The disruptions of Artificial Intelligence (AI) continue to evolve rapidly, and it has become a major factor reshaping the global banking industry.
However, it is also proving to be both a growth engine and a potential risk multiplier, emphasizing how the technology can be both beneficial and a threat.
The latest insights from the KPMG 2025 Global CEO Outlook show that banking leaders across the globe are embracing AI at unprecedented scale, although they acknowledge the new vulnerabilities it introduces.
AI has become a critical strategy for today’s banks and is no longer an experimental tool.
Big Spending, Bigger Expectations
Insights from KPMG’s 2025 Global CEO Outlook, with a focus on the Banking and Capital Markets and Insurance sectors, reveal that the scale of investment in AI alone signals a structural shift.
According to the outlook, 71% of banking CEOs say they expect to allocate between 10% and 20% of their budgets to AI over the next 12 months. This level of expenditure commitment alone reflects a decisive pivot from cautious adoption to aggressive deployment.
As expected, given the level of investments, return expectations are equally bold. 69% of banking CEOs anticipate seeing returns on their AI investments within one to three years. This represents a dramatic jump from just 13% last year.
This simply means that banks are betting that AI will quickly translate into measurable improvements such as smarter credit assessments, faster loan approvals, personalised product recommendations, fraud detection, automated compliance checks, and streamlined back-office operations.
The Human Touch at Risk
Despite the promises of AI, it is not without downsides. The KMPG insights reveal that while the technology enables deeper customer insights and more personalised financial services, executives acknowledge the risk of over-automation.
Digital interfaces, chatbots, and algorithm-driven decisions can improve efficiency, but they also risk stripping away the human connection that builds long-term customer trust.
As experts argue, in retail banking especially, trust remains currency. A mortgage rejection delivered by an algorithm without a clear human explanation can erode confidence. Moreover, an automated fraud block without empathetic support can frustrate loyal customers.
Banks now face a delicate balancing act of harnessing AI to enhance customer engagement without depersonalising the relationship.
A Double-Edged Sword in Cybersecurity
Again, AI’s impact on cybersecurity is equally complex. On one hand, AI strengthens banks’ ability to detect suspicious patterns, flag anomalies in real time, and respond to cyber threats faster than human teams alone.
However, on the other hand, it raises the sophistication of cybercrime itself. Bad actors are increasingly deploying AI to automate phishing attacks, mimic identities, and exploit system vulnerabilities at scale.
In essence, AI is escalating both defence and offence in the cyber arena. This dual dynamic explains why AI is increasingly viewed not just as an innovation tool, but as a strategic risk factor.
“AI is seen as both an enabler and a risk amplifier. It can significantly enhance customer engagement and deepen understanding of customer needs, yet banks must guard against depersonalising interactions and losing the human touch. At the same time, AI raises the cyber threat landscape while also strengthening banks’ ability to detect and defend against bad actors,” the KPMG outlook indicated.
The Workforce Challenge
Amid the disruption, 78% of banking CEOs warn that inadequate AI workforce readiness or upskilling could negatively impact their institutions.
The concern is not simply about adopting new software; it is about whether employees can adapt to a fundamentally different operating model.
Relationship managers must interpret AI-generated insights. Risk officers must understand algorithmic decision-making. Compliance teams must oversee automated systems. Technology fluency is becoming core to nearly every role.
A Defining Moment for the Industry
Amid the evolution sparked by AI, KPMG’s One Africa Head of Financial Services, Pierre Fourie, maintains that the technology, despite the huge opportunity, presents some level of threat. Banks must therefore strive to draw the line to balance the risks and opportunities.
“Technology, in particular AI, presents a huge opportunity, but also a challenge in terms of where to prioritise, how to achieve a measurable return on investment (ROI), and how to ensure responsible and safe adoption to maintain trust,” said Pierre Fourie.
He adds that “Banks need to modernise legacy IT, cope with rising financial crime risk, made more difficult by sophisticated scams using AI, address new competitive threats from fintechs and nimble, cloud-native banks, and comply with complex and changing regulations.”
AI promises sharper competitive advantage, operational efficiency, and enhanced customer intelligence. But it simultaneously amplifies cyber exposure, regulatory scrutiny, and workforce disruption. The hurdle now is whether institutions can master its risks as effectively as they harness its rewards.
