The future of banking will not be defined by any single technology, but by how institutions integrate multiple technologies within their operations. That said, artificial Intelligence (AI) is already top of mind for banking executives, with a recent PwC survey indicating the demand for AI skills in the industry is high.
However, as banking becomes increasingly digital, community banks and credit unions are facing significant challenges in adopting these new technologies. With fewer internal resources available, coupled with the size and complexities of the necessary changes required to stay modern, remaining competitive can be a hurdle that many institutions don’t know how to overcome.
So how can community banks and credit unions ensure they get a seat at the table? Let’s dive in.
The Hesitancy Around Tech Adoption
Smaller financial institutions face a unique challenge when it comes to adopting new technologies, especially when it comes to digital banking tools and AI. While larger banks can establish dedicated task forces to oversee the integration and successful use of these technologies, their regional counterparts sometimes lack this luxury, and aren’t able to spare the needed time and resources.
Local financial institutions may not have the internal expertise to explore the potential of technology like AI, leaving them dependent on third-party vendors. But not all vendors can provide the security, orchestration, integration, and execution required for its successful implementation. This creates a barrier for community banks and credit unions, who are left unclear on how to implement AI, let alone scale it to meet their business needs.
Scaling AI from a pilot project to a full production can be inherently risky, as it is a complex undertaking that requires proper resources for ongoing iteration and governance. This can leave banks exposed to fraud and operational risk, a consideration that would further deter them from diving into a full digital transformation.
Another key challenge for community banks and credit unions is their over-reliance on legacy technology – tools that they’ve been using for years. Many financial institutions have long depended on their core technology providers for advice on new technology initiatives to pursue. Unfortunately, these legacy providers are often reluctant to back new initiatives that are outside of their area of expertise. As a result, community banks and credit unions are not receiving the support they need to confidently explore and adopt digital tools like AI.
Differentiation is Key to Overcoming Barriers
While community banks and credit unions may face challenges with pursuing new technologies, the digital landscape presents a number of opportunities for differentiation. A key way that these institutions can stand out is by leveraging AI to enhance the level of service they provide to customers. AI-powered tools, for instance, can help a community bank or credit union optimize their entire customer lifecycle, providing 24/7 personalized recommendations and support in real time. This is particularly valuable as they strive to compete with the digital forces that the larger market players have on hand.
One of the most transformative applications of AI is within bank call centers. With AI, these institutions can offload a significant portion of their call center volume, improving response times and reducing the overall time needed to resolve customer needs. Modern AI-driven customer service tools like virtual agents provide a more sophisticated and user-friendly experience than the decision-tree models of the past.
These conversational AI assistants might just be one of the most useful ways that community banks and credit unions can get the biggest bang for their buck when it comes to AI. As customers increasingly search for on-demand access to services, banks need to be able to meet those expectations, and do so without drastically increasing operational costs. For example, having an AI-powered platform, which would operate around the clock, would allow customers to submit loan applications, receive financial advice, or resolve account issues all on their own time.
Conversational AI is a game-changer when it comes to enabling financial institutions to offer self-service automation, which in turn can improve efficiency and reduce the need for additional staff. Today’s AI chatbots allow customers to perform actions securely within a single conversation, providing a seamless experience that can prove to be a significant competitive advantage.
The Future of Banking Technology
Ultimately, the success of AI in banking will depend on how well institutions can integrate the technology into their existing systems and unify the data needed to fuel these AI-driven tools. Community banks and credit unions have the opportunity to leverage AI in innovative ways, from improving customer engagement to streamlining internal operations.
For institutions looking to get started with AI tools, the first step should be to assess the readiness of their existing systems and infrastructure. Ensuring your AI solutions can seamlessly integrate with any legacy systems in place helps prevent fragmented data, which could lead to operational challenges. Community banks and credit unions should also prioritize data security and compliance when implementing AI tools, given the nature of the highly regulated financial services industry and the priority among customers to keep their personal information safe.
Additionally, institutions should look for scalable and flexible solutions that meet their specific needs. Whether their customer service team requires support handling more inquiries, or they need assistance automating processes related to customer transactions, banks should start with specific, targeted use cases. This will help them evaluate how AI solutions can benefit them while also identifying opportunities for expanding implementation down the line in tandem with their long-term goals.
As technology continues to evolve, institutions that embrace digital transformation will improve their operational efficiency, while creating a more personalized and responsive banking experience for their customers. This ultimately better positions them to stay competitive in the years to come.
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Bill Schwaab, Vice President Sales, North America, DRUID AI
Bill has been working in the conversational AI space for nearly a decade, scaling AI companies like Mya, Guardian Analytics, and now DRUID AI, so that their solutions can help other businesses integrate conversational AI into their day-to-day operations. This work follows his previous experience working in the financial services industry for well over a decade.
