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Intelligent financial system: how AI is transforming finance

Author

Listed:
  • Aldasoro, Inaki
  • Gambacorta, Leonardo
  • Korinek, Anton
  • Shreeti, Vatsala
  • Stein, Merlin

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 analyse how generative AI (GenAI) and emerging AI agents as well as, more speculatively, artificial general intelligence will impact finance. We focus on four functions of the financial sy stem: 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, Inaki & Gambacorta, Leonardo & Korinek, Anton & Shreeti, Vatsala & Stein, Merlin, 2024. "Intelligent financial system: how AI is transforming finance," CEPR Discussion Papers 19181, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19181
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    Cited by:

    1. is not listed on IDEAS
    2. Leonardo Gambacorta & Vatsala Shreeti, 2025. "The AI supply chain," BIS Papers, Bank for International Settlements, number 154, May.
    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.

    More about this item

    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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