Banks See Risk in Dependence on Big Tech’s AI Capabilities

The growing dependence of banks on Big Tech companies for artificial intelligence (AI) capabilities is reportedly raising concerns about new risks.

This dependency of the financial industry on a limited number of tech companies is seen as one of the biggest risks for banks, European banking executives told Reuters in a report posted Friday (June 7).

The use of AI in financial services has gained significant traction since the launch of OpenAI’s ChatGPT in late 2022, building upon banks’ existing deployment of AI for tasks like fraud detection and money laundering, according to the report.

However, the amount of computing power required to develop AI capabilities has led banks to increasingly rely on a small number of tech providers. Bahadir Yilmaz, chief analytics officer at ING, told Reuters that banks need to have the ability to switch between different tech providers and avoid being locked into a single vendor.

Regulators are also paying attention to this issue. Last year, Britain proposed rules to regulate financial firms’ heavy reliance on external technology companies, such as Microsoft, Google, IBM and Amazon, the report said.

The concern is that problems at a single cloud computing company could potentially disrupt services across multiple financial institutions, per the report. Moving data into the cloud is expected to become more complex as the adoption of AI and computing power increases, requiring banks to notify regulators.

Joanne Hannaford, who leads technology strategy at Deutsche Bank’s corporate bank, highlighted the importance of effectively communicating the risks and benefits of leveraging cloud computing to regulators, according to the report.

This report comes about a week after Europe’s markets regulator, the European Securities and Markets Authority (ESMA), issued guidance for companies using AI when providing investment services to retail clients.

ESMA said that while AI has potential benefits to firms and clients, the technology also brings with it risks, including algorithmic biases, data quality issues and “opaque decision-making by a firm’s staff members.”

The report also comes a day after the U.S. Treasury Department released a request for information, saying it is seeking comments from the public about the use of AI in the financial services sector.