Navigating the AI Seas: How Community Banks Can Stay Competitive

The AI boom can feel like an ocean of opportunity. Some companies will have smooth sailing, while others may feel like they’re drowning. Larger banks have an easier time taking advantage of AI and bringing innovation to their operations and customer service experience–all at a much faster rate. But what about community banks?

Boards and customers are always pushing for banks to adopt new technologies, and AI is no exception. Tools like standard chatbots aren’t enough anymore. But, community banks are often overlooked by larger tech companies who are chasing the bigger fish of bigger banks. And with limited budgets and resources, community banks have to get more creative if they want to leverage AI. 

To avoid getting swept away or rushed into a decision, community banks need to reground themselves with the right questions about AI and AI partners. The right decisions will help companies hold onto their competitive edge and use AI the right way.

Resource Constraints for Community Banks

Big banks are rapidly scaling AI operations. JPMorgan Chase reported a team of 200 AI researchers, 900 data scientists, and 600 machine learning engineers working on AI applications. Bank of America has invested billions of dollars in new technology innovations, including last month’s new mobile servicing chat from its virtual financial assistant, Erica. Even Netflix is looking for AI engineers.

These examples all point toward mass AI adoption in banking. From AI-driven transactions to recommendations on financial decisions, big banks are poised to outrun community banks, even where they’ve traditionally fallen behind: outstanding customer service.  Especially as banks are losing customers due to poor experience, they are turning to AI to provide personalized banking experiences and assist customers with routine tasks and questions. In short: big banks can provide the type of personalized, concierge service typically reserved for their biggest clients to anyone. 

4 Questions Community Banks Need to Ask about AI

From a budget and resourcing perspective, big banks will beat community banks every time with internal, home-grown AI solutions. In that case, community banks need to turn to external partners and existing AI options to integrate into their operations. But not all solutions are a good fit.  Community banks need to carefully consider key questions about how they can (and should) leverage AI to stay competitive.

1. Can I use some of the free AI tools out there? With ChatGPT flooding the news and AI’s integration into standard software solutions like Microsoft Office, free solutions may tempt community banks with easy AI integration. But this approach comes with security and public domain risks. For example, let’s say a lender wants to use AI for underwriting decisions. Brand new legal regulations from the Consumer Financial Protection Bureau now limit how creditors use AI and other predictive decision-making technologies, which may be unfairly denying consumers credit. Free AI solutions aren’t purpose-built for these situations, meaning they can easily lead lenders down the wrong path or post private information into a public domain.
2. Can I hire an AI engineer to help? As companies across all industries scoop up AI talent, community banks will have to shell out big bucks (and benefits) to attract and retain AI talent. And the pool of AI talent remains small, with only 10 percent of the world’s data scientists having AI skills. 
3. What about my reputation?  AI applications feel endless, from helping to write code to approving or denying lending applications. But AI-generated code can introduce security vulnerabilities, and AI might generate false information (called a hallucination). AI carries biases and ethical concerns. If something goes wrong in your AI usage and implementation, the reputational risk can be severe.
4. How will future regulations impact my AI usage? Technology will always outpace governmental regulations. But several agencies, including the CFPB, are already evaluating and updating existing laws, regulation, and guidance. The Biden-Harris Administration is currently working on an executive order relating to AI.  It’s only a matter of time before government standards and regulations come out. Any decisions you make today about AI will need to be able to adjust to tomorrow’s regulatory environment.

‍Choosing the Right Partner 

The best (and smartest) way to leverage AI for community banks is to partner with an AI partner that is purpose-built for financial institutions. The right partner will possess: 

• Financial Industry Knowledge: Established expertise in the financial industry means that the right partner will inherently understand your obstacles and common pain points. Not only does that mean the AI solution itself will align with financial regulations and address specific biases, but it means the team behind the solution will help you build out successful implementations.
• AI Technology Knowledge: A partner should have a firm understanding and history with AI technology, proving their depth of knowledge and commitment to the technology. By extension, this allows them to better understand customer needs and adapt their solutions to match. 
• Scalability: The financial industry will keep evolving with new regulations, rules, and opportunities for a flexing market. The right partner can navigate changes, and scale with new technological opportunities as they come.

Posh empowers financial institutions to unlock their full potential with our suite of AI products and services. As the only purpose-built conversational AI tool created for financial institutions, our team of experts are democratizing AI through the collective insights of community banks and building products with toolkits to easily manage AI. Financial institutions take advantage of Posh’s shared technology and personalized last mile to present unique conversational AI solutions. And Posh’s partnership for life promise means that we keep up with the regulatory environment and navigate the future with you. 

Embrace The Right Solution To Stay Competitive

Building an internal solution with a massive team of AI engineers the way a big bank does isn’t feasible for community banks. And with solutions like Posh, it’s also unnecessary. Every day, Posh helps community banks bridge the technology gap and sail smoothly with AI in a purpose-built, scalable way. 

If you’re ready to see how Posh’s advanced solutions can elevate customer satisfaction, increase operational efficiency, and boost ROI, visit AI in Banking.