Artificial intelligence (AI) is not only reshaping our day-to-day lives, but it’s also reshaping the finance sector. How credit unions and community banks proceed with AI will determine how they retain a competitive edge with fintechs and big banks.
Are you feeling a little uncertain about where to begin with AI? Or maybe machine learning is already driving results for your credit union or bank and you’re unsure of your next move? The classroom of innovation gives plenty of learning opportunities for every step of the AI implementation journey. Here’s how AI is injecting fresh innovation into portfolio growth and productivity.
A is for Automation. Employees are busier than ever. Automation reduces distractions and lets your employees focus on their role priorities. AI learns and automates basic to advanced tasks, reducing the errors, inefficiencies, and delays that come with manual, human-run processes.
B is for Budget. Credit unions continue to fight for digital relevancy, with only a fraction of the budget of a fintech or neobank. But implementation is not all or nothing. AI tools geared towards credit unions and community banks can be adopted at the unique pace that your institution’s budget allows.
C is for Credit Unions. Machine-learned tools combined with the heart of the credit union mission are a powerhouse for staying competitive in a predominantly digital banking landscape.
D is for Digital Wallets. 66% of Gen Z and 67% of Millennials use digital wallets. As we will dive into later in the blog, credit unions, in particular, must meet this digitally demanding demographic on their platforms of choice.
E is for Expectations. Did you know that one in four people expect to open an account digitally (versus visiting a local branch)? These shifting expectations increase the urgency to integrate AI into banking services like account opening and loan approvals.
F is for Fraud. Last year, the FTC reported $8.8 billion lost to fraud. It’s never been more crucial to halt the bad actors in their tracks with fraud detection technology. These systems can monitor and analyze cardholder transactions, flagging potentially fraudulent ones.
G is for Growth. Year-over-year growth is a must to sustain a business, even for mission-based, not-for-profit credit unions. How and when your organization deploys AI will determine the velocity of growth. For example, machine-learned credit decisioning can stimulate portfolio growth by approving more loans (up to 40%) while decreasing losses by 15% compared to traditional, manual loan approvals.
H is for Humans. AI and humans really can work together. AI, when done right, will help human workers focus on their business-specific work and outsource admin tasks to machine-learned assistants. Marketers, IT, call center, and HR need to focus on the unique, business-specific work that can’t be replaced with AI.
I is for Innovation. Evolving AI is helping financial institutions innovate in ways previously only for big banks and fintech. For example, the ability (and affordability) of adding conversational AI to your call center cuts wait time and call abandonments down to zero.
J is for Journey. Digital transformation is a journey, not an overnight switch. It will require time, planning, and most importantly, partners and peers who have forged ahead of you on the digital transformation path.
K is for Knowledge. The main attraction of AI is programmable knowledge. The more AI is used for a specific task or function, the more it learns how to do that task effectively and efficiently. This is why it’s a powerful resource to aid - not replace - humans’ work.
L is for Leading Indicators. Another feature of AI is predictive analytics. These analytics are more advanced than traditional data modeling and provide leading (compared to lagging) indicators for clearer foresight and stronger decision-making.
M is for Market Share. Credit unions hold the largest market share for used auto financing. There are enormous conversion and cross-selling opportunities here that may be missed without AI integrations to help engage this growing market segment.
N is for Nimble. In the next few years, as many as 80% of traditional banking institutions will diminish, and that banking business will go to neobanks and fintechs. Without AI, traditional institutions cannot stay nimble and retain their needed share of the market.
O is for Optimize. Pick an area of your business and chances are, AI can optimize it. Areas such as personalized and consistent service, fraud prevention, loan decisioning, marketing campaigns, and so much more. AI automation can also streamline processes across teams and provide a single source of data truth for workers and decision-makers.
P is for Privacy. For sensitive financial matters (like debt collection) AI can provide borrowers with greater privacy and trust in their financial institution. AI can also detect data breach threats in real time and respond quicker during business or non-business hours.
Q is for Quiet. AI isn’t only accountholder-facing. There are many ways (e.g. fraud prevention, compliance, etc.) artificial intelligence works quietly in the background all to make your institution more efficient.
R is for Regulations. Financial institutions must consider the regulatory environment before onboarding AI. When investing in AI tools, look for ones that are designed with banking compliance in mind, for example, CECL and UDAAP.
S is for Strategy. AI takes the guesswork out of strategic planning by aggregating data insights from all corners of the business and integrating them into a single data hub. These data analytics help decision-makers design strategic plans according to your institution's unique risk appetite.
T is for Trust. In 1979, 60% of Americans trusted their financial institution, compared to 27% today. It’s time for FI’s to repair and build trust with their people. Trust is enhanced when consumers receive a seamless user experience, data privacy, and financial transparency - all results of AI.
U is for Uninterrupted. What happens to your banking services in the event of a natural disaster and other impactful event (say a pandemic) that causes businesses to stall regular operations? AI fills the gaps, providing 24/7 uninterrupted services to your accountholders - no matter the emergency.
V is for Video. Short-form video has the highest ROI of any marketing channel. All teams (from marketing to HR to sales) should have video creation abilities. And with an AI-powered plug-and-play platform, they can.
W is for Withstand. This is not the time to slash your technology budget. That won’t help withstand economic storms. It’s time to play the long game with wisdom: invest in the AI that will make the most impact on your current challenges and build from there.
X is for UX. The user experience (UX) must be a driving factor for implementing AI. People don’t demand flawless; they just want seamless experiences - without glitches that cause them to pause their banking journey and reach out for additional support.
Y and Z are for Youth/Generation Z. Only 4% of Gen Zers are credit union members. This is an incredibly untapped market share that credit unions must strive to capture, especially as older generations become obsolete. Younger generations demand personalized, digital experiences that can only be supplied by digital tools fueled by data analytics.