The Future of Banking: AI Disruption and the Threat to Net Interest Income
The banking industry is poised for a significant shakeup as artificial intelligence (AI) technology continues to advance. As pointed out by JPMorganChase CEO, Jamie Dimon, competition in the banking sector is intensifying. In his comments at the World Economic Forum, he warned of the increasing pressure from fintech startups and the transformative potential of AI. “They’re coming at you, some to pick a sliver of the business, some to take your whole business,” Dimon stated.
Fintech Vs. Tech Companies: The Changing Competitive Landscape
Over the last quarter-century, fintech companies have attempted to replicate and compete with traditional banking services. However, their impact has been relatively limited, with no digital-first bank breaking into the global top 200 banks by assets over this period.
The introduction of AI technology, however, presents a radically different competitive landscape. Tech companies are developing AI engines that can disrupt both sides of the balance sheet while never directly engaging in traditional banking activities. This approach could prove to be far more disruptive than any fintech innovation we’ve seen to date.
AI Assistants: The New Threat to Banks’ Net Interest Income
Imagine being able to ask an AI assistant to optimize the return on your idle cash. This seemingly simple task could directly threaten the deposit beta in the U.S banking system. According to a recent survey by Accenture, 71% of customers would use an “everywhere” AI financial assistant to manage their banking activities, and 55% would trust a generative AI platform to own that experience.
Even a slight shift in pricing could lead to a 5% drop in lending margin and a 15% drop in deposit margin. This could potentially put around 22% of U.S. banking’s pretax income at risk, according to Accenture Research.
How Can Banks Respond?
In response to this emerging threat, banks need to rethink their strategies. They need to decide which products, services, and experiences they wish to protect and keep away from AI engines. For those they are willing to expose, they must find ways to interact directly and efficiently with AI engines to ensure top visibility.
Banks can also take an offensive approach by creating their own rate-optimization engines within their mobile banking apps or by partnering directly with AI platforms. For instance, PayPal is teaming up with OpenAI to support payments processing. Similarly, BBVA has created an app within ChatGPT that allows customers to explore its banking products.
On the defensive side, banks can design more customer-centric products, focusing on the customer’s complete relationship. They can develop offerings that reward customers for the totality of their relationship, combining products into integrated offerings that AI agents can’t as easily disintermediate.
Banks must not overlook the importance of maintaining a physical presence. Data consistently shows that consumers of all age groups appreciate having a branch near them for solving complex problems. Banks should continue investing in these locations — transforming them into advice hubs or micro-booth formats — while keeping day‑to‑day customer journeys fully digital.
Conclusion
The emergence of AI engines threatens the traditional banking model, particularly in relation to net interest income. As AI technology continues to evolve and become more integrated into our daily lives, banks will need to adapt and innovate to remain competitive. The competition of the future is not going to be the same as the competition of the past. Banks have already lost control of the payment experience to digital wallets, and now, they face the risk of losing the banking experience to a new set of tech players.
Banks need to prepare for this inevitable shift in the competitive landscape and consider both offensive and defensive strategies to protect and grow their business. The future of banking may be uncertain, but one thing is clear: those who fail to adapt risk being left behind.
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