AI ripe to shake up private banking, says Israeli entrepreneur

Artificial intelligence tools are “ripe” to disrupt the private banking sector, Amnon Shashua has said, as his new digital bank One Zero prepares to expand its activities outside Israel.

Shashua last year launched One Zero — whose investors include Swiss private bank Julius Baer, US private equity group Cerberus and China’s Tencent — as the first new Israeli bank to be set up in more than 40 years, and is planning to apply for a licence in Italy by the end of the year.

The venture is one of a number of projects deploying AI spawned by the 63-year-old computer scientist, who co-founded and still heads the autonomous driving group Mobileye, and comes as the success of a new wave of generative AI products, such as OpenAI’s ChatGPT and Google’s Bard, has triggered a frenzy of investor interest in the sector.

Shashua said deploying AI technologies, such as large language models, in private banking would radically increase the efficiency of relationship managers and make it possible to offer services previously accessible only to the very wealthy to a much broader selection of clients.

“This is really disruption in the world of banking,” he said in an interview with the Financial Times. “And you can only do it in a neobank because you don’t have the legacy core systems.”

Relationship managers at Switzerland’s private banks, which dominate the global wealth management industry, typically each manage the affairs of about 100 to 200 wealthy clients.

One Zero’s Israeli business — which has acquired 60,000 customers accounts since its launch last summer — has 1,000 clients per relationship manager, and is planning to reach 2,000 by the end of the year.

But Shashua said that the company’s longer-term target was a ratio of 1:10,000, enabling One Zero to provide services previously accessible only to very wealthy clients, such as bespoke financial advice, to a wider market.

“The plan is to be the first pure play pan-European digital private bank for the mass affluent,” he said, referring to clients that One Zero characterises as having disposable assets of between $50,000 and $500,000.

One Zero — which has raised $250mn and was valued at $385mn in its latest funding round in February — uses AI to analyse clients’ portfolios and provide the bankers dealing with them with advice to share.

But Shashua said he expected the greatest gains in scalability to come from deploying generative AI — the powerful technology that lies behind services such as ChatGPT — to allow One Zero’s chatbot to field sophisticated customer queries, and free up bankers’ time for other tasks.

“If people don’t get answers, they feel like they are not being served, so you need to handle this either through human bankers or automation,” he said. “The rise of language models . . . is ripe to create this automation.”

Many banks already use chatbots to deal with customers, but the range of queries they can answer is constrained by the fact that they generally function by offering clients the chance to choose from a pre-determined set of questions, rather than responding to free text.

Nizan Geslevich Packin, a professor of business law at the City University of New York, said generative AI had the potential to improve the efficiency with which banks could provide certain services.

But she added that applying it to personal financial data posed a series of challenges relating to the technology’s biases and tendency to “hallucinate” — when AI confidently gives inaccurate responses — as well as issues around customers providing informed consent for the use of their information. “We’re still in the infancy of trying to understand what this means,” she said.

Gal Bar Dea, One Zero’s chief executive, said dealing with hallucinations and data privacy issues were the two main challenges the bank had faced in developing its generative AI chatbot, as well as making sure it did not answer questions — such as stock tip requests — that it was not allowed to. But he said that it was already being tested internally and that the bank planned to roll it out for clients “in the coming months”.

Since studying maths and computer science at Tel Aviv university, Shashua has founded companies applying AI in areas from robotics to natural language learning. His biggest success, however, was Mobileye, which Intel bought in 2017 in the biggest deal in Israeli history, before listing last year.

Asked whether he would consider selling One Zero, Shashua said it was “too early to talk about M&A”. But he was non-committal about the future. “My interest is technology,” he said. “Once the technology is done — I’m not a banker.”