Deloitte predicts increases in bank fraud due to Artificial Intelligence

Deloitte released its “Financial Services Industry Predictions to 2024,” outlining some of the most significant emerging trends across the financial services industry over the next three to five years.

Among the most significant trends, the report highlights the impact that Artificial Intelligence (AI) could have on transforming retail investment, enabling deepfakes and fraud in banking and driving new insurance offerings.

Climate change is also expected to continue to increase insurance costs for commercial real estate owners and impact insurers’ profitability.

“The seismic changes we will see in financial services as a result of emerging technology and innovation will likely be transformative and provide new opportunities for growth,” said Jim Eckenrode, managing director, Deloitte Center for Financial Services, Deloitte Services LP.

“At the same time, financial services organizations will face new risks and resilience challenges, including market volatility, the impact of climate change, talent shortages and new regulations, and organizations must plan now for what lies ahead in the horizon,” Eckenrode added.

Highlights of Deloitte’s financial services industry predictions for 2024 include:

• Retail investors will soon be able to rely on generative AI for financial investment advice.

• Generative AI is expected to increase the risk of deepfakes and other frauds in banking. Deloitte predicts that GenAI could enable fraud losses to reach $40 billion in the US by 2027, up from $12.3 billion in 2023.

• Providing insurance coverage for AI may be an opportunity. Deloitte predicts that by 2032, insurers could write approximately $4.7 billion in annual AI insurance premiums globally, at a compound annual growth rate of about 80%.

• Climate change will increase the costs of commercial real estate insurance in the US. Deloitte predicts that the average monthly cost of insurance for a commercial building could increase from $2,726 per month in 2023 to $4,890 per month in 2030, at a rate of compound annual growth of 8.7%. For states most at risk for extreme weather, current monthly costs could more than double.

• Climate change and homeowners insurance. Climate change and severe weather events are also dramatically impacting the profitability and sustainability of the U.S. homeowners insurance sector. Deloitte predicts that if insurers, in partnership with government agencies and policyholders, invest $3.35 billion in measures of residential housing resiliency, the two-thirds of American homes that are not currently built to code could become resilient enough to reduce many losses from weather-related claims.

“As financial services companies face an ever-changing landscape, they should think about what’s on the horizon,” said Monica O’Reilly, vice president, U.S. financial services industry leader, Deloitte & Touche LLP. “Market pressures and emerging risks, as well as new growth opportunities, will shape business strategies, and financial services companies should prepare for that now.”

For more details of the study and its methodology, go here.

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