AI Gains for Big Banks Pose a Competition Headache

Core Insights - Bank of America has developed its AI-driven chatbot, Erica, which handles approximately 2 million customer interactions daily, equivalent to the work of 11,000 employees [1] - The bank has invested nearly $120 billion in technology over the past decade, with a $12 billion tech budget last year, including $4 billion for development and $8 billion for maintenance [2][4] - High costs are attributed to the cautious deployment of new tools, particularly generative AI, which can jeopardize trust and waste investments [3] Investment and Returns - Bank of America's consumer division has reduced its workforce from 101,000 to 55,000 due to technological advancements, and fraud losses have been halved since 2018 [5] - Despite increased spending on technology, many financial executives struggle to quantify returns on AI investments, with less than half able to provide measurable outcomes [7] - Morgan Stanley and Bank of America have invested significantly in data preparation, with the latter spending $3 billion from 2014 to 2019 to make its data usable for AI projects [9] Competitive Landscape - Bank of America and Capital One hold 65% of all AI-related patents owned by banks, indicating a strong position in intellectual property within the financial sector [6] - JPMorgan Chase spends about $2 billion annually on AI projects, achieving cost savings of nearly $2 billion, primarily related to fraud [10] - The competitive advantage in AI is likely to widen between the largest banks and smaller institutions, raising concerns about market competition and regulatory implications [13]