Canada’s biggest banks have big plans for artificial intelligence.
Top executives from all of Canada’s Big Five banks told a conference Wednesday they are already using AI tools to boost staff productivity, combat financial crime and improve customer service. While embracing AI is ultimately expected to lead to more revenue, lenders are focused for the time being on using the new technology to cut costs while assuaging concerns about possible job cuts.
“We don’t talk about ‘this is going to eliminate jobs,’” Canadian Imperial Bank of Commerce CM-T chief executive Victor Dodig told investors at the annual Scotiabank Financials Summit in Toronto. “It is going to change the nature of work and actually make working at CIBC even more interesting because it will take the sand out of the gears.”
Harry Culham, currently chief operating officer at CIBC who will be taking over from Mr. Dodig as CEO next month, said roughly 48,000 staff have received AI training over the past year.
“It is top-down, bottom-up, everybody is engaged and it is going to change the way we work over time, no doubt,” Mr. Culham said. “We are really trying to be on the forefront.”
All of Canada’s largest lenders are looking to use AI in hopes of gaining a competitive advantage. Leo Salom, CEO of Toronto-Dominion Bank’s TD-T U.S. division, told the conference AI “is probably one of the biggest levers that the banking industry is going to be able to embrace” to foster efficiency and drive growth.
Mr. Salom referred to TD’s 2018 purchase of AI startup Layer 6 for more than $100-million as evidence that the bank is “trying to build an organization that can pull through AI development activities right through to implementation.”
“Building the model is actually the easy part, it is then weaving it seamlessly into your operating processes, which is more challenging,” he said.
Automating certain software development and computer programming functions has been a low-hanging fruit for the banks. Mr. Salom said TD’s technology group has seen productivity rise by more than 30 per cent since implementing AI-assisted coding.
Customer service is another common part of the banking business where lenders are seeking to deploy AI through services such as chatbots that make use of large language models (LLMs) to address basic client concerns. Several executives at the conference said AI has also proven a useful tool for anti-money laundering and fraud detection and prevention initiatives.
“We are doing some pilot projects on that which are really encouraging in terms of suspicious trading and seeing the benefits of having AI help us with that,” Bank of Nova Scotia BNS-T CEO Scott Thomson told investors. “And given the increasing instances of fraud across all the banks, there is a real opportunity for AI to help on the fraud side.”
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Even local bank branches are being targeted for AI-based productivity improvements. Royal Bank of Canada RY-T CEO Dave McKay said AI is allowing RBC to keep more branches open by making them more efficient.
“You can turn a specialist into a generalist with an LLM, you can create more capacity to do mortgages and to do advice through LLMs in the branch,” Mr. McKay said. “We are focused more on increasing the efficiency and the productivity of those units than on closing them right now.”
Scotiabank’s Mr. Thomson said there will eventually be “a big revenue opportunity” for banks that embrace AI, “but right now we are focused more on the client experience and the cost side as opposed to the revenue-generation side.”
That prediction was echoed by several of Mr. Thomson’s counterparts, though none provided specifics on how AI will help the banks spur more direct business growth.
Also at the conference Wednesday, executives broadly played down the possibility of short-term growth coming through a more traditional avenue: mergers and acquisitions.
“There are a lot of buyers and very few sellers out there, so you’ve got to expect that the premiums on any type of M&A are going to get bid up so high it is going to stress your playbook,” RBC’s Mr. McKay said.
Asked whether Bank of Montreal BMO-T was on the hunt for acquisitions again now that its US$16.3-billion purchase of San Francisco-based Bank of the West in 2023 has long since closed, CEO Darryl White said the lender was currently more focused on organic growth.
“You never turn off the M&A antenna because you need to know what is going on,” Mr. White said. “But the really important thing is to be disciplined about not swinging at every pitch.”