The surge in artificial intelligence (AI) is transforming the financial services landscape, with European banks increasingly turning to major U.S. tech firms to power their AI initiatives. Since the debut of OpenAI's ChatGPT in late 2022, interest in deploying generative AI has skyrocketed among banks looking to enhance capabilities such as fraud detection and anti-money laundering.
However, at a recent fintech conference in Amsterdam, banking executives voiced concerns over the growing dependence on a handful of Big Tech companies. The primary issue revolves around the immense computing power required to develop and sustain advanced AI technologies, which makes it challenging for banks to build these capabilities in-house.
Bahadir Yilmaz, ING's chief analytics officer overseeing the Dutch bank's AI strategies, highlighted this dependency during an interview with Reuters. \"You will always need them because sometimes the machine power that is needed for these technologies is huge. It's also not really feasible for a bank to build this tech,\" Yilmaz explained. He emphasized that this reliance on a limited number of tech providers poses significant risks, particularly in terms of vendor lock-in, which could limit banks' flexibility to switch providers if needed.
The concern is echoed by Joanne Hannaford, who leads technology strategy at Deutsche Bank's corporate division. Speaking at the Money20/20 conference, Hannaford noted, \"AI requires huge amounts of compute and really the only way that you're going to be able to access that compute sensibly is from Big Tech.\"
In response to these challenges, British regulators proposed new rules last year aimed at mitigating the risks associated with financial firms' heavy reliance on external technology companies like Microsoft, Google, IBM, and Amazon. The regulations seek to prevent a single cloud computing company's issues from cascading and disrupting services across multiple financial institutions.
As European banks navigate this evolving landscape, ensuring the ability to transition between different tech providers will be crucial in maintaining operational resilience and safeguarding against potential disruptions.
Reference(s):
Banks say growing reliance on Big Tech for AI carries new risks
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