Banks Boost AI Adoption
Hi! You’re reading AI Street, a weekly newsletter about how AI is reshaping Wall Street. I’m Matt Robinson and every Thursday I share the latest news, analysis and AI tools for investors.
The Rundown
BANK AI UPDATES Big Banks Highlight AI Progress in Q2 Results
The biggest banks provided updates on their AI progress when reporting mostly positive second-quarter results. Here are the highlights:
$BAC
Bank of America CEO Brian Moynihan highlighted that the lender is increasing its technology initiatives, expecting to spend nearly $4 billion on technology this year, with a focus on artificial intelligence for both clients and employees.
The tech is boosting client engagement. “We've delivered more than 6 million insights year to date to our financial advisors, providing them proactive reasons to engage with clients." AI has evolved from primarily cost-saving applications to now enhancing the quality of customer interactions, per the CEO.
$WFC
Wells Fargo is now using AI in marketing, credit decisions and data provision so that bankers have access to information about "what customers could be willing or might be willing to entertain a discussion about,’’ CEO Charlie Scharf said.
The bank’s AI-powered virtual assistant has seen significant adoption in its first year with "nearly 15 million users and over 117 million interactions."
$GS
Goldman Sachs is leveraging both traditional AI and generative AI across various businesses to enhance productivity and client services. CEO David Solomon highlighted several use cases, including improving equity research, investment banking, data analysis, and software engineering.
"If you look and you think across the scale of our business I think you can think of lots of places where the capacity to use these tools to take work that's always been done on a more manual basis and allow the very smart people to do that work to focus their attention on clients are quite obvious,” CEO David Solomon said.
$MS
Morgan Stanley’s Ted Pick briefly mentioned AI applications in the context of enhancing productivity and client services. "AI tools are helping advisors grow, and wealth management's partnership with institutional securities is increasing connectivity around our workplace offering." READ MORE: Morgan Stanley's AI Boost
$BLK
BlackRock CEO Larry Fink highlighted using AI in equity strategies. "One of the big opportunities I see is going to be in systematic equities, where we've had now a 10-year track record of approximately 90% outperformance,” he said. “More and more investors are looking at how you can use AI for investments and we have one of the finest platforms utilizing AI, utilizing big data.”
$C
Citigroup CEO Jane Fraser briefly mentioned the tech on the bank’s earnings call. “We're using some great AI and other data tools that are helping to identify anomalies in data and data flows much quickly.”
ICYMI: Citi’s recent report on AI anticipates the tech could drive banking industry profits up by 9% to $2 trillion by 2028 through productivity gains, automating routine tasks, and freeing up employees for higher-value work.
PARTNERSHIPS BNP Paribas Teams Up with Mistral AI for AI Solutions
The French bank has entered into a multi-year partnership with Mistral AI, encompassing all of the French AI giant's commercial models, according to a press release. The bank's global markets unit has been testing Mistral AI's models since last year, yielding "strong results."
This new agreement gives BNP Paribas access to both current and future commercial models across all its business lines. Using Mistral’s Large Language Models, the bank is already developing numerous use cases in customer support, sales, IT, and other areas.
Mistral AI, founded by former Google Deep Mind and Meta AI scientists, is positioned as a European rival to OpenAI and has raised over EUR1 billion, with BNP Paribas among its investors. The AI company claims its offerings and strategy are well-suited for highly regulated institutions.
Big Picture: Banks Favor Cheaper AI Models Amid Rising Costs
Meta’s Llama model, maxing out at 70 billion parameters, is significantly cheaper to run than OpenAI’s GPT-4, which has 1.8 trillion parameters. This cost efficiency has led banks like Wells Fargo, Citi, and Goldman Sachs to adopt Llama, according to Evident Insights.
As AI costs continue to rise faster than revenue, banks are increasingly opting for smaller, more affordable models.
FUNDRAISING Vectara Raises $25M for Enterprise AI Models
Vectara has secured $25 million in a Series A funding round led by FPV Ventures and Race Capital, bringing its total funding to $53.5 million, according to a July 16 press release. The Palo Alto-based company also launched Mockingbird, a large language model designed specifically for enterprise Retrieval Augmented Generation (RAG) applications, designed to deliver more accurate and factual results.
