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By Shanker Ramamurthy, Global Managing Partner Banking & Financial Markets, IBM Consulting
The banking and financial markets (BFM) sector stands at the precipice of a transformative era driven by generative artificial intelligence (GenAI). This technology, which can create new content from existing data, is reshaping how financial institutions operate, compete and engage with customers. Recent findings from the IBM Institute for Business Value (IBV) reveal that while a significant majority of BFM chief executive officers (CEOs) recognise the necessity of embracing AI to maintain competitiveness, they face formidable workforce and cultural challenges. As institutions race to integrate generative AI into their operations, the implications for workforce dynamics and organisational culture cannot be overstated.
The competitive imperative of generative AI
Generative AI has been heralded as a pivotal force for innovation in the financial sector. IBM’s recent study indicates that 60 percent of CEOs in the banking sector consider generative AI a strategic priority at the enterprise level. (Interviews were conducted with 3,000 CEOs across various industries from December 2023 through April 2024.) Furthermore, 57 percent of BFM CEOs stated that their competitive advantage hinged on best harnessing advanced generative AI technologies. As firms strive to innovate, the expectation of rapid AI adoption has become a central tenet of their corporate strategies. Notably, 66 percent of CEOs agreed that the potential productivity gains from automation were so substantial that they were prepared to accept risks that surpassed those of their competitors. This willingness reflects the urgent need for financial institutions to evolve and thrive in an increasingly digital marketplace.
However, the path to successful AI implementation is fraught with challenges. Sixty percent of surveyed CEOs reported pushing for AI adoption at a pace that could be uncomfortable for some employees. This urgency to innovate often leads to a disconnect between leadership and the workforce, with the latter struggling to adapt to swift technological changes and expectations.
Understanding AI’s risks and rewards
The potential benefits of generative AI are manifold, ranging from enhanced operational efficiency to improved customer engagement. However, the risks associated with its implementation cannot be overlooked. Many financial institutions are grappling with concerns related to data security, ethical considerations and algorithmic-bias potential. Sixty-four percent of CEOs emphasised that maintaining customer trust was more critical for long-term success than any specific product or service.
For instance, as banks increasingly leverage AI for decision-making, the potential for biased outcomes raises ethical concerns. In a sector in which trust is paramount, leaders must prioritise transparency and accountability in their AI systems. This sentiment was echoed by 83 percent of CEOs, who acknowledged that fostering trust through transparency around new technologies was crucial for gaining the confidence of customers and employees alike.
Workforce dynamics and skill gaps
The survey results highlight the rapidly shifting workforce dynamics within the financial-services sector. A striking 50 percent of CEOs reported hiring for generative AI-related roles that did not exist a year ago, yet 53 percent acknowledged their struggles to fill key technology positions. This disparity illustrates a significant skills gap that must be addressed if organisations are to realise AI’s full potential.
The talent-shortage challenge
The rapid pace of technological change has exacerbated the challenge of finding qualified talent. Many employees may not possess the necessary skills to adapt to new tools and systems. To address this talent shortage, financial institutions must invest in upskilling and reskilling initiatives. Sixty percent of CEOs expressed confidence that their teams had the skills and knowledge to incorporate generative AI, but only 40 percent had conducted assessments on how AI would impact their workforces.
Furthermore, the demographic shifts in the workforce present additional challenges. As younger generations enter the labour market, they bring different expectations regarding work-life balance, career development and workplace culture. Financial institutions must adapt their hiring and retention strategies to attract and retain top talent, emphasising not only the technical skills needed for AI but also the soft skills that drive collaboration and innovation.
Bridging the skills gap with education
Ongoing professional development is essential. Financial institutions should prioritise continuous-learning opportunities for their employees to keep pace with technological advancements. Thirty-four percent of surveyed CEOs indicated that a significant portion of their workforce would require retraining and reskilling over the next three years—up from just 7 percent in 2021.
Educational institutions can play a pivotal role in bridging this skills gap by aligning their curricula with the financial sector’s evolving needs. Partnerships between banks and universities can foster talent development, ensuring that graduates are equipped with the skills required to thrive in an AI-driven environment. Internship programs and hands-on experiences can provide students with real-world insights, making them more prepared to enter the workforce.
This proactive approach to workforce development is critical for maintaining competitiveness in a rapidly evolving industry.
