Updated: Oct 10
The banking world is undergoing a profound transformation, and at the heart of this revolution lies Artificial Intelligence (AI). AI enables financial organizations to improve the quality of their offerings and customer experiences. Multi-channel strategies and hyper-personalization increase trust and open up new ways for customers to gain control and visibility of their finances. In the short term, AI can also handle heavy workflows, reduce costs, and automate repetitive tasks, leaving time for banks to focus on building their long-term digitalization strategy.
This fast-paced transition is mainly driven by customers demanding more effortless and transparent access. Even before the pandemic, consumers expected more options for interacting with their financial institutions, but COVID accelerated it further. Customer behavior changes have forced a shift to new online models for everything from lending to investing, which presents long-term impacts for financial institutions. Therefore, digital transformation is no longer optional if banks want to remain competitive, differentiated, and innovative in a crowded market. But how can minority-owned and operated banks (MDIs) with limited resources compete with global financial institutions? The National Bankers Association Foundation explores strategies that MDIs can employ to harness the numerous benefits of artificial intelligence.
1. Start Small: MDIs can begin by implementing AI in particular areas where it can have the most significant impact, such as customer service chatbots, fraud detection, or risk assessment.
2. Collaborate with Fintech Partners: MDIs should consider partnering with Fintech companies specializing in AI solutions rather than trying to do it themselves. These partnerships can provide access to advanced technology without extensive in-house development.
3. Prioritize Data Quality: High-quality data is essential for effective AI implementation. Banks have more data than most other industries, but many also deal with legacy systems, so the process can seem daunting. However, approaching data cleaning in stages will make it less complicated. Solve your most important business problem first before starting on the next.
4. Training and Education: You have to understand your data to know the details of the business problem, which will enable you to be more precise in asking the right questions. However, hiring data scientists in-house can be costly. That said, you can consider training staff in AI-related skills, which can help your bank build some in-house expertise. Those team members can then lead projects that employ outside consultants to analyze your data and devise a plan of action.
5. Focus on Customer-Centric Solutions: MDIs can differentiate themselves by offering highly personalized and customer-centric AI-driven services to compete effectively with larger banks. AI can help to identify your customers' needs and enable you to create personalized solutions.
6. Seek Outside Support: MDIs can explore regulatory incentives, grants, or other types of support designed to encourage the adoption of innovative technologies like AI in the financial sector. For example, the National Bankers Association Foundation has a program called MDI ConnectTech. Its goal is to support investments in technology and talent, enabling MDIs to multiply their lending capacity and increase customer access to financial products and services. The program, which is a collaboration with the Alliance for Innovative Regulation (AIR) and Citi Foundation's Community Finance Innovation Fund, enables MDIs to accelerate their digitalization efforts.
In conclusion, while MDIs may face resource constraints, they are not excluded from benefiting from AI. By adopting a strategic and incremental approach, collaborating with partners, and prioritizing customer-centric solutions, smaller banks can compete effectively and position themselves for growth in an AI-driven financial landscape.
Don’t miss the opportunity to network with industry experts, regulators, and other MDIs and learn more about how AI will transform banking at the National Bankers Association Conference on October 19-20, 2023.
To learn more about the National Bankers Association Foundation, click here.