Artificial Intelligence (AI) in Banking Market - Forecasts from 2024 to 2029

Artificial Intelligence (AI) in Banking Market - Forecasts from 2024 to 2029

The AI in banking market size is valued at US$14.102 billion in 2024 and is projected to grow at a CAGR of 36.52% during the forecast period to reach US$66.883 billion by 2029.

The increasing adaptation of advanced technologies, such as AI-based accounting software for retail and commercial banks, has increased the demand for hassle-free online and mobile banking services. This trend of offering user-friendly services will drive the market's growth during the forecasted period. By integrating AI with banks through investment in coherent technology, banks can gain digital benefits and compete with FinTech companies. AI is the future of banks as it provides the power of advanced data analysis to combat fraudulent transactions and improve compliance.

Further, the AI algorithm performs money-laundering prevention activities in seconds. Otherwise, it will take hours to days. In addition, AI has become an integral part of people's lives in the modern era of development. Banks have begun integrating AI-based technology with their existing technology to meet end-user demand. The major developments in the market are witnessed by enhancing customer benefits, increasing risk management, and following regulatory compliance. However, sensitive information security issues can hinder market expansion, and the requirement to deploy data security with AI integration in the banking sector is crucial.

AI IN BANKING MARKET DRIVERS:

Increasing customer experience is anticipated to boost the global demand for AI in the banking market.

Consumers demand convenience and a user-friendly experience. ATMs are a huge success because of their ease of access. Customers can withdraw money at their convenience. This led to the innovation of bringing AI into the banking sector to enhance this experience so customers can access all the advanced services from the ease of their homes and streamline the bank workflow by assisting their consumers with banking-related difficulties.

For instance, in April 2024, Salesforce presented AI-powered capabilities built on the Einstein 1 Platform to help banks in dealing with transaction disputes more productively. These capabilities, including Transaction Dispute Management and Einstein Copilot Banking Actions, combine transaction information from banking stages with client information from Salesforce, computerizing manual errands, decreasing errors, and progressing client communications. The AI-powered handle streamlines the dispute process, whereas Einstein Copilot Banking Actions computerizes errands like updating client details and personalization communication via email.

Additionally, with AI, banks can manage large amounts of data at record speed and drive valuable insights from them. Features such as AI bots, digital payment advisors, and biometric fraud detection mechanisms enable a higher quality of service across a large customer base. All of this leads to higher revenue, lower costs, and high profits. Chabots are one of the best examples of AI in the banking industry. Once the bots are positioned, they can work 24*7, unlike humans, who have fixed timings to work on.
Rising regulatory compliance and risk management are expected to bolster AI in the banking market.

Banks are one of the most regulated sectors worldwide. Globally, governments have set up regulatory agencies to ensure that customers do not use banks to commit financial crimes and that banks have an acceptable risk profile to avoid large-scale defaults. To read new compliance requirements, AI uses deep learning and NLP, making compliance analysts' work faster and easier. High-quality data is required to apply the algorithm to real-time situations while protecting the information being transformed.

Many day-to-day transactions on various online media and apps occur digitally. For this purpose, banks need to push up their cyber security and fraud detection capabilities. This is where AI comes into play, assisting banks in filling gaps in their security systems, mitigating risk, and managing online transactions smoothly. For instance, in April 2024, Oracle Financial Services launched an AI-powered cloud service called Oracle Financial Services Compliance Agent, which assists banks remove anti-money laundering (AML) risks. The service distinguishes and remediates vulnerabilities, diminishing banks' AML dangers and progressing evidence-based choices to mitigate risks related to the model.

External global factors such as currency fluctuations, natural disasters, and political instability seriously affect the banking and financial industries. In these volatile times, it is important to be extra careful when making business decisions. The AI-driven analysis provides a much clearer outlook for the future, allowing clients to be ready and make timely decisions.

AI IN BANKING MARKET RESTRAINT:

Data security challenges could hinder the AI in banking market growth.

Implementing cutting-edge technologies such as AI globally will not be easy. From security issues to a lack of credible and quality data, banks are facing a lot more challenges when adapting to AI technology. One of the major challenges is the large amount of sensitive information collected in a large amount of data, which requires security measures to be implemented. Hence, getting the right technology partner to provide data security is crucial. Banks need structured, high-quality data for training and validation before deploying a comprehensive AI-based banking solution.

AI In Banking Market Geographical Outlook
The North American region is predicted to hold a considerable market share.

North America is anticipated to grow due to the rising utilization of rapidly evolving digital technologies such as data analytics, AI, blockchain, IoT, cloud computing, and all Internet-based services in the region. It is expected to dominate the global AI of the banking industry. According to the latest report from the United Nations Conference on Trade and Development, IoT devices with cellular connections are expected to grow from 320.6 million IoT connections in 2024 to account for 573.5 million IoT connections by 2029 in North America. This will increase the requirement to provide consumers with AI in Bank services, propelling the market expansion in the coming years.

Moreover, the regional market is expected to grow due to the increasing digitization of the banking sector. In addition, government policies and initiatives to promote the adoption of AI in various sectors, including banks, and the adoption of innovative technologies in developing countries such as the United States and Canada are expected during the forecast period.

AI In Banking Market Key Developments:

June 2024 - NatWest introduced Cora+, a generative AI update to its computerized assistant, Cora, created in collaboration with IBM. The new adaptation will be presented amid London Tech Week and is one of the primary UK banks to deploy generative AI through a digital assistant. Cora supports clients 24/7 by replying to banking queries utilizing common language processing and ML capabilities.
May 2024 - Temenos introduced its first Responsible Generative AI solutions for core banking, transforming proficiency, operations, and item management inside the banking industry. These secure arrangements coordinated with Temenos Core and Financial Crime Mitigation, improving bank information interaction and efficiency. Temenos is presently leading in Generative AI for banking, empowering quicker and more secure deployment of AI solutions in banks through its AI-infused solutions.
December 2022 - Deutsche Bank reported a multi-year innovation partnership with NVIDIA to integrate AI and ML into its financial solutions. The association focuses on improving regulatory-compliant AI-powered services, including smart avatars, fraud detection, and speech AI. The partnership will moreover grow Deutsche Bank's internal AI center of greatness to advance Logical and Dependable AI within the financial services sector and support Deutsche Bank's cloud transformation travel by streamlining and quickening cloud movement choices.

Market Segmentation:

The AI In Banking Market is segmented and analyzed as below:

By Solution

Hardware
Software
Services

By Application

Customer Service
Robot Advice
General purpose/Predictive Analysis
Cyber Security
Direct Learning

By Geography

North America
USA
Canada
Mexico
South America
Brazil
Argentina
Others
Europe
Germany
France
United Kingdom
Italy
Spain
Others
Middle East and Africa
Saudi Arabia
UAE
Israel
Others
Asia Pacific
China
Japan
South Korea
India
Thailand
Taiwan
Indonesia
Others