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Intelligent financial system: How AI is transforming finance

Author

Listed:
  • Aldasoro, I.
  • Gambacorta, L.
  • Korinek, A.
  • Shreeti, V.
  • Stein, M.

Abstract

At the core of the financial system is the processing and aggregation of vast amounts of information into price signals that coordinate participants in the economy. Throughout history, advances in information processing, from simple book-keeping to artificial intelligence (AI), have transformed the financial sector. We use this framing to analyze how generative AI (GenAI), emerging AI agents and, more speculatively, artificial general intelligence will impact finance. We focus on four functions of the financial system: financial intermediation, insurance, asset management, and payments. We also assess the implications of advances in AI for financial stability and prudential policy. Moreover, we investigate potential spillover effects of AI on the real economy, examining both an optimistic and a disruptive AI scenario. To address the transformative impact of advances in AI on the financial system, we propose a framework for upgrading financial regulation based on well-established general principles for AI governance.

Suggested Citation

  • Aldasoro, I. & Gambacorta, L. & Korinek, A. & Shreeti, V. & Stein, M., 2025. "Intelligent financial system: How AI is transforming finance," Journal of Financial Stability, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finsta:v:81:y:2025:i:c:s1572308925001019
    DOI: 10.1016/j.jfs.2025.101472
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    Cited by:

    1. Leonardo Gambacorta & Vatsala Shreeti, 2025. "The AI supply chain," BIS Papers, Bank for International Settlements, number 154, May.
    2. Iñaki Aldasoro & Ajit Desai, 2025. "AI agents for cash management in payment systems," BIS Working Papers 1310, Bank for International Settlements.
    3. Jon Danielsson & Andreas Uthemann, 2024. "Artificial intelligence and financial crises," Papers 2407.17048, arXiv.org, revised Jul 2025.
    4. Satyadhar Joshi, 2025. "Review of Gen AI Models for Financial Risk Management: Architectural Frameworks and Implementation Strategies," Post-Print hal-05101589, HAL.
    5. Danielsson, Jon & Uthemann, Andreas, 2025. "Artificial intelligence and financial crises," Journal of Financial Stability, Elsevier, vol. 80(C).
    6. Leonardo Gambacorta & Enisse Kharroubi & Aaron Mehrotra & Tommaso Oliviero, 2025. "Artificial intelligence and growth in advanced and emerging economies: short-run impact," BIS Working Papers 1321, Bank for International Settlements.

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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