How Gen AI is shaping the future of the banking industry

NTT DATA's recent 'Intelligent Banking in the Age of AI', a sweeping survey of the global banking industry, provides up-to-date insights into the adoption of Gen AI within the financial sector.

The study, spearheaded by the NTT DATA Group’s Global Industry Office, surveyed 810 banking executives from across different geographic locations and markets.

The findings reveal an increasing divide in how organisations can best harness Gen AI as its integration into the banking landscape continues.

Robb Rasmussen, NTT DATA's Head of Global Marketing & Communications, states: "Generative AI represents a pivotal moment for the banking industry. While the potential benefits are enormous, the challenges of implementing Gen AI are complex and varied, requiring careful navigation and a structured approach.

"Given the anticipated high spending on Gen AI, achieving a return on investment is crucial," he adds. "Many banks will expect Gen AI to drive long-term savings by automating IT tasks, improving operational efficiency and creating competitive advantages, but it’s important to note that achieving meaningful ROI requires a clear strategy, tailored implementation and robust governance at the same time."

How Gen AI impacts the banking sector

NTT DATA finds that 97% of banks have adopted a Gen AI strategy, with 71% increasing their IT budgets for Gen AI, marking an average rise of 11%. NTT says that Gen AI is revolutionising banking with automated compliance procedures, AI-driven customer service bots and enhanced fraud detection through real-time anomaly spotting.

Niraj Singhal, Group Senior Vice President at NTT DATA North America, reflects on the broader impact, stating: "Gen AI isn’t just a technology. It’s a mindset shift. It offers cost efficiency, competitive advantage and the potential to fundamentally transform how banks operate."

Despite these strides in adoption, there remains a significant discrepancy in how organisations are deploying this technology. For instance, 50% of banks measure Gen AI success by enhanced efficiency and productivity, while 49% focus on minimising IT costs and 48% on securing a competitive edge.

Transforming an industry

Gen AI is playing a prominent role in various banking sectors like retail, investment and commercial banking, with features such as AI-powered chatbots in retail banking, automated fraud detection, and tailored financial advice which both secures and enhances customer relations. In investment banking, NTT finds that AI is being used to enhance market analysis and algorithmic trading, transforming portfolio management and the ability for effective decision-making.

NTT DATA underscores Gen AI’s impact across all facets of banking:

• 49% of banks utilise Gen AI to optimise working capital decisions.
• 44% observe AI-driven improvements in checkout experiences and customer support automation.
• 69% of leaders recognise that Gen AI enhances fraud detection accuracy.

Arsen Aslanyants, Managing Director at NTT DATA North America, highlights the role of Gen AI in cybersecurity: "Fraudsters are heightening the sophistication of attacks, which is consequently increasing the frequency of data breaches.

"Encryption, multi-factor authentication and real-time monitoring are baseline measures, but identifying weaknesses allow firms to tailor defences leveraging technologies such as AI," he adds. "With growing regulatory scrutiny on consumer protection, cybersecurity investment not only safeguards profits and maintains customer trust, but it also prevents regulatory penalties.”

Challenges and the future

Despite its promise, Gen AI presents concerns such as data privacy risks, posing challenges for regulatory compliance and security. NTT says that effective AI governance is essential to ensure fairness, transparency and accountability. According to its report, 41% of banks cited financial issues as the primary challenge to Gen AI utilisation, with security concerns and regulatory issues also proving significant barriers.

To navigate the AI landscape successfully, implementing structured methods to develop robust infrastructures and integrate AI responsibly is crucial. Collaborative AI-human workflows, rather than complete automation, emerges as the preferred method among 52% of banks.

Rasmussen concludes: "Many banks are lacking in maturity when it comes to this technology and are unsure where to start. Partnering with systems integrators can be a good starting point, allowing them to access the latest knowledge while ensuring compliance with industry regulations. 

“By working with specialised providers, banks can ensure that Gen AI implementations can deliver the desired ROI, while maintaining robust data protection measures and meeting both internal security standards and regulatory requirements.”

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