Banks and insurers could achieve substantial cost savings and revenue growth through artificial intelligence, but their increasing dependence on a small number of technology companies may create new risks for the global financial system, according to Moody’s.
Reliance shifts towards technology suppliers
The rating agency warned that most financial institutions depend on a concentrated group of foundation-model developers and cloud-computing providers. This could leave banks exposed to widespread disruption if a major supplier experiences an outage, security breach or technical failure.
As AI becomes embedded in credit assessments, fraud detection, customer service and administrative processes, disruption at one provider could affect multiple institutions simultaneously. Moody’s expects regulators to place greater emphasis on operational resilience and the concentration of external technology suppliers.
Banks may also face higher costs if dominant AI and infrastructure companies gain greater control over pricing. Several leading generative AI businesses continue to invest heavily while facing pressure from investors to demonstrate sustainable profits.
Financial benefits require heavy investment
Moody’s expects AI eventually to reduce costs and increase revenues across banking, insurance and asset management. However, achieving those benefits will require substantial investment in data systems, cybersecurity, employee training and regulatory compliance.
Competition could also limit the financial gains. If most banks introduce similar AI systems at roughly the same time, efficiency improvements may be passed to customers through lower prices instead of producing lasting increases in profitability.
More than three-quarters of financial companies in the City of London already use AI, according to a UK parliamentary report published in January. Current applications range from automating routine administrative work to processing insurance claims and evaluating the creditworthiness of borrowers.
Lloyds commits billions to transformation
Lloyds Banking Group has outlined a £13 billion strategy involving greater use of AI to attract customers, improve efficiency and increase shareholder returns. The programme includes approximately £2 billion of cost reductions and is expected to affect existing roles.
The bank has said that employees will need to acquire new skills while the organisation recruits people with expertise suited to AI-driven operations. Moody’s estimates there is a 20 per cent probability that AI will be able to perform the work of a capable mid-level employee by 2030.
The forecast does not imply that all such positions will disappear, but it highlights the potential for significant changes in staffing, responsibilities and career development across the financial sector.
Cybersecurity and fraud risks increase
Greater automation may expose banks to new forms of fraud, model manipulation and data theft. Sensitive customer information processed by external systems could also create privacy and compliance concerns, particularly when data moves across jurisdictions.
Banks retain important safeguards, including control over proprietary customer data and extensive experience negotiating technology contracts. Some institutions are also developing internal systems, using open-source models or working with several suppliers to reduce dependence on any single provider.
AI could accelerate deposit flight
Moody’s warned that AI-powered financial assistants could make it easier for customers to identify higher-yielding accounts and move money rapidly between institutions. This could accelerate deposit withdrawals during periods of market stress and make funding less stable.
The central challenge for banks is therefore no longer simply whether to adopt AI. They must capture its benefits while ensuring that essential financial services do not become dangerously dependent on a narrow group of technology companies.
Newshub Editorial in Europe – 11 August 2026
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