AMSTERDAM (Reuters) – The boom in artificial intelligence will increase banks’ dependence on big U.S. tech firms, creating new risks for the industry, European banking executives said.
Excitement around using artificial intelligence (AI) in financial services has soared. Banks explore deploying generative AI, inspired by OpenAI’s viral chatbot ChatGPT.
At a fintech executives’ gathering in Amsterdam, concerns emerged about the computing power required for AI development. Some worry it would further consolidate banks’ reliance on a few tech providers.
ING’s chief analytics officer, Bahadir Yilmaz, anticipates increasing reliance on Big Tech companies for infrastructure. He expects this trend to continue in the future.
“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,” he said.
Banks’ dependency on a small number of tech companies was “one of the biggest risks”, ING’s Yilmaz said, emphasising that European banks in particular needed to ensure they could move between different tech providers and avoid what he called “vendor lock-in”.
Britain last year proposed rules to regulate financial firms’ heavy reliance on external technology companies, such as Microsoft, Google, IBM and Amazon. Regulators are worried that problems at a single cloud computing company could potentially bring down services across many financial institutions.
Moreover, the reliance on Big Tech for AI solutions raises concerns about vendor lock-in and dependency risks. Banks must carefully evaluate the long-term implications of partnering with Big Tech firms for AI capabilities, considering factors such as scalability, flexibility, and interoperability.
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