Think of how your banking habits have changed in the last 10 years. In 2007, chances are you still visited your local bank branch for any transaction.
Technology has changed all of that. Want to check your statements? Pull out your phone. Want to pay your bills? Pull out your phone. Want to pay your friend some cash you owe? You can pull out your phone for that transaction, too.
Even if you walk into a bank branch today, recent advancements in ATMs allow consumers to complete most transactions without talking to another person.
Then there’s the use of artificial intelligence, or AI, which is changing the banking industry and how it reacts to markets.
As the financial services industry has evolved, banks and modern technology have formed a match made in heaven.
One recent example of these tech advancements is Wells Fargo’s announcement to increase its emphasis on new technologies through its Payments, Virtual Solutions and Innovation (PVSI) group.
The creation of this group hopes to accomplish three things, according to John Sotoodeh, lead regional president of Wells Fargo Arizona:
• Boost connectivity for the bank’s payment efforts
• Increase artificial intelligence efforts
• Advance application programming interfaces to corporate banking
Wells Fargo’s new innovation group is just one example of how banks, both large and small, are betting on technology.
“Technology continues to evolve around us and it is important for the financial industry to adapt right along with it,” Sotoodeh says. “By bringing our lines of business together under PVSI, we are looking to accelerate our pace for innovation.”
Artificial intelligence
One of the major technology innovations that could both increase the speed of banking, while simultaneously enhancing its ability to predict and react, is through the implementation of artificial intelligence. As a result, data analytics, data mining and AI may be a game changer for the banking industry.
Wells Fargo’s new innovation group plans to accelerate the bank’s AI efforts. The bank sees ways it can use data to create a personalized customer service experience through the use of AI.
AI uses aren’t just limited to national banks. The innovative minds at Alliance Bank of Arizona feel data analytics is part of the future of banking, says Alliance Bank of Arizona President Ed Zito.
Alliance Bank is studying the use of AI as it relates to model risk management and predictability, Zito says. The industry as a whole is moving toward algorithm-based, forward-looking forecasting, as well as back testing of plans and assumptions, he says. This will all be further enhanced through AI implementation.
Utilizing data analytics — or data mining as it’s often called — and increasing the bank’s understanding of AI and the potential it has in the banking and financial service industry is a “dramatic step forward,” Zito says.
AI integration is an outgrowth of what the banking industry experienced during the Great Recession, and the bank’s ability to be forward looking, not only when it comes to serving customers, but managing inherent risk in the industry, he says.
As a commercial bank, AI integration will help Alliance keep its “thumb on the pulse” of its clients’ industries, which will enhance Alliance’s ability to service customers, Zito explains.
If you’re worried banks will become fully autonomous machines once they start using AI, relax, this isn’t SkyNet or HAL 9000. AI is meant to further your relationship with the bank and its employees, not destroy those face-to-face relationships.
“The implementation of AI and machine learning — in terms of continuing to train and update our team members — will help us execute quicker, better and smarter for our clients and we see this as a way to enhance the overall relationship with our clients,” Zito says.
Customer choice
Businesses, entertainment and beyond have become increasingly focused around the phone. And so has banking.
Past innovations from banks were geared towards online banking, but now things have moved towards mobile banking and it looks like mobile is here to stay.
Wells Fargo says it had 28.1 million digital (online and mobile) active customers in March. Of that number, 20.3 million were active mobile users.
JPMorgan Chase says it has 27.3 million active mobile customers in the first quarter of 2017, which was an increase of 14 percent year-over-year.
Wells Fargo executive Sotoodeh notes that mobile banking has become Wells Fargo’s fastest-growing channel. Mobile transaction growth has increased, as customers interact with Wells Fargo through their phones 20 or more times a month, he says.
The same is happening at JPMorgan Chase & Co. The mobile user is growing faster than any other banking channel at Chase, says Saul Van Beurden, managing director of global technology at JPMorgan Chase & Co. Mobile banking is slowly taking over most of the online traffic Chase experiences, he says.
Mobile banking usage and investments have increased as phone service providers increased the availability of LTE service, which has made mobile banking quicker, Van Beurden says.
Brick-and-mortar remains
Despite being able to do just as much through your phone, mobile and online banking aren’t killing the brick-and-mortar bank branch.
Chase sees a combination of digital banking and branch banking continuing to work across the world.
Van Beurden notes that the number of Chase branches across the U.S. has been stable over the last few years. Branches in some areas have been consolidating, while branches have been moved or added to other regions.
“We do things with the customer in mind,” Van Beurden says. “We’re not going to be a rigorous bank where everything will be online and no one can go to a branch.”
Those who wish to bank at the branch, meeting someone face to face, can continue to do so. While others will be geared more towards mobile or online banking. It’s all about customer choice.
How are smaller banks seeing things?
Like much of the industry, National Bank of Arizona sees customers who want to bank when and where they want, says Brent Cannon, executive vice president and director of community banking at National Bank of Arizona.
This might mean the customer wants to bank at the branch or via online or mobile platforms, Cannon says. To survive in today’s evolving climate, banks need to be able to deliver a consistent and excellent customer experience through every channel, Cannon notes.
National Bank of Arizona has increasingly invested into technology to boost the mobile and online banking options for its customers, Cannon says.
Cannon says National Bank of Arizona is constantly looking at releasing new features for its online and banking platforms to keep in line with the entire industry.
Currently, National Bank is making a massive investment into the replacement of its core operating platform, Cannon says. The new platform, dubbed Future Core, will integrate all of the bank’s systems, from the loan systems to the consumer deposit systems, Cannon says.
All of the bank’s previous systems were built as one-offs and did not work efficiently together, Cannon says. But with the new Future Core system, National Bank of Arizona hopes to improve the customer experience, while enabling the bank to further invest into mobile and online channels, Cannon says.
Securing the new vault
In the past, a bank’s primary security concern centered around its vault. But with everything going online, the banks are concerned about much more.
Today, the online log-in, the online site and the mobile app are huge points of security protections for Chase, says Van Beurden.
Every year, Chase invests hundreds of millions of dollars into every type of cybersecurity protection and prevention tool that could protect the bank, he says.
In early May, President Donald Trump signed an executive order to strengthen the cybersecurity of federal networks and critical infrastructure.
The executive order is aimed at protecting federal agencies and the country’s infrastructure from cyber threats.
Rob Nichols, president and CEO of the American Bankers Association, applauded Trump’s executive order.
“The executive order will enhance the security of government systems and help protect our critical financial infrastructure — and ultimately bank customers — through enhanced information sharing and greater cross-industry collaboration,” Nichols says.