Although nearly all Canadian banks are now incorporating artificial intelligence in some capacity, the most significant gains are being realized through its application in combating criminal attacks.

A recent study from GFT revealed that approximately 75% of Canadian banks are using AI for fraud detection, while about two-thirds are leveraging it to enhance cybersecurity. Additionally, nearly 68% reported employing AI to improve customer service.

While the majority of surveyed banks indicated their investments in AI have yielded positive results, the highest returns were found in cybersecurity efforts, with 23% citing this as delivering the most substantial return on investment (ROI). Fraud detection followed closely at 22%, and automated customer support ranked third at 19%.

A Back-Office Function

Another notable finding from the study highlighted a greater role for AI in back-office initiatives compared to front-line services. Although most retail banks have invested in AI for enhancing customer service, only 18% reported seeing tangible results in this area. In contrast, while only one-third of banks have implemented AI for internal operational functions, the majority found that these back-office applications are delivering significant value.

AI presents a dual challenge to these banks as they weigh the potential for innovation against cybersecurity risks. Half of the surveyed banks identified cybersecurity concerns as their top challenge when adopting AI. With AI systems handling sensitive data and influencing critical decisions, banks are increasingly balancing the push for technological advancement with the need for robust security measures.

Seeking External Support

Currently, 63% of Canadian banks are using AI in some form. They are already dedicating more than a third of their IT budgets to AI and plan to increase that allocation by 20% over the next five years.

Banks recognize they will need additional support to fully exploit AI technology. Over half of those surveyed intend to adopt a hybrid approach, combining in-house expertise with external partners. An equal number of banks prefer outsourcing their AI efforts to external partners as those planning to build strong internal capabilities.

“AI has become an essential tool for fraud prevention and detection,” said Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research. “As attacks grow more sophisticated, AI and machine learning are better at detecting anomalies and suspicious behaviors than traditional methods. The key is that these models improve over time, making fraud detection increasingly precise as they learn from new data.”