Finance and Economics Discussion Series (FEDS)
December 2025
Artificial Intelligence Innovation by Financial Innovators: Evidence from US Patents
Abstract:
This paper examines the evolution of artificial intelligence (AI) patent rates (i.e., the number of AI patents/number of firms of the same type) and concentration metrics (i.e., the Herfindahl-Hirschman Index (HHI) and Gini coefficient) among financial market participants from 2000 to 2020. It documents the historical trajectories of AI innovation for regulated banking entities and less-regulated firms, revealing that nonfinancial companies exhibit the highest baseline AI patent rate, while banks show the highest growth in AI patent rate over time. Banks have the highest HHI, and nonfinancial companies have the highest Gini coefficient, suggesting that a small number of banks dominate AI innovation and the distribution of AI innovation at nonfinancial firms – though higher in number – is highly skewed toward a subset of players. These findings indicate that the AI technological gap between small and large banks may be widening and the diversity of nonfinancial companies serving as third-party AI service providers may be limited.
Keywords: Artificial intelligence, Banking, Financial innovation, Patents, Regulatory perimeter, Technological change
DOI: https://doi.org/10.17016/FEDS.2025.104
PDF: Full Paper
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