Amazement. Excitement. Controversy. Fear.By now, you’ve probably heard of ChatGPT, the revolutionary artificial intelligence (AI) technology that has stunned the world in 2023. Perhaps you’ve even tried out the free version of this powerful tool to draft an email to your boss or write a poem about your pet.
As exciting as generative AI applications like ChatGPT are, they’ve also triggered fear and uncertainty across many spheres, from education, where many school districts have banned students from using AI to write their term papers, to the financial services industry, where major banks like JPMorgan Chase, Bank of America and Wells Fargo have prohibited their employees from using AI for corporate communications, citing compliance concerns. Meanwhile, other financial institutions, such as Goldman Sachs, are experimenting with generative AI tools internally to help write and test code, which has some developers worried about their roles.
While conversational AI tools like ChatGPT, Jasper and Google Bard have suddenly captured the public’s imagination, the underlying technology is not new. And it’s certainly not the only—or best—use case for generative AI in banking.
Cloud adoption is now a necessity for financial institutions seeking enhanced services, requiring changes in work culture, system integration and regulatory compliance. As the financial landscape evolves into distinct segments, executing effective digital strategies is crucial for long-term success, positioning institutions to prosper in the new age of banking.
Adopting the cloud is no longer a nice-to-have option for financial institutions (FIs) that want to lead by example; it is a requirement. The benefits offered by a cloud-based platform make it an essential and revolutionary solution for any bank aiming to offer a best-in-class product to its customers.
As with all revolutions, change is required in order to achieve the most effective outcome. In the case of the cloud, this includes the way people work, the integration of new systems with existing platforms, an upgrade of risk and control mechanisms, buy-in from senior management and regulatory approvals.
Banks should aim to embrace these changes, as the benefits far outweigh the short-term challenges—benefits such as resilience, rich functionality, speed-to-market and scalability, not to mention the financial and human resource benefits.
Although the future is unpredictable, as COVID-19 has shown, what is beginning to emerge is an industry structure across FIs that is shifting from an “All Winner” environment of dominant incumbents owning the market, to a highly diversified one comprised of the following segments:
Future Winners: These organizations are the incumbents that are evolving their business model and becoming platforms, competing based on their relevance and brand, and leveraging technology and digital partnerships to enable this.
Utility Players: These organizations provide core banking services and have an optimized cost structure.
New Entrants: These are the new challengers to the market that are digitally enabled and have the technology and ability to be nimble.
Vertical Specialists: These are focused on a specific business, for example asset managers or Big Tech organizations that specialize on payments.
Losing Players: These organizations will be acquired or fail over the next 3 to 5 years.
Naturally, most financial institutions would prefer to find themselves in the Future Winners segment, along with other organizations that are facing complex technology architectures, evolving their business models and meeting changing customer needs under the guidance of strong, forward-thinking leadership.
And who can blame them? Especially as it becomes clear that those organizations that are able to effectively execute on a digital strategy will prosper in the new age of banking, while those that hesitate may find they face even stronger headwinds in the future.