The Banking Executive Magazine - July 2024 Issue

ISSUE 187 JULY 2024 the BANKING EXECUTIVE 1 Editorial ADAPTIVE STRATEGIES: EMBRACING AI IN ARAB BANKING The dawn of the AI era heralds a transformative period for global economies, with generative AI set to redefine productivity and economic growth. As Arab financial executives, it is crucial to understand and adapt to this evolving landscape to ensure our institutions remain competitive. The potential economic gains from AI are substantial, with projections indicating a $16 trillion contribution to the global economy by 2030. These benefits will predominantly accrue to capital owners due to the significant investments required in AI innovations, as evidenced by the substantial R&D expenditures of leading technology firms. The labor market is poised for significant changes, with varying estimates on the impact of AI on employment. While some predict extensive job automation, others foresee a balance through job creation in emerging sectors. Regardless of the projections, the possibility of long-term structural unemployment necessitates proactive measures to prepare our workforce for the future. The need to reskill and up-skill employees to adapt to an AI-enhanced environment cannot be overstated. The implications for capital and taxation are profound, with the distribution of economic gains likely favoring capital owners. This shift necessitates a reevaluation of business models and government policies to address potential economic imbalances. There may be a need to reassess tax policies to capture the excess profits generated by automation and consider safety nets for those displaced by AI-driven changes In light of these developments, it is imperative for Arab banks to adopt strategies that leverage AI effectively. Investing in AI capabilities will enhance operational efficiency, customer service, and risk management. Prioritizing workforce reskilling will prepare employees for new roles in an AI-driven landscape. Engaging with policymakers to advocate for balanced regulations that promote innovation while addressing ethical concerns is essential. Ensuring ethical AI adoption will build trust and safeguard reputations. Forming strategic alliances with technology firms and research institutions will keep institutions at the forefront of AI advancements. By embracing AI and implementing these strategies, Arab banks can navigate the challenges and opportunities presented by this transformative technology, driving growth, innovation, and economic prosperity in the region. Dr. Joseph Torbey, Chairman - World Union of Arab Bankers