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Artificial Intelligence: Closing the Gap Between Large Financial Institutions and Regional Banks

Zor Gorelov, chief executive officer and co-founder of Kasisto, discusses in post for BAI how regional banks can use AI to improve efficiency and remain competitive with larger banks -- in spite of potentially daunting hurdles like costs and compliance concerns.

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.

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A Benefit to Consumers and Employees

Adding to the benefits of AI, Mr. Gorelov emphasizes that the technology does not just benefit the consumer, but employees as well:

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.

He goes on to note that these employee and customer improvements are more important than ever now that there are 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.”

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AI Technology Availability -- Finding the Right Partner

Finally, as we've noted in this space more than once, engaging the right partner is crucial in finding success:

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.

Regional banks, community banks, and credit unions typically lack the internal resources to develop these technologies independently. Luckily, many fintech vendors partner directly with banks and their core processors, enabling quick deployment of the tech.

This is true for check processing automation and check fraud detection, where core processors are leveraging these technologies via the solutions available to these banks. The technology integration becomes seamless, with minimal internal resources needed from smaller banks to leverage the tech from which larger financial institutions benefit.

It's never been a better time for smaller banks to join the AI revolution!

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