Executive Summary

In the rapidly digitising world, the integration of Artificial Intelligence (AI) across the financial services sectors presents immense opportunities. The global AI in retail banking market size was valued at $3.88B in 2020 and is projected to reach $64.03B by 2030, growing at a CAGR of 32.6% from 2021 to 2030. The latest research is showing that investment in new digital technologies boosts productivity for early adopters while depressing productivity for slower firms, who may become less competitive over time. Banking is leading the charge here, as the industry hosts some of the biggest near-term opportunities for AI application. Brian Moynihan, CEO of Bank of America, has said that AI could have “extreme benefits” and would help to reduce headcount. But he also urged caution adding “we have to understand how the decisions are made” as AI becomes more advanced. However, this progress is shadowed by a growing challenge: the AI Governance Gap. This gap signifies the disparity between AI technological advancement and the necessary oversight mechanisms to ensure its safe, ethical, and consistent application.

The AI Governance Gap emerges from the tension between AI’s rapid progression and the lagging frameworks to oversee its deployment. The retail banking sector, reliant on precise data interpretations, is particularly vulnerable. A lack of robust AI governance can lead to unpredictable decision-making, regulatory complications, and operational inconsistencies from risk management to customer interactions.

While the industry has made several attempts to bridge this gap, current solutions often fall short. Approaches such as ignoring the issue, leaving the responsibility to board members, or addressing problems on a case-by-case basis, among others, have proven to be reactive, inconsistent, or overly general, leaving significant vulnerabilities.

A more comprehensive and proactive approach is the development of a Tailored AI Governance System. Central to this solution is the belief that AI governance should be dynamic, specifically tailored to an organisation’s unique needs, and that strategic leaders, including C-Suite and board members, should take an active role in its oversight.

Choosing the right partner to design and implement a Tailored AI Governance System is crucial. Essential criteria include demonstrated AI experience, strategy expertise, a systemic viewpoint, industry-specific tailoring, proven experience in board and executive training, a clear stakeholder management perspective, and a flexible approach to project management. Leaders that select partners with these capabilities, will experience greater success in AI Governance attempts.

The AI Governance Gap, if left unchecked, presents significant risks to retail banking firms. However, with the right approach and partnership, organisations can harness AI’s capabilities responsibly and ethically, ensuring both operational excellence and maintained trust among all stakeholders. To read the full report, please click the download button above.