More than $1 trillion. That’s how much analysts estimate that artificial intelligence will save the banking industry. Financial institutions should expect a 22% cost reduction in operating expenses due to AI, with most of the savings coming from the front office. But it all hinges on one thing: consumers’ level of comfort with AI.
There are about 7.5 billion people on the planet, give or take a few. But that number pales in comparison to the number of connected devices worldwide. According to Autonomous, a financial research firm, people are outnumbered three-to-one by their smart computing devices — an estimated 22 billion in total. And the number of smart devices will continue to explode, with venture capital firms pouring $10 billion annually into AI-powered companies focusing on digitally-connected devices.
For financial institutions, their slice of this massive AI pie represents upwards of $1 trillion in projected cost savings. By 2030, traditional financial institutions can shave 22% in costs, says Autonomous in an 84-page report on AI in the financial industry. Here’s how they break down those cost savings:
Front Office – $490 billion in savings. Almost half of this ($199 billion) will come from reductions in the scale of retail branch networks, security, tellers, cashiers and other distribution staff.
Middle Office – $350 billion in savings. Just simply applying AI to compliance, KYC/AML, authentication and other forms of data processing will save banks and credit unions a staggering $217 billion.
Back Office – $200 billion in savings. $31 billion of this will be attributed to underwriting and collections systems.
These numbers align with what other analysts and research firms have forecast. Bain & Company has pegged the savings at around $1.1 trillion, while Accenture estimates that AI will add $1.2 trillion in value to the financial industry by 2035.
In the U.S. banking sector, 1.2 million employees have already been exposed to AI in the front-, middle- and back office, with almost three-quarters of workers in the front office using AI (even if they don’t know it). If you include the investment and insurance industry, there are 2.5 million U.S. financial services workers whose jobs are already being directly impacted by AI.