Cultural shifts and collaboration challenges
Cultural transformation emerges as a critical component for successful AI adoption. Fifty-nine percent of CEOs emphasised that cultural change was more important than overcoming technical hurdles to becoming data-driven businesses. Yet, a significant hurdle remains: 50 percent of executives noted that competition among C-suite leaders often hampered collaboration, further complicating efforts to foster a cohesive, AI-friendly culture.
Cultivating a culture of collaboration
Fostering a culture of collaboration is essential for leveraging AI effectively. Financial institutions must break down silos between departments to encourage cross-functional teamwork. When finance, technology and operational teams collaborate seamlessly, organisations can develop innovative solutions that drive efficiency and enhance customer experiences.
Leadership plays a crucial role in cultivating this collaborative culture. Executives must model the behaviours they wish to see in their teams, promoting open communication, knowledge sharing and a willingness to embrace change. Additionally, organisations should create platforms for employees to voice their concerns and share ideas regarding AI adoption, thereby fostering a sense of ownership and engagement.
The role of leadership in cultural transformation
Leadership’s commitment to cultural transformation is paramount. CEOs must champion initiatives that promote inclusivity and empower employees to embrace new technologies. Providing clarity around the strategic vision for AI adoption can help mitigate employees’ anxieties and resistance to change.
A robust change-management strategy is also essential. By involving employees in the process and providing them with the necessary resources and support, organisations can build a culture that embraces innovation rather than fears it. Furthermore, celebrating small wins and acknowledging individual contributions reinforces a positive attitude toward AI adoption across the organisation.
Navigating ethical AI implementation
Navigating the ethical implications of AI implementation is a key challenge for financial institutions. As AI systems make more decisions, concerns regarding accountability, fairness and privacy have emerged. As financial institutions embrace AI, the importance of maintaining customer trust cannot be overlooked. A substantial 64 percent of CEOs agreed that sustaining customer trust was more critical for success than any specific product or service. Eighty-three percent acknowledged that transparency in adopting new technologies was essential for fostering trust among customers and employees. Organisations must establish clear guidelines for the ethical use of AI, ensuring that algorithms are developed and deployed responsibly.
Implementing diverse teams in the AI-development process can help mitigate bias and ensure that a wide range of perspectives is considered. Engaging stakeholders—including customers, regulators and industry experts—can provide valuable insights into the ethical implications of AI applications.
The road ahead: Prioritising long-term strategies
While productivity remains a top priority for most CEOs in the industry, the recognition that an overemphasis on short-term performance can stifle long-term innovation is growing. The survey revealed that 46 percent of CEOs viewed generative AI as one of the most valuable tools to overcome challenges related to productivity, profitability and scalability.
However, leaders must balance this immediate focus with a commitment to long-term strategies that emphasise cultural change, workforce development and sustainable growth. Companies that prioritise the integration of AI within their broader strategic visions will be better positioned to adapt to future challenges and seize opportunities.
Embracing innovation for a resilient future
To thrive in the age of generative AI, financial institutions must foster an environment that encourages innovation and embraces change. This involves creating a supportive culture, investing in workforce development and prioritising ethical considerations in AI implementation.
Financial leaders must remain agile, continuously reassessing their strategies to adapt to emerging trends and technologies. By building a resilient organisation that values collaboration, transparency and ethical practices, financial institutions can navigate the complexities of the digital landscape and emerge stronger.
Conclusion
In navigating the complexities of generative AI, financial institution leaders must adopt a holistic approach that prioritises both technological advancement and the cultural transformation necessary for successful adoption. By addressing workforce challenges and fostering a culture of trust and collaboration, financial institutions can not only enhance their competitive edge but also pave the way for a more resilient and innovative future.
References
IBM Newsroom: “IBM Study: Banking and Financial Markets CEOs are Betting on Generative AI to Stay Competitive, Yet Workforce and Culture Challenges Persist,” June 5, 2024, IBM Institute for Business Value.
IBM Institute for Business Value (IBV): “6 hard truths CEOs must face: How to leap forward with courage and conviction in the generative AI Era.”
ABOUT THE AUTHOR
Shanker Ramamurthy is the Global Managing Partner Banking & Financial Markets within IBM’s consulting practice and has a particular focus on digital transformation, core banking and payments. He is also the President of the IBM Industry Academy and a Member of the IBM Acceleration Team.
