Artificial intelligence-powered software is taking on roles in some financial institutions that would have seemed impossible only a few years ago. iStock illustration

More consumers are turning to artificial intelligence for financial advice. That’s pushed local credit unions and community banks to use AI to gain an edge against their national competition.

A new survey by consultancy J.D. Power found 51 percent of respondents say they are turning to AI to get financial advice or info and 27 percent say they haven’t but are considering it. Consumers are using AI to create savings strategies, find retirement or mortgage suggestions or even seek investment advice.

“Those that are using it, are using it with a fairly high degree of frequency, and they have at least some measure of trust in the tools solutions,” J.D. Power’s Senior Director of Banking and Payments Intelligence Jennifer White said. “Now, when I say they’re using AI to get financial advice, that doesn’t mean they’re always asking the best questions, but what we do know is that high proportion of them at least somewhat trust AI to give them an actual answer. They might need to validate the data, but they’re excited about the fact that they get that answer.”

For smaller financial institutions, getting an answer to a question without making a phone call or going to a physical location can sometimes be difficult. They don’t have the capital to invest in technologies and staffing levels that regional and large institutions do.

Better Call Centers

Reading Cooperative Bank is looking to utilize AI as it bolsters its call center capabilities by outsourcing the efforts to a separate organization. This would see AI software handle more common requests with human representatives stepping in when the requests are more complex. Customers could open an account or receive information on products without having to go into a branch or speak to a person.

“If we’re going to compete, we’re going to have to embrace it in order to keep up,” Reading Cooperative COO Marianela Vazquez said. “We just have to figure out again, how to do it in our way.”

Chelsea-based Metro Credit Union has been slowly upping its investment since 2020, starting with a “very lightweight chatbot” on its website that could generate answers to common member questions, said Metro Credit Union Chief Operating and Strategy Officer Traci Michel said.

The idea was to free up staff to tackle bigger issues.

“We know our members, we know our communities, and arguably, I think we know them better than the big national players,” Michel said. “So, when you pair the human element with these digital tools, that is a combination that the national players can’t match, and the online-only banks don’t have that physical presence that someone can get comfortable going to when they need it.”

But consumer expectations have changed, Michel said. They don’t just want an answer, they want to be able to take immediate action.

Metro Credit Union worked with Posh AI, a Boston software company, to build a core connector that allows members to execute banking transactions without having to interact with an employee.

“Our employees are always there,” she said. “There’s this human-assisted element to everything that we do but if someone’s looking to do something quickly, easily and without human intervention, we’ve built a bridge to make that happen through banking transactions.”

Will Bank Headcounts Shrink?

Technological developments also come with concerns about what it means for the workforce – and whether banks will shrink their headcounts as their AI tools evolve.

Reading Cooperative’s Vazquez said that as AI continues to make processes more efficient, some roles at the bank could be eliminated or changed.

“It’ll require us to be prepared and ready to upskill our employees,” she said. “But I also think for an organization of our size, it actually also creates an opportunity. Most banks our size don’t have a separate call center, so you don’t have that outbound sales-skill person behind the scenes, behind that phone. So, this is creating an opportunity for us to create that role. We can bring talent, or we can grow talent.”

With developments in AI, Metro employees have had to undergo training to handle more complex requests and issues from customers, Michel said. After moving from keypad phone system to an ai-assisted voice system, the number of transactions being automated at the credit union doubled.

“But at the same time, we aren’t necessarily seeing a sharp decline in other types of interactions,” Michel said, “We see a lot of different kinds of interactions, but what we’re finding is the questions are more complex. They’re lending-related. They’re about specific ways to make different types of payments. They’re more complex situations that perhaps AI isn’t best suited to handle today. That means our agents need to be trained and enabled to handle more complex types of financial conversations, because they’re not doing transfers and deposits and withdrawals all day.”

Sam Lattof

Most AI investments made right now by financial institutions have been on the business side of banking instead of on the consumer side, said White, the J.D. Power researcher. For example, AI is being used for cybersecurity measures and detecting fraud.

But developments in the future could see AI become a part of the branch or physical experience by adding AI technology to self-help kiosks.

Some financial institutions, like Metro Credit Union, already use generative AI chatbots that can solve user problems and fulfill requests.

And Reading Cooperative’s Vazquez noted that while AI programs can suggest personalized rates for lending, these terms can then be passed off to human employees to discuss the terms with a customer.

“Will there be some form of employment adjustment that occurs as a result of these developments across any of the industries J.D. Power measures?” she said. “That seems inevitable, but I also like to be cautiously optimistic and consider the fact that for those employees that remain, maybe after that adjustment occurs, the use of AI becomes about optimizing how they spend their day.”