IBM: Which Banks Will Lead in the Age of AI?

As artificial intelligence continues to reshape the financial services landscape, FinTech Magazine gets the thoughts of IBM Consulting’s Global Managing Partner for Banking & Financial Markets – Shanker Ramamurthy – and IBM Technology’s General Manager for Financial Services – Monica Martins – on how banks can ensure success in the age of AI.

The Age of AI: Banking Transformation

Over the past two decades we have seen incredible change in the world of finance, prompted by fallout from the 2008 financial crisis, an increasingly complex regulatory environment, the challenge of historically low interest rates, fierce competition from existing players and new industry entrants and disruption from the global pandemic. 

We are now in the midst of another transformative period—the Age of AI. While the industry has been using early iterations of artificial intelligence and automation for nearly a decade, it is now poised for dramatic transformation as financial institutions reinvent their operations and business models to meet the changing needs of clients while managing new risks and regulatory requirements. 

Generative AI is a potent game-changer that will demonstrate its central role in any leading bank’s business strategy.

Like the industry itself, AI is evolving rapidly, reshaping the landscape in both exciting and uncertain ways. 

This year, we expect to see the advancement, optimisation and diversification of AI models providing significant value across the financial services industry, with models such as Small Language Models (SMLs) and Large Reasoning Models (LRMs). 

The big question is—which banks will lead by making the most of these capabilities?

According to the 2025 Global Outlook for Banking and Financial Markets: Elevate Banking Performance in the Age of AI, a report published by the IBM Institute for Business Value (IBV), the answer is not clear-cut. 

The study reveals that more than 60% of financial services CEOs are willing to accept substantial risks as a result of harnessing advanced AI and automation advantages to enhance their competitiveness. However, this ambition does not always translate into strategic action. 

The IBV found that only 8% of banks in 2024 were leveraging AI strategically across the enterprise, while 78% were opting for a more tactical approach of experimentation. If the financial services sector is to flourish in our evolving global economic landscape, we would expect to see that breakdown to reverse significantly.

Banks must transcend AI experimentation and even basic deployment, adopting instead a comprehensive strategy that aligns AI integration with their long-term objectives. Here are some recommendations:

1. Integrate AI into your business strategy

Simply adopting AI is not enough. Banks require a cohesive, forward-thinking business strategy harnessing artificial intelligence to drive targeted outcomes like operational efficiency, enhanced client experiences and developer productivity.

Equally critical is their ability to clearly communicate this vision, enabling them to stand out in an industry increasingly dominated by AI-driven innovation and differentiation. 

This involves understanding what the bank wants to achieve in the next three to five years and how AI can help. A successful AI strategy requires close collaboration across all aspects of the business, ensuring technological investments are aligned with business priorities and can deliver tangible results.

Business innovations and technological innovations should not be separate as each increasingly drives the other in a virtuous loop to reinvent the future of banking.

2. Work with AI, not against it

When deployed correctly AI can both optimise and reimagine existing processes, driving unprecedented efficiency and innovation. By embracing AI as a partner rather than just a tool, banks can unlock new avenues for growth and development. 

This approach will require a shift in mindset from seeing AI as a threat to traditional banking methods to recognising it as an enabler of new opportunities and improved operational efficiency. While AI will not replace banks, the ones that use AI to its full advantage as part of an enterprise-wide strategy will likely gain market share.

3. Strike a balance between caution and innovation

Banks certainly stand to benefit from enterprise-wide AI adoption, but they must not lose sight of the risks. As AI systems become more sophisticated, they can also become more difficult to understand and manage. Clear platform governance is crucial to manage security, compliance and resiliency as innovation scales. 

This balance will ensure banks can reap the benefits of AI without compromising on safety and security. It involves identifying the potential risks and developing robust strategies to mitigate them. It also calls for a renewed risk management culture — one in which every banker is an AI risk manager.

Looking ahead

The financial services sector has seen a significant increase in AI investments, with spending projected to rise from US$35bn in 2023 to US$97bn by 2027.

While this is promising, going forward, financial institutions must ensure they are not simply investing in generative AI in order to check a box, but are deploying this important technology judiciously in ways that match compute capabilities to their highest priorities while mitigating any risks. 

Bank must embrace generative AI by taking initial steps towards productionalising their AI use cases, even if small, to avoid stagnation in the pursuit of perfection. Progress begins with action, and deploying the first AI project is crucial to building momentum.

Like a snowball, once the first step is taken, the impact can grow exponentially over time. The key is to start, learn and iterate, rather than taking a backseat approach and waiting for the perfect solution.  The future of banking belongs to those who dare to begin—raise their ambitions, and let innovation lead the way. 

As the industry continues to rapidly evolve, banks that can effectively leverage AI, align it with their business objectives, and assess and manage the associated risks will be well-positioned to lead in this new era. Transformation is not just desirable, it's essential — and banks must set the pace or risk being left behind.

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