AI Assistants' Cash Optimization Could Spark Bank Run, Economist Warns

A growing trend of using AI assistants to optimize cash returns has raised concerns about the potential for a bank run. According to Torsten Slok, chief economist at private equity firm Apollo, this could happen if everyone’s agent simultaneously moves their money from traditional banks to higher-yield accounts offered by fintech firms.

Slok’s theory is based on the idea that AI agents like Meta’s Muse can identify low-interest checking and savings accounts, which typically offer returns of 0.1% or 0.4% per year respectively. These agents then divert funds to more lucrative options, such as Adelphi’s high-yield accounts, which offer up to 5% annual interest for some accounts.

The problem arises when everyone’s AI agent performs this optimization simultaneously, causing a sudden and massive withdrawal of deposits from traditional banks. This could lead to a bank run, where banks lose the cheap deposits they rely on to fund loans. As Slok noted in an insights post, ‘If every household used AI agents to optimize the return on their cash balances, banks could lose a large share of the cheap deposits they rely on to make loans.’

Slok’s firm, Apollo, has significant interests in lending and credit markets. With its $849 billion credit arm competing directly with traditional banks, it is clear that Slok’s warning carries weight. Moreover, Apollo aims to manage an impressive $1.2 trillion in private credit by 2029.

Personal AI agents like Muse and Instinct have gained popularity recently, with users employing them for everyday tasks such as ordering groceries or buying movie tickets. However, this trend has also led to concerns about data security and misuse of sensitive information. For instance, Amazon blocked Muse from adding items to shopping carts due to its handling of account data.

The online retail giant raised concerns that the AI assistant doesn’t identify itself properly and scrapes account data without permission. This incident highlights the need for businesses to be cautious when dealing with AI assistants and ensure they comply with conditions of use. As more people turn to these tools, it is essential for companies like Amazon to establish clear guidelines for interacting with AI agents.

The rise of AI assistants has also led some businesses to block access from these agents due to concerns about data security and misuse. While this trend may seem alarming at first glance, it underscores the importance of responsible use of technology in optimizing financial returns.