For investment banks, a ‘wait and see’ attitude on AI is untenable

Leaders in investment banking share a common belief that the sector is standing on the precipice of huge, technology-enabled change. However, they are increasingly divided between early adopters making significant tech investment decisions that reflect this and those cautiously holding back.

From pitch books to processes, it’s clear that emerging technology has the potential to radically reshape the investment bank business model. Looking at generative artificial intelligence in particular, Statista estimates that AI spending in the financial sector globally will hit $97 billion by 2027, up from $35 billion as recently as 2023.

The commitment to investment isn’t evenly distributed, though. Despite many senior stakeholders being sold on the game-changing potential of AI there is a growing divide between those willing to take the plunge financially and those that remain more bearish. In fact, my company’s research shows 34% of investment banking IT leaders in the U.S. believe AI will have a significant positive impact on their bottom line or deal sourcing, yet only 24% plan to invest in 2025.

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But taking a “wait and see” approach to investing in transformative technology must surely risk businesses being left behind, and missing out on future opportunities to competitors.

So, what’s the root of this hesitance, and what will a good tech investment strategy look like in 2025?

Investing significant sums in enterprise technology often brings risks. One of the key risks for the investment banking sector is poor onboarding, implementation and integration, which leads to technology being underused or falling short of its potential. Shockingly, more than two-thirds, or 68%, of senior IT professionals in the sector believe they’re wasting up to a quarter of their software budget this way.

Poor due diligence during the IT procurement process and hasty decisions by leaders keen to embrace the next big thing must be replaced by smart investment strategies backed up with clear and thorough implementation plans.

Tracking return on innovative IT investments can be difficult too, or else isn’t given the attention it deserves. Any lack of transparency on return on investment makes it much more challenging to make the case for significant IT spending.

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Whether investing in AI, automation, or data analytics tools, however, the costs and risks involved have to be balanced against the lost opportunities of holding back.

While AI is a relatively novel technology and there is no clear road map to successful implementation, data is emerging that hints at the competitive advantage it can bestow. Research from Farsight AI suggests that empowering investment bank teams with AI could generate millions more in extra revenue.

Then there are the changing expectations of both employees, potential recruits and clients. Given the choice between working for or with a business that is innovating and automating — freeing up human time and energy — and one that isn’t, many will opt for the business embracing a digital future.

Investment bank leaders find themselves having to navigate a narrow path between two extremes. On one side, rushed tech investments that can drain IT budgets and waste time. On the other side, falling behind while competitors harness the power of technology.

The challenge for the industry in 2025 isn’t just to invest, but to invest smart. Don’t waste money on technology without a clear strategy to realize its full potential. This will be key to navigating a crowded vendor landscape and choosing IT solutions that are scalable, adaptable and make a real impact to the bottom line.

One strategy that isn’t going to work in 2025, however, is standing still. As investment banking and the wider financial sector continue to explore AI, automation and other transformative technologies, fortune will favor the bold; and those businesses willing to take the plunge will attract both clients and the top industry talent.