"Long-Term Evolutionary Risk": BofA Explains How Meta's Muse Agent Poses a Threat to Banks

AI-powered agents, such as Meta’s much-talked-about Muse, are capable of making purchases and managing accounts on their own. This poses risks for banks that profit from customers’ cash sitting idle in checking accounts, Bank of America warned. Shares of major banks have fallen amid Muse’s success, but financial institutions still have time to prepare.

Agent-based AI assistants like Meta’s Muse, which are capable of autonomously performing tasks—including making purchases and managing accounts—pose a “long-term evolutionary risk” to banking business models, according to a BofA note cited by Business Insider. Over time, such AI assistants will be able to manage users’ money and move it between accounts and investment products, automatically directing available funds to where returns are higher, rather than leaving them in low-yield savings or checking accounts, BofA explains.

“For banks, the key issue here isn’t the e-commerce scenario itself, but the precedent: major platforms are connecting users’ payment data to a third-party agent,” wrote Bank of America analyst Ebrahim H. Punawalla. “The difference between ‘find me a better deal and pay for it’ and ‘find me a higher return and transfer my spare cash there’ is becoming increasingly narrow.”

He added, “A chatbot might tell a client that their income is too low. An agent, on the other hand, can determine the amount of available liquidity, compare returns, and take action on their own.”

For savings and checking accounts, banks in the U.S. often offer interest rates well below 0.1%, whereas many money market funds yield about 4% per year, Business Insider explains. According to a Bankrate study, $10,000 at 4% per year will yield $2,167 over five years, whereas at a rate of 0.01%, the return over the same period will be only about $5. According to the Federal Reserve, Americans currently hold about $5.4 trillion in checking accounts.

If banks begin to lose access to such a low-cost funding base, it could significantly erode their margins. Investors are already factoring this risk into financial sector stock prices, notes Business Insider. The State Street Financial Select Sector SPDR ETF has fallen 2.4% since the market opened on September 22, while the Invesco KBW Bank ETF has dropped 3.2%.

Agent-based AI will not become widespread overnight, so banks still have time to adapt, according to Bank of America.

One option is to “cannibalize” their own business and launch their own AI assistants to help customers manage their money. In that case, banks would at least be able to keep funds within their own ecosystem and direct them toward their investment products, BofA explained.

“Banks that combine retail banking, brokerage services, and wealth management must be better prepared to keep client funds within their ecosystems,” Poonawalla wrote. “Those without such integration may have to improve their own offerings, partner with third-party companies, or face increasing pressure on funding and margins.”

Meta’s new artificial intelligence agent— a “personal assistant” available in the Muse app—has reignited market concerns that AI will disrupt the traditional financial services industry, according to The Wall Street Journal. This triggered a sell-off on Tuesday, September 22, in U.S. financial sector stocks, including those of major banks.

The trend in the financial market was reminiscent of a similar sell-off that occurred in August, when the fintech company Altruist introduced a tool for creating personalized tax strategies, according to the WSJ. However, analysts note that Meta, which has already entered into partnership agreements with companies such as PayPal and the fintech firm Plaid, has far greater potential to transform many fundamental aspects of consumer payments and financial planning. Meta Platforms’ multibillion-user base also creates an advantage for Muse, the newspaper points out.

This article was AI-translated and verified by a human editor