KUALA LUMPUR (July 14): Only 25% of banks and financial institutions trust artificial intelligence (AI)-generated outputs enough to act on them in key business decisions although AI is being deployed in areas such as “know your customer” onboarding, fraud detection, anti-money laundering and counter financing of terrorism and employee productivity, study by the Asian Institute of Chartered Bankers (AICB), AICB’s Chief Risk Officers’ Forum and Ecosystm found.

The results of the study, which was published in the “AI in Practice: How Malaysia's Banks & DFIs are adopting and governing AI” report, collected responses from 87 senior leaders across Malaysian commercial banks, digital banks, Islamic banks and development financial institutions, supported by insights from executive roundtables and interviews.

According to AICB chief executive Edward Ling, banks and finance institutions are no longer asking whether AI has a role in financial services, but rather whether they have the judgment, ethics, governance and professional capability to use AI responsibly in decisions that affect customers, risk and their performance.

According to the report, only 26% of banks and financial institutions have a defined strategy in linking AI to business goals, even though 44% are already developing custom AI solutions.

AI governance remains another major constraint as more than half (53%) of organisations still rely on fragmented or ad hoc governance approaches instead of consistent, risk-based frameworks to determine the appropriate controls, approvals and oversight for different AI use cases. Only 33% have established structured AI governance and model risk management frameworks, while just 27% formally classify AI applications by risk level to ensure oversight is proportionate to the potential risks involved

“As AI expands into higher-risk use cases, financial institutions want greater clarity on model risk management, explainability, third-party AI, and data governance. But regulation alone will not keep pace with the technology. Ongoing collaboration between industry and regulators will be equally critical to ensure governance frameworks evolve alongside AI innovation,” said Sash Mukherjee, Ecosystem’s vice president.

The report also found shortages in specialised AI technical skills (79%), while only 20% actively promote AI-driven decision-making across the workforce, highlighting organisation-wide AI capability gaps.