2024 was the year that generative AI reached the peak of its hype cycle. But as the hype dies down and organizations start to realize that it’s not a panacea for all their woes as some might have had them believe, there’s no doubt it’s here to stay. In fact, you’d be hard pressed to find any corner of the financial services sector that isn’t at least exploring its potential use cases.
By the end of the year, Wall Street banking giants JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citi, and Bank of America were already significantly advanced in their implementation of generative AI. Autonomous AI-powered banking agents are fast becoming standard across the industry, and they’re redefining the roles of software developers in finance and just about every other sector.
Big banks capitalizing on the data advantage
As some of the biggest and longest players in the industry, Wall Street’s banking institutions have collected vast amounts of data over the decades. As we know, data is the fuel that drives AI model development – the more quality data you have to train a model, the better, and that’s something that the Wall Street banking giants have plenty of.
This presents a major potential challenge to smaller fintechs, which typically lack the data and expertise necessary to build and integrate their own bespoke AI solutions. Until recently, they have managed to gain a decently sized market share due to the convenient and innovative solutions they offer, such as digital wallets, low transaction fees, and faster processing times. However, as the biggest players in the industry up their game by scaling their use of generative AI, fintechs will need to find new ways to keep ahead.
A new era for fintech partnerships and innovation
Fortunately, even though Wall Street is leading the way in generative AI, there are still ways fintechs can stay relevant. For instance, with the rapidly growing availability of open-source AI foundation models and assets, they can quickly develop and deploy niche applications tailored to specific market segments. With faster iteration lifecycles, they stand a reasonable chance to outmaneuver larger banks, especially if they specialize in underserved markets.
Partnership opportunities will likely also become more important in the coming years. Instead of competing head-on with the major players, fintechs might instead collaborate with them by providing specialized AI-powered tools, such as fraud detection and compliance monitoring. If they can embed their own solutions into existing banking ecosystems and in doing so, become part of their value chain, they’ll have a fair chance at fueling growth while reducing economic risk to themselves.