AI innovation in the big banks is ramping up
By Alexandra Mousavizadeh, Co-founder and CEO of Evident
From credit cards and ATMs to mobile apps and chatbots, successful banks continuously reinvent themselves in response to new innovations. When the tech changes, so do they—and right now, AI is transforming the banking landscape at a pace never seen before.
The rapid advancements in generative AI over the last 18 months haveled banks to innovate faster, arguably, than at any point in the last two decades.A survey of 4,700 CEOs released at Davos in January 2024 suggested that 45%of corporate leaders were worried that their existing business model would notprove viable in a decade’s time without significant “reinvention.”
But while all banks are thinking about how AI can enable better,faster and more efficient operations, there are five key innovation areas in which the leading banks are makinglong-term, top-down investments.
Banks are investing in AI research to keep pace with cutting-edge AI advancements and explore how to scale theory into practice. 28 of the 50 banks in our AI Index published AI research in 2023 (40 of 50 since 2018), with JPMorgan Chase the current Index leader.
Banks are filing AI patents to protect their AI innovation or to profit from it in the future. 21 of the Index banks have filed AI patents since 2018 (up to and including the latest available data in 2H22), and Royal Bank of Canada is leading the way in our Index.
Banks are investing in AI startups to gain front-row access to new technologies as well as to realise direct financial gains. 30 of the banks we track engaged in AI-focused venture investments in 2023 (47 of 50 since 2018), with Goldman Sachs the current Index leader.
Banks are forming AI partnerships (technology, solutions, advisory, and academic) to help source, test, and develop new ideas, with 43 of the banks in our Index showing evidence of an AI-related vendor partnership and 30 showing evidence of an AI-related academic partnership.
Banks are participating in AI open-source activity to share intelligence and support the delivery of more efficient, transparent and better-debugged AI tools. 12 of the Index banks maintain an active AI-related GitHub code repository, with Capital One leading the Index in this activity.
What’s clear is that AI innovation in the big banks is ramping up. Our latest Innovation Reportreveals that in just the past six months, the banks published +284 new AI research papers, +449 new AI patents, and made +97 new investments into AI startups.
GettingAI innovation “right” is key for the banks that wish to prosper in thecoming decade.However, cultivating innovation is hard. It takes years of incremental investment in the above areas, and the established leaders – banks such as JPMorgan Chase, Capital One and Royal Bank of Canada – enjoy a massive head start within their established areas of strength.
These banks exhibited consistently strong performance acrossall innovation areas in our November 2023 AI Index and – based on ourlatest interim data – continue to lead the way as of March 2024. While otherbanks are ramping up, these banks are ahead and accelerating away from the pack. In the case of JPMorgan Chase, for example, not only was it responsible for nearly half (45%) of all AI research output in 2023, but it is growing its output 2.4x as fast as the other top 10 publishers.
Of course, judging innovation success typically requires the benefitof hindsight. It’s hard to identify until after it happens. But our research shows that the top four banks for AI capabilities also lead on AI innovation, and these banks are now seeing greatly improved stock price performance compared with their peers.
We can also see that different banking management teams are making very different choices in the AI innovation space. They’re grappling with questions such as: when to buildinternal capability versus bring in the best off-the-shelf solutions from externalpartners,which generative AI providers they shouldwork with, how to avoid vendor lock-in, and how to rebuild their infrastructure tomaximise flexibility.
Moreover, banking leaders are not operating in a vacuum.AI leaders are required to keep up with a staggering rate of externaldevelopments, educating themselves, their leaders, and their organisationsalong the way, and all the while establishing processes to mitigate complex newrisks and managing an emerging regulatory environment.
Jesse Pitts has been with the Global Banking & Finance Review since 2016, serving in various capacities, including Graphic Designer, Content Publisher, and Editorial Assistant. As the sole graphic designer for the company, Jesse plays a crucial role in shaping the visual identity of Global Banking & Finance Review. Additionally, Jesse manages the publishing of content across multiple platforms, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.