(This column originally appeared in Forbes)
For the past few years the world’s largest financial institutions have been making big investment in AI. But now, it’s the smaller players that are starting to make big bets. Community banks and credit unions are finding practical uses for artificial intelligence: processing loan applications, assessing credit risk and answering customers’ questions. Here are some examples.
AI For Loan Processing And Operations
Earlier this year Greensboro, Georgia’s BankSouth announced that they would be implementing a platform developed by Fidelity National Information Systems (FIS) to serve as its central operating system, maintaining customer accounts and processing deposits, withdrawals, loans, transactions, interest, fees and other banking activity as well as offer advanced analytics and integrations to a number of financial services providers.
Harold Reynolds, BankSouth’s President and CEO said that FIS gives his bank “seamless connectivity to the fintech partners we need.” He believes that his institution’s data strategy and “commitment to data-driven banking” will set them apart.
A similar commitment was made earlier this year by Luana Savings Bank, which is headquartered in Luana Iowa, by investing in nCino, a cloud-based banking platform that helps banks and credit unions automate and manage processes such as lending, account opening, customer onboarding and risk management. Luana’s strategy is to use the nCino platform to “unify and transform its commercial and agricultural lending operations,” according to the bank’s CEO Shane Greenleaf. The bank is one of the largest agricultural lenders in Iowa and says employees had been entering loan data as many as four times per loan.
“We chose nCino because it was the only platform that truly enables end-to-end transformation and not isolated improvements,” Greenleaf said. “We are re-engineering how we originate, underwrite and manage loans, eliminating manual touchpoints and empowering our teams to focus on strategic client engagement instead of administrative tasks.”
CFG Bank, which is based in Baltimore, is doing something similar. They’ve invested in the Jack Henry Platform on Google Cloud. Similar to the other platforms above, Jack Henry is a cloud-native system that brings core banking processes (deposits, account transactions, etc.) and digital services into one environment. The system connects to the bank’s existing core or replaces it, migrating data from the old system, and configures workflows and integrations. Jack Henry & Associates say that approximately two-thirds of their customers are on a private cloud.
In Fort Lauderdale, Florida Locality Bank is using Parlay Finance AI to automate the intake, qualification, and pre-vetting of small-business loan applications. The platform uses AI and machine learning to analyze applicant information and generate loan summaries, integrating with the lender’s existing loan origination system. Parlay is designed to identify pain points and speed up the decision-making process, eliminating excessive paperwork and is helping Locality to more efficiently process its Small Business Administration loan portfolio.
“Too many banks are still pushing paper across desks and calling it progress,” said co-founder and COO Corey LeBlanc. “South Florida businesses don’t have time for that. With Parlay, we can move SBA loans with the same discipline we’ve always had, but at a speed that matches the market.”
AI For Credit Decisions
Making the right credit decisions is critical for any financial institution. That’s why Commonwealth Credit Union (CCU) has invested in Zest AI, an AI-powered technology that helps credit unions make faster, more accurate loan decisions. The Frankfort, Kentucky firm is leaning on Zest AI to help analyze its borrower data and predict credit risk as well as automate some of their loan decisions, identify creditworthy borrowers and reduce their lending risk.
According to Jaynel Christensen, CCU’s Chief Growth Officer, “Zest AI’s technology is helping us manage our risk, strategically continue to underwrite deeper, say yes to more members, and control our delinquencies and charge-offs.”
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CoVantage Credit Union is doing something similar with Scienaptic AI, an AI-powered credit-decisioning and underwriting platform that helps lenders approve more qualified borrowers while controlling credit risk and automating routine underwriting. Scienaptic analyzes loans using machine learning, automates underwriting decisions, activates fraud detection, and has integrations with major loan-origination and banking platforms such as MeridianLink, Origence, Symitar and Fiserv.
CoVantage reports up to a 22% increase in approvals and up to a 48% increase in automation thanks to Scienaptic.
AI For Fraud Detection And Compliance
Fraud is obviously a big concern in the financial services sector. Big banks can invest significant sums to catch and prevent fraud. But smaller firms in this industry also now have more affordable technology options to help them.
For example, Amerant Bank, a community bank based in Coral Gables, Florida, a few years ago rolled out an AI-powered identity and fraud prevention platform called Alloy that is helping to verify customers, automate account opening decisions and detect suspicious activity. The platform connects banks to more than 85 data source products to help with identity verification and transaction monitoring.
Amerant vice chairman and CEO, Jerry Plush agrees.
“With the addition of Alloy, we’ll be able to still meet regulatory requirements, while ensuring a faster and more seamless onboarding and underwriting process that will benefit both customers and Amerant team members,” he said.
Alloy’s co-founder and CEO Tommy Nicholas says that “The distinction won’t be who uses AI; it will be how — specifically how to anticipate attacks and identify risk the moment it enters the system.”
Dime Community Bank in Hauppauge, New York uses Quantifind Graphyte AI, an AI-powered sanctions screening and financial crime risk intelligence for payments. The bank relies on Quantifind to provide an accurate and real-time risk assessment integrating internal data with unstructured public information and to strengthen its overall compliance.
Dime CTO Michael Fegan says that Quantifind’s AI-driven platform “equips us to protect our customers and communities while maintaining the highest standards of regulatory compliance.”
AI For Customer Interactions
Many companies are leaning into AI systems to help interact with customers and American Heritage Credit Union (HCU) is doing the same. The Philadelphia-based financial services firm has deployed the Gigi Virtual Associate. Gigi is a conversational AI agent designed to improve the customer service experience. When asked a question, Gigi uses artificial intelligence to analyze words in order to understand a request. Based upon that understanding, it will select the most appropriate response from a pre-defined set of answers written by HCU associates. HCU’s internal team reviews the conversations and refines responses to make sure Gigi is updated with new information and data regularly.
“When our members call our contact center, the front door is Gigi,” Adrian Rodriguez HCU’s SVP Data and Integration said. “It’s both voice and chat, and it’s basically to help our members if they need to do something that’s simple and straightforward. Whether it’s resetting passwords or checking a balance. We also use it now for our account opening and loan products.”
Finally, Clear Mountain Bank, with headquarters in Bruceton Mills, West Virginia, has deployed an AI platform built by Alkami Technology, which is positioned between their core systems and their customers. They use it to coordinate digital banking, account opening and onboarding and AI-powered data analysis. The bank specifically says it wants to use that solution to analyze transaction data, identify customer needs and personalize engagement.
A growing number of AI-powered platforms are also providing workflow solutions. One example is the Penny AI Assistant, which is now used by Farmers State Bank (FSB) in Montana to handle multi-step workflows. The system connects to the bank’s scheduling tools, data, and messaging system to answer customer questions, enabling real-time, two-way text interactions. Penny can also retrieve data from FSB’s website and internal documents and forward questions or tasks to human employees when needed.
FSB’s Chief Retail Banking Officer Scott Falagan says that the platform is “helping us reimagine the banking experience, where customers can engage on their terms, receive immediate, accurate guidance, and still feel connected to the people who know them best.”
Smaller financial institutions have demonstrated that there are practical places to start with AI. The next question is what these investments deliver — shorter processing times, less administrative work and better service. Those are the results I’d want to see before calling any implementation a success. But the takeaway is that plenty of smaller banks and credit unions aren’t sitting around. They’re making targeted investments in AI solutions that are starting to provide realistic return-on-investment. And, from what I’m seeing, they’re just getting started.
