Generative AI Will Transform How Financial Institutions Interact with Customers

How Community Banks and Credit Unions Can Navigate This Change Successfully 

Artificial Intelligence (AI) is the latest wave of game-changing technology to have a huge impact on the financial industry. Generative AI is as big of a disruptor as the internet, mobile, and cloud and, just as in these previous waves, it presents significant adoption hurdles for community banks and credit unions. But, it also offers outsize benefits to those that can overcome them. 

“The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone. It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.”

Bill Gates, 2023

Hurdles to AI adoption for community banks & credit unions

Budget and talent constraints  

It is no surprise that one of the biggest hurdles is resources. Finding talent to build and integrate new AI tools is hard and expensive, as are the Generative AI and Large Language Model cloud tools and services that power them. Smaller financial institutions are competing with big banks and tech companies for IT staff which not only narrows the pool, but also drives up those salaries. JP Morgan Chase alone is advertising for 3,600 AI-related jobs. And, despite tech layoffs, the unemployment rate for the tech sector was 2.3% in December, substantially below the national rate.

Dealing with irresponsible AI 

AI is being attached to everything today, but not everything needs Generative AI or will be improved by it. Community banks and credit unions should be extremely excited about the promise of these new AI capabilities, but also cautious about new AI solutions and vendors. Beware of vendors who have rushed products to market that are unfinished, untested, and add complexity without delivering genuine value. Generative AI is incredibly powerful, but it is not magic. Building demos that look cool is easy, yet building solutions that really work requires expertise and skill that rushed solutions won’t have.

Generic AI products

AI tools built for Home Depot or AT&T are likely not the best fit for your institution. And, it is too costly to make the necessary changes to customize them, as is being done by the big banks. 

Since community banks and credit unions simply aren’t a big enough end market for most major AI and technology companies to build out specialized products, these institutions are left with generic AI. These general-purpose AI systems fall far short of their requirements, especially, but not only, in terms of compliance and security. Made for larger industries, such as retail and travel, these generic products may look great with an incredible demo, but getting these tools to actually work and deliver real value for your banking customers, members, or staff will require a lot of customized configuration and setup. 

How to navigate these AI challenges 

  • Find partners you can trust, who are using AI responsibly to streamline workflows without introducing complexity or adding risk.
  • Look for partners who are at scale and have access to the best talent and the latest cloud tools and resources. 
  • Choose partners who are banking specialists to ensure that they thoroughly address your specific AI needs to lower complexity, satisfy important compliance and security requirements, and provide you with peace of mind. 

Critical questions to ask AI providers

  1. How many IT resources do you need to implement their AI solution? This will indicate how the AI project will impact other projects needing IT resources. The fewer, the better of course.
  2. How long does it take to implement their AI offering? The shorter the time, the faster your ROI.
  3. Is the AI offering made specifically for financial institutions? This will tell you how familiar the provider is with your compliance and security requirements.
  4. Does the AI provider have a technology roadmap showing the development of their offering for the next few years? This indicates the provider’s commitment to AI advancements.

The benefits of AI, such as efficiency, cost savings, and streamlined customer and member experiences are readily understood these days. But, it is not as easily understood how to carve a path to those benefits as a community bank or credit union. Ask the right questions of AI vendors in order to clear big hurdles and successfully find the right partner for your AI needs. Check out our AI web page to learn more about this technology and how to get started.