AI can automate 60-70% of manual risk management work in banks, McKinsey report says

A new report on the growing impact of AI in the banking sector has stirred concern among bank employees. According to a McKinsey report, AI can automate 60% to 70% of the risk management work that employees currently do by hand.

Risk management in banks means assessing the risk involved in lending to a customer or a company. For this, employees have to collect a wide range of information and examine documents. With the help of AI, collecting the financial details of customers and companies, and preparing and verifying loan documents, could become easier. AI can likewise be used to check whether rules are being followed, to monitor bank transactions and to keep watch for fraud in banks.

According to the report, the change will cut banks' time and costs, and employees will be able to focus on more important work. But this does not mean that 70% of bank employees will lose their jobs. Instead of recommending a large-scale reduction in staff, the report recommends automating manual tasks.

McKinsey says banks can use the time and resources freed up by AI for more important work. The report says banks can put about half of the spare capacity into better analysis, risk-based advice and quicker decisions. The remaining resources can go into developing AI technology, protecting data and building new technology systems. In other words, bank employees can be put on more challenging work instead of only checking documents.

The report says AI could bring major changes to the way the banking sector works. Its use may grow in tasks that require the same process to be repeated again and again. But humans will continue to play an important role in tasks such as assessing complex cases, taking key decisions and giving risk-related advice. Banks will need employees who understand both banking and AI. It will therefore be necessary for employees to learn new technology and build their skills.

The report also says banks that adopt AI early may gain an advantage over others. With AI, banks will be able to take better decisions in less time and bring down their costs. However, to implement AI on a large scale, banks must have strong technology systems, trained staff and clear data security rules.