AI endangers bank profits worth $500B
Under the title "Warnings About the Impact of AI System Developments on Bank Profits," the company "Lex" revealed that advanced technologies, such as Meta's "Muze" system, could lead to a reduction in banks' revenues from inactive customer funds by enabling savers to obtain better returns or automatically transfer their money into money market funds. The company pointed out that banks like JPMorgan, Bank of America, and Wells Fargo collectively hold non-interest-bearing deposits amounting to $1.6 trillion, with interest costs potentially reaching $47 billion annually if the banks pay a 3% interest rate on these deposits—amounting to nearly half of their combined profits. While Lex notes that the likelihood of automatic withdrawal of these funds is currently low, it warns that the loss in value of deposit rights could reach about $500 billion, roughly one-tenth of American banks’ total assets, based on estimates of intangible assets. On the other hand, the report emphasizes that AI provides significant benefits to banks, including cost reduction and improved loan pricing, citing Bank of America's experience, which invested $400 million in technology and reaped returns of $800 million. However, the greatest risk for investors is not technology-related but rising interest rates. Officials assured that AI could help reduce errors and generate financial gains, but it also presents challenges concerning trust and accountability in fund management.
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