On a mild spring day in April, I met with Michael Conway online. It’s been two years since Michael spoke to Disruption Banking. The main topic of our discussion this time was IBM Consulting’s collaboration with the Nationwide Building Society, the UK’s second largest provider of mortgages. As the leader of IBM’s UK consulting branch, Michael has a knack for asking the right questions.
“The march to digital is somewhat inevitable,” he tells us. “But how do you service and delight in a digital world? I think our contention is that AI is a big part of that.”
As we spoke, Michael demystified GenAI, putting its potential into terms anyone can understand. The advantages are clear: it increases operational efficiency, lowers costs, and boosts innovation. But according to a recent IBM report, only 8% of banks demonstrated a strategic approach to incorporating it company-wide in 2024.
As it turns out, developing GenAI technology from a proof-of-concept to a cornerstone technology raises new challenges. It evolves from being a novel tool to something that demands large-scale compliance checks, and raises an entirely new set of questions.
But these are the questions Michael wants to answer. In 2023, Disruption Banking spoke to Michael about how IBM was using GenAI “before it was cool.” As the technology continues to develop, I asked Michael about how financial institutions might move from experimenting with GenAI proofs-of-concept to integrating it systemically, with a centralised strategy.
As Michael says, “There’s a new feeling in this technology, which is wonder. Often we’re doing work which just blows your mind. But my contention is that we need to move from pure wonder into something that’s really useful but still full of wonder.”
How Significant has GenAI Become to Financial Institutions?
In 2025, GenAI is at the heart of a new technological frontier, and financial institutions that adopt it have the potential to outperform rivals in a large swathe of areas. Michael explained why he thinks banks will have a unique advantage in the emerging digital world:
“I often say to banks that they’ve got an inherent advantage against other sectors, and they don’t always realize it. They’ve been doing model risk management for decades. If you’re a retailer, and you want to get into AI, there’s all sorts of regulations coming. But if you’ve already been using data and have been using models, I think you’ve got a massive head start.”
It’s a familiar story. When cloud banking first emerged, financial institutions were hesitant to adopt it. Today, technology providers are developing cloud solutions specifically tailored for banks. The same pattern is emerging with GenAI. As a recent IBM report outlines, GenAI is quickly evolving from being a useful tool to becoming a foundational part of financial institutions’ business models. In 2024, 78% of banks developed a tactical approach to AI, and 16% of clients said they were comfortable with a branchless, digital bank as their primary banking relationship. But if that’s the case, why have only 8% developed a strategy to integrate it systemically?
Why Aren’t More Financial Institutions Integrating GenAI Systemically?
While everyone is comfortable experimenting with AI, its integration at a systemic level raises an entirely different set of problems. When AI models are introduced at scale, they require a completely new approach to risk-assessment and integration.
“If you’re looking for fish in a bucket,” Michael explains, “you need a pretty rudimentary piece of string and a hook. If you’re trying to find that same fish in the ocean, it’s not just a bigger piece of string. It’s a completely different set of problems. I think there’s still too much of, ‘we just need a bigger piece of string.’”
This is in part because regulations are slow to respond to technological advancements. Michael tells us how he worked with a global bank where they were able to automate an entire week of work using GenAI. But they discovered it would take 19 years of labour to check that the AI’s work complied with risk-assessment regulations. “Let that sink in: a week of work automated away, and you’re introducing 19 man-years of effort to check it was correct.”
But what will it take to integrate GenAI at a systemic level? The answer is strategy. Successful GenAI integration requires board-level, centralized strategies, not just proofs of concept without an overarching approach: “I think the ones that aren’t successful are the ones that just throw the seeds out to the business units. Everyone experiments. 1000 flowers bloom. And then nothing happens.”
How IBM Helped Nationwide Build a GenAI Strategy
Financial institutions that want to succeed in the digital world will have to move from experimenting to innovating at scale, according to their demands. An AI strategy that articulates its integration as being central to operations at all levels will unlock lower costs and boost efficiency, while keeping pace with rapid technological advancements.
IBM Consulting’s collaboration with the Nationwide Building Society offers a model for how to create a centralized strategy to integrate GenAI systemically. With the support of IBM Consulting, Nationwide established a society-wide AI strategy and operating model which culminated in the creation of an AI centre of Expertise (CoE): “We started talking to the building society around, what would a Centre of Expertise look like? How do we govern it? What questions do we need to ask? Rather than, what answers do we need?”
All of the questions Michael has raised about GenAI in our discussion have come up already at the AI CoE. How can financial institutions integrate GenAI company-wide? How will it be regulated? What problems could it face, that aren’t immediately clear at a proof-of-concept level?
How IBM is Making GenAI Strategy Sustainable
Beyond making customer service more efficient, the partnership between IBM and Nationwide is unlocking the potential of GenAI by developing, testing, and piloting further AI solutions. Nationwide is adopting GenAI tools across a broader range of operations: “78% percent of banks have a tactical approach to AI, but the rest have no approach. Our job, as I see it, is moving the 78% towards having more of a strategic approach.”
The AI CoE represents a sustainable model for AI strategy. While customer service is a clear example of where AI can boost efficiency, the AI CoE allows Nationwide to continue innovating into the future, piloting new models, and adapting in line with changing industry demands. With the AI CoE, IBM Consulting leaves behind a strategic legacy for GenAI solutions, rather than a novel technology that boosts efficiency in the short-term.
IBM’s Report on GenAI in Banking: What Does This Say About the Industry?
As IBM’s report states, “AI mastery is a Darwinian process for banks – those that lead will outpace and outlive competitors who lag behind.”
While AI adoption is growing, only 8% of banks are developing GenAI systemically. As IBM’s collaboration with Nationwide shows, financial institutions that invest in GenAI will be better equipped to thrive in the digital world. For Michael and IBM, it’s important that banks have a strategy that will clearly distinguish them from competitors:
“I think what I’m seeing is that pretty much everyone is experimenting. But it’s the amount of central control and central strategy that’s coming from the board level, which is that systemic lens on how to apply this technology. Anyone can experiment, anyone can create a proof concept, but actually getting that thing to scale is where the systemic strategy needs to be.”
What we’ve seen so far from GenAI is exciting, but it’s not the full picture. Industry-wide hesitance has limited the scope of our understanding of the potential in these technologies. What we understand to be possible now is only the tip of the technological iceberg. Going forward, banks will need to make GenAI strategy a core part of their business models in order to excel in an increasingly unstable and fast-paced world.
Author: Sean Maguire
See Also:
How IBM was using GenAI before it was cool with Michael Conway | Disruption Banking
NatWest and IBM Collaborate on Generative AI Initiative to Enhance Customer Experience | Disruption Banking
What Banks Need to Know about Generative AI with Prashant Jajodia from IBM | Disruption Banking
