At Bank Director's Acquire or Be Acquired conference, I had a sidebar conversation with a longtime friend and banking industry investment banker about ChatGPT, which stands for Chat Generative Pre-Trained Transformer. As described by ZDNet.com, "ChatGPT is a natural language processing tool driven by AI technology that allows you to have human-like conversations and much more with a chatbot. The language model can answer questions, and assist you with tasks such as composing emails, essays, and code."
On its website, ChatGPT describes its limitations as may occasionally generate incorrect information, may occasionally generate harmful instructions or biased content, and has limited knowledge of the world and events post 2021. It's in its "feedback" phase from the public. It is open to anyone.
Will this replace the need to get information from humans, at least beyond what ChatGPT "learns" from humans by their writing? I'm not convinced. But I wanted to give it a try with relevant banking questions. Here are the results.
Me to ChatGPT: Describe the current economic situation in the United States.
ChatGPT: The current economic situation in the United States is characterized by growth and recovery following the impacts of the COVID-19 pandemic. The economy has been supported by fiscal stimulus, including government spending and relief programs, and a strong rebound in consumer spending. The labor market has also improved, with unemployment declining and job growth picking up. However, some industries and workers continue to struggle, and inflationary pressures and supply chain disruptions have created some challenges. Overall, the US economy is on a path of recovery, but the pace and strength of the recovery will depend on the course of the pandemic and the success of vaccination efforts.
My take: This looks like it's from one year ago, consistent with ChatGPT's disclosed current limitations. But TV talking heads should be worried.
Me to ChatGPT: What is the outlook for the US economy?
ChatGPT: The outlook for the US economy is generally positive, with continued growth and recovery expected in the near term. Factors supporting this outlook include the ongoing rollout of COVID-19 vaccines, improving consumer and business confidence, and accommodative monetary policy from the Federal Reserve. However, there are also potential challenges and uncertainties that could impact the outlook, such as the pace of vaccine distribution, the emergence of new COVID-19 variants, and the possibility of inflationary pressures. Additionally, the implementation of new policies by the government, such as changes to taxes and regulations, could also influence economic outlook. Overall, the US economy is expected to continue growing, but the pace and strength of the expansion will depend on a number of factors, both domestically and globally.
My take: Future predictions look like canned responses. And there is similar language in the first and second inquiries.
Me to ChatGPT: What is the outlook for US banks?
ChatGPT: The outlook for US banks is generally positive, with the industry expected to continue recovering from the impacts of the COVID-19 pandemic. The improving economic conditions and the steady growth in loan demand are expected to boost revenue for banks. Additionally, low interest rates, which have been maintained by the Federal Reserve, are expected to continue supporting profits for banks by reducing borrowing costs for customers and increasing the spread between interest earned on loans and interest paid on deposits. However, the ongoing pandemic and the potential for rising defaults and loan losses in certain sectors remain risks for the banking industry. Additionally, regulatory changes and increasing competition from fintech companies could also impact the outlook for banks in the future. Nevertheless, the US banking industry is expected to remain stable and continue to support the broader economy in the near term.
My take: I could envision a bank analyst saying the same thing on CNBC at the beginning of 2022.
I asked the "best bank in the US" and it punted, saying it was subjective and gave me some criteria people consider when determining the best. Subjective questions might be a challenge.
Overall, I believe AI will evolve into a tool to weigh against our opinions. But I'm not sure, lacking context, discernment, and other "gray" factors, if it will surpass good old-fashioned judgment and common sense.
Potential bank use cases of generative AI, aside from the questions above: Research on certain industries to help determine credit risk, such as "How did the hotel industry perform in the 2008 recession?"; Vendor management due diligence, such as "Where can I find third-party reviews on the nCino loan operating system?"; Talent management, such as "What do Generation Z want from their employers?"; Assistance in cyber security measures, such as "Describe the 2021 Kaseya ransomware attack."; And make content writing easier by asking specific questions that used to take more research, such as "Describe the impact on small business from the 2017 tax cut."
The tool is still new and evolving. It has the potential to streamline research that helps make decisions. However, as I mentioned, it will not do well in replacing discernment, context, and gray areas where community banks tend to operate.
~ Jeff
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