Banks are making significant cost savings through initial artificial intelligence implementations, but the technology will eventually hit their profits
Banks are making significant cost savings through initial artificial intelligence implementations, but the technology will eventually hit their profits
Banks could save huge amounts in operating costs through artificial intelligence (AI), but the technology will eventually erode their profits, as AI agents make recommendations to customers.
According to McKinsey’s latest report, while AI savings could be up to 20%, taking account of the cost of the technology, banking industry profits could fall 9% as customers move money based on AI agent recommendations.
“The impact of savings, while welcome, won’t last,” McKinsey said. “As with earlier innovations, competition will likely erode the gains for banks and most of the benefits will accrue to customers over time.”
The report said $23tn of the global total of $70tn in consumer deposits sits in current accounts with zero interest rates, with much of the remainder in low-interest accounts.
“If just 5% to 10% of [current account] balances migrated to top-of-market rates, an action that might be prompted by AI agents, that could reduce the banking industry’s total deposit profits by 20% or more,” McKinsey said.
