The State of Commercial Banking: January 2023 Market Analysis. Access the on-demand webinar


How Will You Earn it in the Future?

Up until this point we’ve talked about how your bank needs to “Earn it.” We’ve walked you through the importance of building relationships, the central role pricing plays, and how those relationships build your bank’s all-important brand.

But that’s all about where your bank needs to go now. When you get there, where will your bank go?

Why Banks Should Really, Really Care About AI

The banking industry we all know today has been shaped by a handful of key transformations. There was the formation of the FDIC in the 1930s to restore public faith in banks. Then there was the phasing out of Regulation Q interest rate ceilings on deposit accounts in the 1980s. In 1994, the Riegle-Neal Interstate Banking Act relaxed restrictions against interstate branching. And of course, there was the explosive growth of online and mobile banking over the last two decades that has reshaped the way banks deliver their products and interact with their customers. Now we are on the brink of another generational transformation with machine learning and artificial intelligence.

(Note: While there are definitional differences between artificial intelligence and machine learning, for the purposes of simplicity, we’ll only use the term “AI” in this chapter.)

Many bankers will dismiss this notion as just the latest “trend of the day” among technology firms. After all, bankers have been exposed to many fear-mongering sales pitches, and they’ve learned to ignore the doomsday “your business is about to change!” kind of messaging. But this time it’s different, because AI is exploding in every industry and countless different use cases.

A go-to example, and one you’re probably already familiar with, is the self-driving car. But AI is also at the root of many tools and products you use on a daily basis. Amazon, for example, uses AI to predict what products you will want to see, based on what you’re already viewing, what you’ve purchased in the past, and what others with similar context have purchased. And they are exceptionally good at it.

Similar approaches are used by Spotify to suggest what music you will like, by Apple to predict which apps you will buy, by Google to hone the perfect search results, and by Facebook to shape your personal news feed. There are other subtle examples, as well. Have you noticed airline confirmation emails now automatically generate calendar events for the flights? Or have you seen your iPhone or Facebook photo collections organized by the people in the pictures?

These things happen behind the scenes, and are rarely noticed or thought about by end users, but they have been game changers for each of the aforementioned companies. They are now taking that success and pushing AI front and center in our lives in the form of Siri, Alexa, Cortana, Google Assistant, and the like. These “bots” are powered by AI, and the more interaction we have with them, the better they “learn” how to respond to human voice commands, and accurately and efficiently answer queries.

As the possibilities for AI expand, the list of industries it can impact will grow. In fact, banking might be the perfect business for AI. To understand why, we need to go back a few years to a story that will be familiar to many experienced bankers.

This is an excerpt from the book, "Earn It"

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