If you’re a solo marketer, and if you work in community banking, especially the conversation based AI tools, it can replace that person that you would have otherwise given those ideas to."
Petulla also uses AI tools to handle small but often tedious tasks, such as writing meta descriptions for SEO. While some marketers rely on AI for content generation, Petulla remains cautious about fully embracing this approach.
"I don’t like to use it for pure content creation for articles because I find it takes so long to fact check," she says. "That’s less productive for me. But others I find in the industry find it a lot more productive to start with that base."
AI is already having, and will continue to have, a transformative impact on many industries, with much of its potential still untapped. Ultimately, the key differentiator, according to Potts, will be the human element in the conversation.
"Artificial intelligence isn’t going to replace employees, but employees with artificial intelligence skills will replace employees," Potts says. "A world where success and differentiation is predicated on the human in the loop —which is the core of what community banking is all about."
