Why it’s Time for Banks to Hire a Chief AI Officer — and What That Looks Like

While banks aren't rushing to hire AI executives , they are investing in the technologies more frequently. Banks that are serious about making digital transformations when it comes to AI should consider having a centralized leader to take on the job. Here's why.

Hiring a chief AI officer, or CAIO, is an emerging trend that companies from hospitals to staffing firms are exploring as the utilization of generative AI increases. However, the chief AI officer title has been met with skepticism, with some claiming the technology could outpace the need for such a specific title.

Banks aren’t necessarily rushing to fill these roles. Right now, they’re mostly hiring data scientists, data engineers, prompt engineers and general AI experts to meet their needs according to Gartner research. More than half of banks (52%) say they plan to hire generative AI staff or experts this year, according to the Gartner data.

Banks do have big plans for this technology — and tapping a chief AI officer may become more prevalent soon. Roughly 22% of leaders from banking and investment firms say they are currently implementing or already implementing generative AI, according to research from Gartner. About 22% are piloting use cases, and 30% are planning to actively implement the technology in the next six months.

A leader whose sole focus is to implement and upskill staff on new AI technology and tools is needed at financial institutions right now, experts say. That said, hiring for a chief AI officer can be difficult, says Agustín Rubini, director analyst in the Financial Services and Banking team at Gartner.

Chief AI officers, he says, often need both advanced science degrees and experience in business strategy. That combination isn’t always easy to find, Rubini says. But that doesn’t mean the role isn’t needed.

“We believe that the CAIO will start appearing more and more in this picture,” he says.

Who Is The Boss?

The first challenge banks will have to address if they want to hire a chief AI officer will be understanding where that role sits within the broader organization.

At some companies, the chief AI officer may sit on the IT side, while in other companies, they may report to the chief operations officer. The role is a sort of hybrid between a chief technology officer and a chief information officer, Rubini says. But the internal focus of the role may make it slightly closer to a CIO.

“The CIO is a little bit closer to getting value for the business on the initiatives,” he says.

What are CAIOs responsible for?

CAIO will be expected to perform the following functions:

  • Partner with business leaders on AI initiatives.
  • Orchestrate the design, creation, testing and deployment of AI technologies with technology leaders.
  • Design, test and deploy AI policies with legal, risk and compliance objectives in mind.
  • Measure the business and financial impact with the finance and operations teams. CAIOs must deliver quantifiable results.

AI touches every department in a bank in some way, says Sophia Velastegui, chief product officer at Aptiv, an automotive and technology company. Banks should make sure their CAIOs have a broad view of how the business functions, so they can better understand how AI can help workers in all areas of the business, from customer service to HR.

“For AI to be most impactful, it has to solve key business problems and goals,” she says. “Bringing AI to every function and role of your company is key.”

Dig deeper:

From the Top Down

Another reason why banks may need to consider hiring a chief AI officer is that many employees expect their AI strategy to come from the top down. More than half of workers (57%) say they want training on AI from their companies, according to an Adecco survey.

AI strategy, in general, does tend to originate from the top, Rubini says. Roughly 74% of bank executives say their AI strategies originate from leadership, the Garner research found.

Banks also have to consider what their AI strategies will be long-term, Rubini adds. Do they want this individual to build their own team of experts who will then develop AI tools for the company internally? Or would the company rather outsource to consultants or vendors?

From the Top Down:

Nearly three-quarters of bank executives say the company's AI strategies come from down the pipeline of leadership.

Wall Street banks are already building their own tools: Goldman Sachs, JPMorgan Chase and Morgan Stanley have all developed their own AI tools for a variety of functions. JPMorgan Chase, for example, has developed IndexGPT, an AI investment tool that analyzes and selects securities based on customers’ needs. The bank is also experimenting with AI for document management.

But smaller and mid-sized banks will probably want to partner with a vendor or a consultant to bring in new generative AI technologies. “A great way is instead of trying to learn everything with AI, partnering with key tech providers, so you start understanding the different flavors of how AI can be,” Velastegui says.

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AI Needs to be Part of the Conversation

Generative AI is still new territory for many small banks — but the pressure to innovate is building. If community banks want to keep customers and avoid losing business to mega competitors, leadership will need to think critically about how they can shift the culture toward digital first.

Banks often have siloed business and IT departments, and that can make it difficult to shift the culture toward digital transformation, according to McKinsey research. Banks also have aging workforces, who may be less open to using new technology.

“While technology is a potent tool, it cannot single-handedly solve the deep-rooted cultural challenges that impede the evolution of banks,” J.P. Mark, an equity research analyst and the founder of Farmhouse Equity Research, LLC, wrote in an article. “Actual progress demands a firm commitment to overturning established norms, setting the stage for a comprehensive digital transformation.”

“Actual progress demands a firm commitment to overturning established norms, setting the stage for a comprehensive digital transformation.”
— J.P. Mark

Banks may also struggle to recruit and retain strong tech talent. Software engineers, for example, may prefer to seek out roles at Big Tech firms like Facebook or Amazon. These companies often offer flexible work schedules and comprehensive benefits packages. If banks want to hire more tech talent, they’ll have to start offering competitive perks.

“Talent doesn’t see financial institutions as fast movers,” says Anna Kooi, national financial services practice leader at the consulting firm Wipfli. “Historically, the pace of change has not been anywhere near the pace of change on the technology side.”

Microsoft Didn’t Start Out as an AI Company, Either

Even the companies leading AI today — like Microsoft and Google — didn’t start that way. These companies invested in strong leadership and top talent that pushed their strategies forward, Velastegui says. Banks can do the same, but it may take some work on the talent side.

“Microsoft, Google, these tech companies, they were not AI companies [originally],” Velastegui says, who previously served as chief technology officer for AI at Microsoft. “But they have been leveraging AI for 20 years and have mind blowing innovation and growth.”

Community banks may be somewhat newer players in the space compared to Wall Street, but with time and a few new hires, it’s possible to make progress. Now, Velastegui says, is a good time for bank leadership to start making these decisions.

“If you don’t innovate now, you won’t be able to catch up later, let alone compete,” she says.

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