AI lenders

Banks have long been fans of AI, being among the industries that quickly embraced machine learning and deep learning techniques, and now years later, the industry is beginning to see how the major banks rank in how they use and invest in the technology.

Banks – with their significant capacity for investments, the massive amounts of proprietary data they manage, and “often fluid business models” – used machine learning and deep learning technologies for such jobs as improving risk-management processes, loss mitigation, fraud prevention and driving efficiencies and profit growth, Miriam Fernandez, associate director of financial institutions for S&P Global Ratings, wrote in a report in October 2023.

“For the same reasons, it is also little surprise that banks are now poised to take a further step in integrating more powerful ‘generative AI’ technology in their operations,” Fernandez wrote.

Some recent reports have looked at how aggressive banks have been using AI in their operations and how much they’re investing into the technology, particularly 16 months after generative AI blasted onto the scene with OpenAI’s release of its ChatGPT chatbot in November 2022.

Evident, a platform that benchmarks and tracks AI investments in the financial services sector, in its Evident AI Index in November 2023 ranked JPMorgan Chase first among 50 of the largest banks in North America, Europe and Asia that it tracks. Evident assessed all the banks on more than 100 individual indicators that fall within four pillars – talent, innovation, leadership and transparency.

After running the numbers, JPMorgan Chase came out with a 69.3 score, ahead of Capital One with 62.4 and Royal Bank of Canada with 51.7. In each of the four pillars, the bank ranked first or second. Capital One finished first in talent capability and development and second in innovation, including patents, research, ventures and ecosystem.

Evident noted that JPMorgan Chase “continues to radically outperform the wider market in AI research, helping to preserve its position as the banking leader for Innovation” and that it ranked first in transparency because of its “wide-ranging efforts to uphold and reinforce responsible AI practices across the bank.”

Edith Reads, a financial analyst with the company behind the Stocklytics stock analytics mobile app, noted the top standing in the transparency, pointing to its “ethical practices in deploying AI. The bank has focused on ensuring the use of AI technologies, earning recognition for promoting integrity and accountability throughout its organization.”

Stocklytics also said that JPMorgan is investing heavily in AI talent, increasing its share of AI research output from 30% in 2018 to 45% last year. It has more than 200 AI researchers, more than four times than that of Royal Bank of Canada, its closest competitor.

Looking at AI Patents

AI patents is another area that has gotten some attention. According to market research firm Statista, Capital One filed the most AI patent applications among banks from 2021 to 2024, with 967 of them. It was followed by Bank of America with 640 patent applications filed and JPMorgan Chase, with 274.

Stocklytics’ Read said Capital One’s innovation push “exemplifies its prolific pursuit of AI patents. By continuously investing in AI-driven solutions, the financial service firm is revolutionizing customer experiences and setting new standards for security, efficiency, and personalized banking services.”

In November 2023, Venable LLP wrote a column about the rapidly increasing number of AI patent applications being filed in the United States. Between November 2021 and 2023, there was a 367% increase in Google searches touching on AI patents and U.S. patent filing records shows the appearance of terms such as “machine learning” in applications went from 5,500 in 2011 to more than 100,000 in 2021, according to Venable.

In those 10 years, the appearance of the term “artificial intelligence” grew from more than 5,000 times to more than 100,000 times.

“Patent applications are strong indicators of where businesses see future innovation and technological value moving to within their industries,” the law firm wrote.

That includes within banks, financial institutions and fintech companies. A 2022 survey of IT executives in banking by The Economist found that 85% have a “clear strategy” for using AI in products and services, Venable wrote. In addition, a Forbes survey last year found that a third of C-level already were seeing tangible results from using AI.

“AI-related patents in this area cover everything from actuarial tasks to automation of asset management, blockchain, cryptocurrency, insurance, robo-advisors, and securing digital transactions,” Venable wrote.

Generative AI on the Radar

All of this points to financial services and banking sectors being aggressive in adopting AI, a trend that is expected to continue with generative AI. In the S&P Global report, in 2022, the banking, financial services and insurance industry captured 18% of the global machine learning market share, second only to the IT and telecommunications field at 19%.

Now comes generative AI, which both S&P Global and global consulting firm Ernst & Young found promise of significant benefits as well as possible risks. That said, the enthusiasm for embracing the technology is there. In a December, Ernst & Young wrote that a survey found that 99% of financial services leaders said their organizations were deploying AI in some manner and all said they were using or planning to use generative AI.

Banking’s use of generative AI will be incremental, with continued testing of models and heavy investing in them being the norm in the next two to five years, before deploying them to customers and running more transformative projects, according to Fernandez.

“The bulk of banks’ near-term use cases will likely focus on offering incremental innovation (i.e., small efficiency gains and other improvements across business units) and will be based on specific business needs,” Fernandez wrote, adding that “despite that gradual onset, the potential for wide-ranging application of generative AI means the banking sector is among those likely to experience the biggest impact from the advancement.”

She cited a 2023 McKinsey & Co. report that said that generative AI could add between $200 billion and $340 billion in value annually if use cases are fully implemented.

“The ways in which generative AI will be used by banks is likely to hold some surprises, but it seems certain that the new technology will result in both an evolution and an expansion of AI’s role within the banking sector,” Fernandez wrote.