The bank–fintech relationship has the potential to accelerate adoption of generative artificial intelligence (genAI) in financial services, said Michael Barr, vice chair for Supervision at the Federal Reserve in a recent speech.
This may come in the form of direct competition, with fintechs taking market share from banks for certain products, or banks crowding out fintechs by introducing better technology into their existing or new product lines.
Such competition usually benefits consumers by providing more choice and better and cheaper products, provided that the risks are appropriately managed. It may also create competitive pressure and consumer demand that pushes banks to adopt genAI products and solutions more quickly.
Alternatively, fintechs and banks may enter into a symbiotic relationship, forming collaborative partnerships where fintechs and banks merge their strengths. Examples of these partnerships may include banks purchasing or investing capital in fintechs with genAI products, or banks and fintechs entering into traditional vendor–client relationships.
“Successful integration of genAI into banking will require both creativity in adoption as well as getting the guardrails right. That’s not a zero-sum game. It’s an opportunity for all stakeholders – banks, fintechs, regulators, and consumers – to help to set the foundation for the benefits of the technology to be achieved and the risks to be effectively managed,” Barr said.