Gen AI to add up to $340b new value to banks: McKinsey

It will add $56b and $54b in new value to corporate and retail banking, respectively.

Generative artificial intelligence (AI) is expected to bring between $200b to $340b in value to the banking industry, according to a new study by the McKinsey Global Institute.

The economic impact of generative AI will likely benefit all banking segments and functions, with the greatest absolute gains in the corporate and retail sectors. The corporate banking sector is expected to get an additional $56b in value annually from gen AI adoption, whilst the retail banking sector will attain $54b in value.

Notably, the technology could greatly alter how some jobs are done and how customers interact with banks, experts from McKinsey wrote, adding that it might even lead to entirely new business models.

However, adopting gen AI into their operations is beyond the scope of what banks and bankers have ever seen before, the management consulting firm said.

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“The first is the scope of the task and related implications. Just as the smartphone catalyzed an entire ecosystem of businesses and business models, gen AI is making relevant the full range of advanced analytics capabilities and applications,” wrote McKinsey partners Vishnu Kamalnath, Larry Lerner; senior partners Jared Moon, Gokhan Sari, and Vik Sohoni; and expert Shuo Zhang.

“Scaling gen AI will demand more than learning new terminology—management teams will need to decipher and consider the several potential pathways gen AI could create, and to adapt strategically and position themselves for optionality,” they added.

Scaling gen AI also requires banks to interact more deeply with analytics, something that remains a work-in-progress for most banks.

The fast pace of change, and the talent needed, may also be a challenge for smaller banks. The rapid pace could stress operating models of organizations, whilst banks with fewer AI experts on staff face the challenge of recruiting and training their workforce.

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Finally, a successful gen AI scale-up requires a comprehensive change management plan. This includes training senior leadership and employees, outlining expected priorities and outcomes, stating the incentives of adopting gen AI, and articulates how the bank plans to change mindsets and culture, amongst other processes.

Overall, the successful deployment of gen AI solutions demands a shift in perspective—that is, starting with the end user experience and working backward, McKinsey’s experts said.

“This approach entails a rethinking of processes and the creation of AI agents that are not only user-centric but also capable of adapting through reinforcement learning from human feedback. This ensures that gen AI-enabled capabilities evolve in a way that is aligned with human input,” the McKinsey experts said.