AI: Banking’s great equalizer

2023 has been challenging for regional banks in the wake of bank failures earlier this year. Influenced by macroeconomic conditions, including high inflation and climbing rates, bankers are focused on managing their balance sheets and making smart investments as budgets remain tight. Many regional and mid-market executives are now exploring AI to remain competitive with bigger banks; yet misconceptions about AI can create barriers to adoption. The reality is that this technology can serve as a great equalizer in the industry and allow smaller banks to grow and scale.  

AI benefits for both customers and employees 

The technology doesn’t just benefit the customer externally, but also bank employees internally. There are several ways that conversational AI and the latest innovations in generative AI—an advanced technology that enables machines to generate content in response to natural language requests—are helping regional banks and credit unions operate efficiently and effectively, while also helping them save money on operational costs. 

For example, a consumer can benefit from conversational AI by connecting with an intelligent digital assistant that is trained to speak the language of banking. These digital bankers serve as greeters at the virtual front door, delivering fast, accurate responses and personalized suggestions and enabling smaller financial institutions to provide 24/7 service outside regular hours of operation. The result is a better overall experience for customers and members.  

Generative AI can help employees become more productive and free up valuable time to focus on more complex customer questions or high-value tasks. Generative AI almost functions as another teammate, helping employees find information faster and providing more complete recommendations. While generative AI does not replace the work of an existing employee, through its use, it can help the employee do their job more efficiently and effectively by taking on tasks that would be near impossible or incredibly time-consuming.  

Generative AI also can analyze operational data and patterns, identifying bottlenecks within an organization and areas for improvement, such as resource allocation and capacity planning through predictive analytics and demand forecasting. Generative AI can point out areas of inefficiency within a process and help find ways to streamline work: all easy ways to showcase value on the bottom line.  

Increasing customer access and improving employee effectiveness is even more important as regional banks open fewer brick-and-mortar locations. PwC recently estimated that “regional banks entering a new geographic market can now rely on about 80% fewer branches than they would have considered just five years ago.” 

The hurdles of implementing AI within a regional bank 

Although the benefits are clear, there are still hurdles when it comes to implementing AI. Leaders have to view this technology as an investment into employee productivity and customer experience. While it may be challenging to justify the investment, especially for smaller financial institutions with smaller technology teams and budgets, the benefits of AI can far outweigh the cost of implementation. In addition to helping save money on operations, engagement with AI is linked to customer and employee retention. 

Concerns about regulatory compliance can also be a barrier to implementing AI. However, when built responsibly and with governance in mind, AI can actually be a powerful tool in enabling regulatory compliance. For example, conversational AI allows banks to monitor and closely control the messages that digital assistants share with customers. And generative AI can be trained to generate accurate, trustworthy responses by leveraging a private, financially astute large language model that is purpose-built for banking. This gives the financial institution greater control over the outputs of generative AI and greatly reduces the risk of factual inaccuracies. When used by customer-facing employees, this capability empowers them with a vast amount of knowledge at their fingertips.  

As big financial institutions such as Wells Fargo, Capital One, JP Morgan Chase and others lean into AI, it will remain key for mid-sized and regional institutions to ensure they’re not falling behind. According to McKinsey’s report on Building the AI Bank of the Future, “AI can potentially unlock $1 trillion of incremental value for banks, annually.” 

Finding the right partner is key to implementing AI 

For most regional banks still in the exploratory phase of AI, the next step is finding the right partner. AI is a big investment, and executives must be able to showcase their return on investment. As such, a partner with proven experience and a clear understanding of the financial services industry is key to successfully introducing AI to customers and employees.  

The partner you choose and the team you build must understand the nuances of banking. They need to understand the unique needs of the customer base to save time in onboarding and put human team members at ease with this technology. These partners will also be better versed in the tight regulatory environment banks operate in.  

Ultimately, AI is going to be table stakes for banks, both big and small. But to keep a competitive edge against competitors, regional and mid-market institutions need to be making investments in technology to provide their customers and employees with AI teammates, enabling more efficient and effective banking. A strong AI-plus-human customer care team is becoming essential in maintaining a competitive edge moving forward. 

Zor Gorelov is the chief executive officer and co-founder of Kasisto.