By Michael L. Stevens, President & CEO
The second-year class at GSBC’s Annual School Session spends an afternoon working in small groups debating “hard questions.” The concept is straightforward: leaders must work through the questions people don’t know how to answer or don’t want to answer. The topics discussed at GSBC’s 2024 session were selected from strategic projects developed by third-year students; the third-year students presented a synopsis of their work followed by small group discussions exploring the topic further based on each student’s experience, views on risks and thoughts on opportunities. The topics focused on corporate culture and people in the adoption of technology and risks and possibilities of artificial intelligence in community banking.
Diverse Approaches to Technology Adoption
Community bank attitudes and approaches to technology adoption are as diverse as the industry. The more aggressive banks do not want customers to say a product or service is not offered that other banks offer. There are banks that maintain a conservative posture, some with “extreme security protocols,” restricting social media and artificial intelligence usage.
Many banks report having committees and innovation groups to explore new technologies. This approach keeps ideas on the table to be explored even if the bank is not ready for adoption. It is also an opportunity for people to engage in the process, ultimately increasing buy-in. Bankers observed this as an effective way to identify and develop future leaders, aiding in succession planning.
A common dynamic for most community banks is to be a fast follower but not a late adopter and not deploying untried technology. The availability of solutions is not an issue, but the challenge is picking the right option to minimize cost and disruption.
There were two interesting observations about customers. A banker stated that the goal was to focus on what the next customer will need and expect. Another banker referenced “new school” farmers who are quite adept at the use of the latest technology in their operations. One must assume this impacts how the technology-adept customers view their bank. There is always another generation coming, but sometimes that “next” customer is already here.
AI and the Relationship Business Model
Utilizing technology in a way that supports the relationship business model at the core of community banking is an ongoing dilemma. As technology solutions are increasingly beyond customer-facing and now “customer-engaging,” ensuring the customer experience and a relationship is even more important.
The growth and accessibility of artificial intelligence has provided banks opportunities for increased effectiveness and efficiency. There are risks that must be managed. Banks are very focused on ensuring customer data is protected. The opportunities are too great to not at least study and learn about applications even if a bank is not ready to adopt. A common recommendation from speakers on this topic is to start with internal processes, which can provide efficiency and significantly limit or completely wall off customer data.
Practical Applications of AI
Bankers shared some of the ways they have started to use AI tools. Chatbots are being used to provide basic customer service, such as hours of operation. One bank uses an AI tool to learn customer behavior for BSA/AML compliance. Fraud prevention is a rapidly growing use of AI with its ability to analyze tremendous amounts of data. Banks use AI tools to create regular reporting items instead of building reports manually. There has been an increase in banks using AI tools to spread financial statements for loan customers, improving speed and accuracy. Of course, there is the primary benefit of lending staff having more time to spend with customers.
Prospects
Bankers were challenged to brainstorm on what could be possible with AI as it continues to develop, and the industry and regulators become more comfortable with risk management. Here are the top ideas for readers to investigate:
- AI tools to manage exam information and documentation requests.
- Automated compliance checks to ensure the bank is complying with the law.
- Customer prospecting and opportunities for cross-selling of existing customers.
- Back test loan underwriting against the loan policy.
- Automate the loan review process.
- Predictive modeling to forecast the direction and risk from interest rates, credit quality, and deposit flows.
Empowering Bank Culture
Embracing new technology in banking isn’t just about upgrading systems, it’s about creating a culture of excitement and buy-in. This infographic highlights four strategies to spark enthusiasm and drive engagement to make innovation a natural part of your bank’s culture.
Embracing Technology with Prudence and Collaboration
The take-aways from this student driven collaboration is banks can evaluate and adopt technology consistent with their overall risk posture. Banks that do not have the expertise or just are not ready for specific functionality will be well served to have a team of employees continuing to learn and explore.
There is much to learn when bankers have a mechanism to share what they are doing and even more importantly, what they forecast is possible. This type of peer collaboration is a hallmark of the GSBC experience.