Zeroing in on Artificial Intelligence (AI)
Community banks face mounting challenges in delivering personalized, timely support to consumers who increasingly expect seamless digital banking options. Many see an opportunity to overcome limited resources in staffing and dollars through investments in efficiency.
The popularity of generative AI tools like Chat GPT for text and MidJourney for images throughout 2023 led to a heightened focus on artificial intelligence (AI) as one such efficiency driver. This has led multiple industries to explore AI and its many variations to better understand the rapidly growing field. The banking sector was no exception, with nine in 10 bankers expressing interest.
Not only do they feel they understand it, but they are also widely optimistic about its potential.
I understand what artificial intelligence is and how it can be used in banking.
I am optimistic about the potential of AI in banking.
When asked how they envision applying AI to daily work, bankers are interested in applications across business units.
I would be interested in using AI for sales/relationship management.
I would be interested in using AI for fraud and AML detection and prevention.
I would be interested in using AI for back-office tasks.
I would be interested in using AI for customer service.
Nevertheless, bankers have adopted a measured approach, as three-quarters have concerns. More telling, only 39% of respondents reported prioritizing investing in AI or automation in the coming year.
I am concerned about the potential of AI in banking.
Investing in efficiency drivers like AI and Automation.
Industry Analysis
Specific forms of AI and Machine Learning (ML) have been used in banking for years, particularly for fighting financial crime. In fact, the AML Modernization Act of 2020 mandates the adoption of AI within financial networks to identify relationships between fraud and money laundering.19
Similarly, sophisticated chatbots and customer communications have already been successfully deployed at institutions nationwide. This has led to general confidence from bankers in their ability to help streamline initial touchpoints and automate specific manual tasks in relationship management or other areas.
Notably, bankers’ confidence in AI declines when considering direct customer service. Many experts expect to see growth in this area later than others, given community banking’s focus on human relationships. In general, many respondents are adopting measured optimism around AI, awaiting more practical use cases and proof of concept.
Expert Insight
Although commonly lumped under the AI umbrella, there are some critical distinctions between today’s widely used AI tools and innovations in conversational (generative) AI. Though seen as the Wild West, generative AI could eventually help level the playing field between big banks and community institutions by offering assistance and smart automation.
Anticipated advancements in this realm await greater regulatory clarity initiated by recent executive orders and proposed rules.20 These measures set the groundwork for comprehensive AI governance and regulation. Consequently, ongoing and open communication between financial institutions and regulators is paramount as banks plan safety assessments, equity guidelines and research initiatives.
As investments in this domain persist, FIs and technology providers must also establish robust policies and governance frameworks for data and models. Equally critical is the need for employee and customer education on AI, encompassing disclosures and preventive measures against potential threats, including methods to detect AI-generated cyberattacks.