The question of when investments in generative AI will yield tangible returns is now pressing for Wall Street banks, according to insights from McKinsey.
For numerous banks, the rise of generative AI has led to significant investments, with the intention of leveraging this technology for competitive advantages. Two years down the line, many institutions have yet to see substantial returns, finding themselves stuck in a state McKinsey’s expert Larry Lerner describes as ‘POC purgatory.’ This phase is characterized by continuous investment without reaping observable benefits.
According to Lerner, only a select few financial institutions are beginning to experience gains, notably through cost savings and revenue generation. The key to transitioning from stagnation to success lies in a few strategic decisions, McKinsey’s research indicates. First, it’s crucial for business leaders to treat AI initiatives as business opportunities rather than just technological projects. This shift ensures that business leaders carry accountability, fostering a stronger alliance between business and technology sectors within the organization.
Focusing efforts on a limited number of impactful use cases instead of dispersing resources across numerous areas is another strategy McKinsey recommends. By concentrating on three primary domains, companies can achieve more profound transformations and quicker access to value. This focused strategy contrasts sharply with the inefficacy of attempting to juggle 60 different projects across various business lines.
Tracking return on investment (ROI) in AI can be challenging, especially when the benefits are indirect or time savings. However, McKinsey emphasizes that certain applications, such as AI-driven customer service solutions or marketing enhancements, provide measurable returns. For instance, one large bank is anticipating a 10% increase in revenue from using a new AI analytics platform.
The reusability of AI solutions is another aspect Lerner highlights. Developing a tool that can be deployed multiple times accelerates growth and ensures that the technology fits existing compliance standards. Furthermore, for AI solutions to provide the expected benefits, employee and customer adoption is vital. Historical challenges in adopting new technologies persist, but overcoming them is essential for realizing AI’s full potential.
In summary, while many banks are yet to see significant returns from their investments in generative AI, those who align AI with core business strategies and focus on measurable, reusable solutions are beginning to unlock value. Leadership buy-in and strategic focus are crucial for navigating AI’s complex landscape and transforming potential into profit.
Source: Businessinsider
