This week on the Common Cents podcast, we’ve got a rapid-fire roundup of four fascinating trends emerging in the banking world: branches bounce back, AI regulation heats up, FIs partner with high schools, and IMF reports some wild cyber attack trends. Check it out!
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Read the full episode transcript below:
Welcome in to the Common Cents Podcast by Kinective, where we connect you to the future of banking. Join us as we dive into the latest news and trends in banking and fintech, learn from leaders in the space, and make the complex simple. It’s common cents!
Today we’ve got a rapid-fire roundup of four fascinating trends emerging in the banking world, so let’s get to it. I’m your host, Ben Halbrooks. Here we go!
It seems like, post-COVID, we all assumed branches were donezo… but the numbers are telling us otherwise. According to a new report from Adrenaline, there’s been a recent resurgence in physical bank visits, with customers, especially Gen Z – seeking more human interaction alongside digital tools. That shift has led to a reimagining of branch design and customer experience.
So how can FIs shift branches from transaction centers to value drivers?
First, focus on offering expert advice and problem-solving. Clients often research online but prefer face-to-face interactions when making financial decisions. Next, untether bankers from desks and use handheld devices for a more engaging client experience. Here’s a killer line from Ben Hopper, managing director of retail strategy and advisory services at Adrenaline: “Reduce the time counting the dead presidents and increase the time talking to live customers.”
To further enhance the branch experience, banks should break down back-office silos and ensure experts are readily available. And finally, don’t forget that cash is still king in a bank branch, even in the digital era, particularly for small businesses, which just goes to show the ongoing importance of ATMs and other in-branch services.
Bottom line? Banks that focus on building relationships through personalized interactions are going to have a big competitive edge.
AI-powered solutions are transforming financial services, but regulatory scrutiny is heating up. President Biden’s October 2023 Executive Order on AI underscores that tension, emphasizing the need for safe innovation. The order requires transparency in safety testing, standard-setting, and risk assessment, and means the government’s taking a proactive stance on AI regulation. The US and UK have also just signed a bilateral agreement to regulate the risks of AI models by jointly developing safety tests.
But wait, there’s more! The CFPB has issued guidance on AI’s use in adverse action notification, and in March, the SEC settled its first AI-related actions against what they’ve dubbed “AI washing” – or creating publicity based on false claims about AI expertise.
So, what to do? FIs that want to harness AI’s potential have to navigate a complex regulatory landscape. It’s a balancing act between innovation and compliance. Don’t wait for a mandate! It’s more important now than ever to craft firm-wide AI policies, and FIs can use the National Institute of Standards and Technology (NIST) AI Risk Management Framework as a guide. NIST’s framework provides a structured approach to assessing and managing AI risk, ensuring institutions consider potential harm to individuals, organizations, and ecosystems. If you’re adding AI to the mix, a proactive approach to AI governance and compliance is an absolute must.
Studies show high school financial education has an overwhelmingly positive impact on financial behavior. And in the US, where almost 9 out of 10 adults are financially illiterate, financial institutions have a unique opportunity to turn the tides by partnering with high schools to cultivate a savvy client base. An educated client is a good client, and connecting with them early is the key.
The problem is pretty glaring: a report from Ramsey Solutions shows that 88% of adults believe high school didn’t fully prepare them for handling money, and almost three-quarters say they would be “further ahead with their money today if they had a personal finance class in high school.”
FIs have done their part to combat financial illiteracy by offering education, but traditional methods only go so far–often information only reaches customers when they seek it out or they’re well into adulthood.
That’s where partnering with schools makes sense. Here’s one example: The Credit Union of Texas has multiple branches in high schools run entirely by students, providing intensive training and scholarship incentives.
Their president and CEO, Eric Pointer, describes it like this: “We currently employ nearly 60 student employees as bank managers, tellers, financial literacy coaches, or marketers at the SMART Branch, each of whom receives a $1,000 scholarship. We’ve paid more than $71,000 in deposit funds as part of the ‘Pay for Grades’ initiative, which rewards students who receive excellent report cards. And we’ve completed more than 2,700 transactions and opened 315 checking accounts.” Not bad, right?
This kind of approach doesn’t just benefit students, but it also creates a loyal customer base. So as Gen Z graduates into challenging economic times, FIs can play a pivotal role in shaping a financially literate generation. And that is a win-win.
A recent International Monetary Fund report reveals that the financial sector has lost $12 billion over the last 20 years due to more than 20,000 cases of cyberattacks. Not surprisingly, the surge is attributed to increased digitalization and geopolitical tensions.
Since the start of the Covid-19 pandemic, reported cyber attacks on financial firms have doubled. Direct losses have risen, quadrupling since 2017 to reach $2.5 billion. IMF also points out that indirect losses, like reputational damage and security updates, are “substantially higher.”
FIs, and banks especially, are prime targets due to the sensitive data and transactions they handle. And these attacks don’t just pose immediate financial threats but also have the potential to erode confidence in the financial system, leading to market instability or bank runs.
The IMF report underscores the need for both national and international efforts to address cyber risks: regulation, supervision, and information sharing are crucial to mitigate cyber risks and strengthen the financial sector. Stay safe out there, folks.
And that’s a wrap for today. Thanks for listening!
Common Cents is brought to you by Kinective, the leading provider of connectivity, workflow, and analytics software for the banking sector. Check us out at kinective.io and connect to the future of banking.
Until then, we’ll catch you on the next episode. It’s Common Cents!
