This week on the Common Cents podcast, we’ve got a rapid-fire roundup of new trends emerging in the banking world: local banks’ AI ambitions, the key to deposit growth, how a decline in fintech funding creates new opportunities for FIs, and a shout-out to Forbes’ 2024 World’s Best Banks. 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 new trends emerging in the banking world, so buckle up. I’m your host, Ben Halbrooks. Let’s do this!
First up: Local Banks Embrace AI to Compete with Wall Street Giants
AI technology isn’t just for big banks like Chase and Wells Fargo; local bank branches are also adopting AI to enhance customer service and streamline operations. The pandemic accelerated these changes, and branches are looking to transform into AI-driven financial service centers.
Small banks are seeking to leverage their agility to outdo larger banks in customer service with AI’s help. Christopher Naghibi, CEO of First Foundation Bank, predicts a future where traditional teller lines disappear, replaced by AI that handles routine inquiries, which would allow employees to focus on personalized customer assistance. Naghibi puts it this way: “The teller line, as we see it today, will eventually die.”
Smaller banks like BAC Community Bank are already using AI to provide personalized services via apps like Smart Alac, which match customers with personal bankers and offer self-service options. AI, it seems, can deliver significant benefits even without vast data resources.
However, some industry experts caution that effective AI implementation requires high-quality data management. And human relationships remain irreplaceable, crucial for services like mortgage assistance.
Despite these challenges, Naghibi sees AI as a tool for deeper community involvement, making local bankers more accessible and integrated into their customers’ financial lives. Here’s what he had to say: “People don’t want untouchable and unreachable. Making local bankers more accessible is the promise of AI.”
The Key to Deposit Growth? Convenience
It’s no surprise that the competition for deposits is fierce, so what are successful FIs doing? A cohort of financial institutions seeing deposit growth all have something big in common: they’ve removed friction from funding by introducing digital account opening. Case in point: Midwest BankCentre, a 117-year-old bank with assets under $3 billion, has leveraged digital account opening to streamline their processes, allowing customers to open deposit accounts in just three minutes. The bank’s digital branch, Rising Bank, saw substantial deposit growth, raising $200 million in just two years. The achievement mirrors the success of other institutions that have maintained deposit growth over four consecutive quarters – what Cornerstone’s Tristan Green dubbed the “4Q Club.”
Green’s analysis found that 81% of banks and 100% of credit unions in the 4Q Club have implemented digital account opening solutions, compared to less than half of the industry overall.
For banks aiming to optimize their user experience and mitigate fraud, removing friction from the account opening process is critical. That includes quick and accurate address verification, which can prevent application delays and abandonment. Rob Heidenreich of fintech company Loqate puts it this way: “Consumers expect the same level of user experience in every product they interact with, irrespective of the industry.”
In the evolving landscape of banking, institutions prioritizing digital account opening are better positioned to attract deposits and improve customer satisfaction, which just goes to show that a digital-first approach is essential to staying competitive.
A Decline in Fintech Funding Creates New Opportunities for FIs
Global funding in the fintech sector has fallen to its lowest level since 2017. After previously surging, fintech funding has been in decline since 2021, but industry insiders see this not as a downtown, but as a stabilization, creating opportunities for regional and community banks to partner with fintechs.
While there’s still an abundance of funding available, investors are now more selective, focusing on companies with solid revenue models. Investor interest is shifting towards – you guessed it – AI in fintech, alongside issues like cybersecurity and fraud prevention. FIs need to improve data infrastructure to effectively implement AI and comply with regulatory requirements. Enhancing back office efficiencies and addressing issues like check fraud are key areas for fintech impact.
The American Bankers Association’s Brooke Ybarra says this: “Banks will continue to focus on finding the best solutions to support their businesses.”
Many FIs that have digitized or are digitizing and can benefit from fintech partnerships. Regional and community banks and credit unions are increasingly making direct investments in fintech startups, driving innovation and improving loan volumes.
At the end of the day, a decrease in fintech funding doesn’t equate to a shortage of technology partners who can assist banks in modernizing. As later-stage fintech companies mature and demonstrate profitability, more and more FIs, especially regional and community banks, will be able to utilize reliable and proven technologies.
Forbes just released its 2024 list of the World’s Best Banks
The rankings are based on five criteria: trustworthiness, terms and conditions, customer service, digital services, and quality of financial advice. And get this: 60% of the US-based best banks in the world work with Kinective!
Cloris Chen of Cogito Finance, says this in summary: “Customers need confidence in their bank’s financial stability and the security of their money. Trust and security, along with technological innovation, are three of the most important factors that make a good bank for all customers, regardless of whether they are corporate or retail, international or local.”
Here’s a roundup of Kinective’s clients who are recognized by Forbes as a best bank in the world:
- Gate City Bank
- Heartland Bank and Trust Company
- Bangor Savings Bank
- Bar Harbor Bank & Trust
- Arvest Bank
- Dollar Bank
- American National Bank
- First Financial Bank
- Eastern Bankshares
- Pinnacle KNM
- Southern Bank, Missouri
- Central Bancompany
- Middlesex Savings Bank
- City Bank
- FirstBank (CO)
- Dacotah Bank
- Centier Bank
- First Security Bank
- Washington Trust
- United Fidelity Bank
Huge congrats to everyone who made the list, which you can find on forbes.com.
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!
