European banking executives have voiced concerns that the rapid adoption of artificial intelligence (AI) is increasing their industry’s reliance on major U.S. technology companies, creating new risks in the financial sector.
At a recent fintech conference in Amsterdam, executives highlighted that the substantial computing power required for AI development is making banks more dependent on a small group of tech giants. This reliance could pose significant challenges, including potential disruptions and issues related to vendor lock-in.
“You will always need them because sometimes the machine power that is needed for these technologies is huge,” said Bahadir Yilmaz, Chief Analytics Officer at ING. “It’s also not really feasible for a bank to build this tech.”
Yilmaz emphasized the risks associated with dependency on a limited number of providers. “One of the biggest risks is banks’ dependency on a small number of tech companies,” he noted, stressing the importance for European banks to ensure flexibility in moving between different tech providers to avoid vendor lock-in.
The excitement around AI in financial services has surged since the launch of OpenAI’s ChatGPT in late 2022. Banks are exploring ways to leverage generative AI beyond its current uses, such as detecting fraud and money laundering.
Joanne Hannaford, who leads technology strategy at Deutsche Bank’s corporate bank, echoed these concerns. Speaking at the Money20/20 conference, she said, “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.”
Regulators are also paying attention. Last year, the United Kingdom proposed rules to regulate financial firms’ heavy reliance on external technology companies, including Microsoft, Google, IBM, and Amazon. There is a growing concern that issues at a single cloud computing company could potentially disrupt services across numerous financial institutions.
The need for vast computing resources in AI development underscores a critical challenge for banks: balancing the adoption of cutting-edge technologies with the management of operational risks associated with reliance on external providers.
As the financial industry continues to innovate with AI, banks are urging a cautious approach to ensure that technological advancements do not come at the expense of stability and security.
Reference(s):
Banks say growing reliance on Big Tech for AI carries new risks
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