PORTUGAL Trends and Developments Contributed by: Rodrigo Formigal, João Diogo Barbosa and António Kreiseler de Albuquerque, Abreu Advogados
nificantly reshape how financial institutions oper - ate and engage with their customers. Leveraging these technologies, banks may automate and enhance various processes, such as risk assess - ment, fraud detection, credit scoring, customer service, and compliance management. Genera - tive AI could have the potential to analyse vast datasets and generate predictive models that inform business (and lending) decisions, help - ing to reduce defaults and improve profitabil - ity. Additionally, LLMs can enhance customer interactions through personalised communica - tion, enabling chatbots and virtual assistants to provide tailored financial advice and support, thereby improving customer satisfaction and engagement. In the realm of compliance, such models could in the future assist in monitoring transactions for anomalies, ensuring adher - ence to applicable regulations, and streamlin - ing reporting processes by automatically gen - erating necessary documentation. Furthermore, generative AI can facilitate product innovation by analysing customer preferences and market trends to help banks develop new services that better meet client needs. As these technologies continue to evolve, their ability to drive efficien - cy, enhance security, and deliver personalised experiences positions banks to remain competi - tive in an increasingly digital financial landscape. This year has also marked the entry into force of the European AI Act, which will guide the first phase of AI adoption by relevant market players. European lawmakers employed a risk-based approach setting the obligations for processors and controllers of these technologies. Regulat - ing these matters through the AI Act reflects an alignment of the legal framework at the EU level, as new AI technology is required to comply with fundamental rights, presenting a similar commit - ment to the one that exists on a data protection level, where individuals may not be subjected to
a decision solely based on automated process - ing. This has also had an impact on different legal orders, which have closely followed European rules on this matter. This could benefit operators in Europe from a compliance perspective. Nonetheless, the lack of experience in imple - menting AI technologies in the sector presents non-neglectable risks and close scrutiny of the systems and processes that are in place is required to ensure regulatory expectations are met. With more players in the market, banks are forced to compete, not only with each other, but also with other entities, notably fintech compa - nies. As part of a larger effort to integrate gen - erative AI in the financial sector, the Securities Market Commission (CMVM) has committed one of their goals of 2024 to incorporate AI into the regulatory and supervision field. Amongst recent efforts and initiatives in the banking market is Project Gaia, a system that facilitates the analy - sis of climate-related risks in the financial sys - tem, integrating LLMs for the analysis of climate- related indicators, at an unprecedented scale. Digital Banking Digital Banking has kept a tendency of expo - nential growth, and its influence is expected to become increasingly more relevant in the bank - ing industry. Key developments include embed - ded finance, banking-as-a-service (BaaS), gen - erative AI as a power for personalisation and automation, and Central Bank Digital Currencies (CBDCs). In the coming years, some areas will enhance the potential of digital banking. Consumers’ awareness on the relevance of their personal data enables banks to portray themselves as the safest place for consumers’ data. Equally, business models have already started a move towards platformisation. As more players in oth -
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