Concerns about new risks are reportedly growing as banks become more reliant on big tech companies for artificial intelligence (AI) capabilities.
European banking executives said in a Reuters report published on Friday, June 7, that the financial industry’s reliance on a limited number of technology companies is seen as one of the biggest risks for banks.
According to the report, the use of AI in financial services is set to gain significant traction following the launch of OpenAI’s ChatGPT in late 2022, building on banks’ existing AI deployments for tasks such as fraud detection and money laundering.
But the amount of computing power required to develop AI capabilities is making banks increasingly reliant on a small number of technology providers. ING Chief Analytics Officer Bahadir Yilmaz told Reuters banks need to have the ability to switch between different technology providers and not be locked into a single vendor.
Regulators are also paying close attention to the issue: Last year, Britain proposed rules to curb financial institutions’ over-reliance on outside technology companies such as Microsoft, Google, IBM and Amazon, the report said.
The concern, according to the report, is that a problem at a single cloud computing company could disrupt services at multiple financial institutions.As AI adoption and computing power increases, moving data to the cloud is expected to become more complex, requiring banks to notify regulators.
According to the report, Joan Hannaford, head of technology strategy at Deutsche Bank’s corporate bank, stressed the importance of effectively communicating the risks and benefits of embracing cloud computing to regulators.
The report comes about a week after Europe’s markets regulator, the European Securities and Markets Authority (ESMA), issued guidance for firms that use AI when providing investment services to retail clients.
ESMA said that while AI offers potential benefits to firms and customers, it also comes with risks such as algorithmic bias, data quality issues and “opaque decision-making by firm staff”.
The report also came a day after the U.S. Treasury Department issued a request for information seeking public input on the use of AI in the financial services sector.