Mockingbird is set to enhance RAG technology by reducing hallucinations and improving structured outputs. By using RAG, LLMs can rely on external sources outside their training data, producing more accurate and relevant responses.
Arcee AI Raises $24M Series A For Small Language Models
Arcee AI, which helps businesses build small language models (SLM), raised $24 million in Series A funding led by Emergence Capital, with participation from Long Journey Ventures Flybridge, Centre Street Partners, Scott Banister, and new investor Arcadia Capital, per a LinkedIn post. The Miami-based startup raised $5.5 million six months ago.
Unlike massive language models, SLMs are more efficient and specialized, designed for specific tasks such as HR inquiries or medical question-answering. Business can create custom AI models without the need for enormous computing power or extensive datasets. (VentureBeat)
HIRING Biggest Banks Accelerate AI Hiring Despite Overall Slowdown
Despite a 23% decrease in overall hiring, the world's largest banks are expanding their AI workforce, according to Evident, an AI benchmarking firm. The lenders now employ over 112,000 AI-related roles, with about 10,000 new positions added between Q4 2023 and Q1 2024. (Payment Expert)
BIG PICTURE
Banks are facing pressure to leverage AI technologies and improve efficiency as the rapid rise in rates has curbed profitability. "AI investment is viewed by the banks as the panacea that will allow them to bring about the needed productivity gains," according to Evident CEO Alexandra Mousavizadeh.
REGULATION Mortgage Lenders Face Checks on Automated Valuation Models
Federal regulators have introduced a new set of requirements aimed at mortgage lenders, focusing on their technology-driven appraisal processes to prevent inaccurate valuations or discriminatory practices against borrowers.
The Federal Reserve, along with five other federal agencies, released the final rule on Wednesday, emphasizing the importance of maintaining the trustworthiness and reliability of models employed in home valuations for certain mortgages. (Bloomberg)
AI ADOPTION AI for Work: Visits to ChatGPT Surpass Reddit
The Top 100 AI Tools for Work grow by 43% in June, led by ChatGPT, which is now the 13th most most visited website globally, surpassing TikTok, Reddit, and Amazon, according to Flex.OS.
One-Third of Asset Managers Actively Use AI: Study
A recent survey shows that 36% of asset management firms actively use AI, with 37% planning expansion, according to Linedata. While AI adoption is growing, firms face challenges with data quality, costs, and limited expertise, per the report.
RELATED READS SF Fed Reserve Chief: A.I. replaces tasks, not people
The San Francisco Fed president Mary Daly also noted that, in the longterm, new technologies tend to create more jobs than they eliminate, and she suspects AI will be no different. (Fortune)
PwC US Names First AI Chief in Wake of $1 Billion Investment
PwC added its name to the list of mega companies elevating an employee to the C-suite to oversee artificial intelligence integration. (Bloomberg Law)
SymphonyAI targets second half 2025 IPO
The U.S. artificial intelligence company, whose products help companies like Pepsi predict demand and financial companies spot fraud, is preparing to go public in the second half of next year after reaching profitability. (Reuters)
Bosses, employees differ on AI time-saving expectations: Study
A Workday survey of 1,200 U.K. respondents shows a notable gap in AI time-saving expectations, with business leaders anticipating 4.4 hours saved per workday, while employees estimate only 2.9 hours. (Fortune)
Capital One leverages cloud maturity for AI adoption
Capital One is leveraging its cloud experience to adopt AI across its business lines, according to Aparna Sinha, the bank's head of AI product. “It’s difficult to imagine doing AI at scale without a solid foundation of experience using and scaling applications in cloud.” (Banking Dive)
AI ODDITIES FeatheredGPT: The latest in AI Bird Surveillance
Last week we talked about AI decoding dog barks, this week we have one for the birds:
The startup Bird Buddy has announced a new AI-powered feature called "Name That Bird.," which allows users to identify and track individual birds visiting their feeders, while also detecting injuries or illness.
Thanks for reading! Feedback? Reach out at matt@ai-street.co.
