AI To ‘Unlock $370bn’ A Year In Additional Bank Profits

Retail banks could unlock hundreds of million of dollars a year in additional profits through large-scale deployment of artificial intelligence, says Boston Consulting Group.

According to a report from the consultancy, lenders could rake in $370bn-worth of extra profits annually from AI, with the group estimating its use can reduce banks’ costs by as much as 40 per cent.

“AI isn’t just an efficiency play; it’s a catalyst for business model transformation,” said Holger Sachse, a managing director at Boston Consulting Group and co-author of the report. “Banks that move quickly to scale agentic AI and redesign their workflows will not only survive, they will lead.”

The consultancy believes banks have an “abundance of attributes that sit squarely in AI’s sweet spot”, such as enhanced customer support, personalisation of service and offers, and the automation of manual or repetitive tasks.

It says: “Banks need to break out of a toxic revenue-cost squeeze that threatens to erode profitability in the near and medium term.

“Traditional banks also risk becoming uncompetitive with both fintechs and faster-moving rivals. AI opens big opportunities on both the revenue and cost sides of the income statement.”

According to the report, AI adoption is not just about efficiency, it is about future viability.

“Even if only 5 per cent of retail banks successfully embed AI across their operations — and the number will almost certainly be larger — these institutions will alter the competitive dynamics of the industry, especially as more agents come on stream, and render non- or slow movers increasingly irrelevant over time,” the firm said.

The consultancy identifies three stages of AI maturity — what it calls deploy, reshape and invent. It suggests the biggest gains occur only when banks scale AI to transform “end-to-end workflows” and introduce new business models. “Sticking to basic automation will not be sufficient to stay competitive,” it says.

“Too many banks are stuck in deploy mode, automating tasks without rethinking their business,” adds Bharat Poddar, a senior partner at the firm and co-author of the report. “Those that fail to scale and invent will fall behind. AI-first banking requires more than tools; it demands a reinvention of the operating model.”

In February, DBS became the first major Asian bank to say it will make significant job cuts as a result of its use of AI.

The bank’s previous chief executive Piyush Gupta told delegates at a conference earlier this year that over the next three years the bank “will shrink” its workforce by “about 4,000 [people] or 10 per cent”.

He said: “In my 15 years of being a CEO, for the first time I’m struggling to create jobs. So far, I’ve always had a line of sight to what jobs I can create. This time I’m struggling to say how I will repurpose people to create jobs.”