"Big Tech AI Dependency: Banks Warn of Emerging Risks"

Boston Brand Media brings you the latest - "Banks are cautioning against the escalating reliance on Big Tech for AI, highlighting emerging risks associated with this dependency. The warning underscores concerns about the potential consequences of entrusting critical financial functions to tech giants, whose algorithms and data practices may lack transparency and accountability. As financial institutions increasingly integrate AI-driven solutions from these companies, they face heightened exposure to regulatory, operational, and ethical challenges, prompting calls for careful evaluation and risk mitigation strategies."

AMSTERDAM, June 7 (Reuters) - European banking executives expressed that the surge in artificial intelligence (AI) adoption will heighten banks' reliance on major U.S. technology companies, thereby introducing novel risks to the industry. 

They noted the escalating enthusiasm for employing AI in financial services, particularly in functions like fraud detection and anti-money laundering, which has intensified following the introduction of OpenAI's widely-discussed chatbot, ChatGPT, in late 2022. This surge has prompted banks to explore avenues for implementing generative AI technologies.

During a recent meeting of fintech executives in Amsterdam, there were voiced concerns about the growing necessity for substantial computing power in developing AI capabilities, potentially deepening banks' dependence on a select few tech providers. Bahadir Yilmaz, ING's chief analytics officer overseeing the Dutch bank's AI initiatives, informed Reuters that he anticipates an increasing reliance on Big Tech firms in the future, particularly for infrastructure and machinery support.

Yilmaz emphasized the perpetual necessity for Big Tech firms due to the immense computational power required for these technologies, asserting that it's impractical for banks to independently develop such infrastructure. He identified banks' reliance on a limited pool of tech companies as a significant risk, stressing the importance for European banks to maintain flexibility by seamlessly transitioning between various tech providers and preventing what he termed as "vendor lock-in."

Boston Brand Media also found that last year, Britain introduced regulations aimed at overseeing financial firms' significant dependence on external technology providers like Microsoft, Google, IBM, and Amazon. Regulators are concerned that issues at a single cloud computing company could disrupt services across numerous financial institutions. Joanne Hannaford, responsible for technology strategy at Deutsche Bank's corporate bank, stressed at the Money20/20 conference that accessing the substantial computing power required for AI is predominantly feasible through Big Tech companies.

At the Amsterdam conference, AI took center stage. The CEO of Mistral AI, a French startup often likened to OpenAI, highlighted the compatibility between its GenAI products and financial services, citing opportunities in data analysis and monitoring that align with bankers' preferences. ING is piloting an AI chatbot for customer service, currently handling 2.5% of chats. Yilmaz anticipates it will manage over half within a year. The EU securities watchdog emphasized that banks and investment firms must ensure customer protection and boardroom oversight in AI usage, warning of its potential impact on retail investors.

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Source: Reuters‍