AI push is putting banks at mercy of tech firms, warns Moody’s
Moody's has warned that the financial sector's rush to adopt AI is leaving major banks increasingly dependent on a small number of Silicon Valley technology firms, exposing them to the risk of outages and price increases. While the rating agency said AI would ultimately cut costs and boost revenues for banks and insurers, it cautioned that the scramble to adopt the technology would require heavy investment and that many gains would be "competed away" as rivals chase the same goal.
More than 75% of City firms already use AI, according to a UK Treasury select committee report from January, with insurers and international banks leading adoption for tasks such as processing claims and assessing creditworthiness. Moody's flagged risks including data privacy, cybersecurity, fraud and "deposit flight", alongside "vendor dependence risk" as AI providers like OpenAI and Anthropic come under pressure to turn a profit. Lloyds Banking Group's £13bn AI strategy, including £2bn of cost cuts affecting staff, was cited as an example, while Moody's put a 20% chance on AI matching a "solid mid-level employee" by 2030.
- Moody's says banks risk becoming overly reliant on a few AI firms
- AI adoption could cut costs but expose banks to outages, price rises
- Lloyds' £13bn AI plan includes £2bn of cost cuts affecting jobs
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Moody's, the credit rating agency, has looked at how banks and insurers are adopting artificial intelligence and concluded that this is making them increasingly reliant on a handful of American technology companies. The concern is that if banks build AI deeply into how they operate, they become exposed to the risks that come with relying on outside suppliers, such as service outages or sudden price rises, because so few firms provide the underlying technology.
The financial sector has been adopting AI quickly, with most City firms already using it for tasks like assessing loan applications or processing insurance claims. Big AI providers such as OpenAI and Anthropic sit behind much of this technology, and Moody's notes that these companies are themselves under pressure to become profitable, which could affect how they price or supply their services to banks in future.
This matters because banks are core to the economy, and problems with a widely used technology supplier could ripple across many institutions at once rather than staying contained to one firm. Moody's view sits alongside a wider debate about how much AI can realistically replace human staff and how quickly its costs and benefits will be felt, questions that remain unresolved as banks continue investing heavily in the technology.