Credit Unions outpacing community banks in AI chatbot adoption (08/2024)
A recent study by Cornerstone Advisors has revealed that credit unions in the United States are moving more aggressively than community banks in their plans to adopt AI-powered chatbots in 2024.
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The "Whas Going On in Banking" annual report surveyed 359 US financial institutions, with 54% being banks and 46% credit unions.
The findings show that nearly 30% of credit unions intend to invest in AI chatbots this year, while 42% of community banks are still in the discussion phase, and 24% have not even considered the technology. The report does not specify whether these planned chatbots will be consumer-facing or used internally to enhance employee productivity and job satisfaction.
The slower adoption by community banks may be attributed to limited tech budgets and concerns over AI "hallucinations," such as in the Moffat vs. Air Canada case, where a company was held liable for a chatbots negligent misrepresentations to a consumer. This has led more risk-averse firms to delay public-facing implementation.
However, financial institutions may still experiment with internal AI chatbots. Morgan Stanley, for example, launched an AI assistant last year to help advisors and support staff navigate research reports, while Bank of Americas Erica serves retail banking customers, and its Banker Assist helps employees provide unique client insights.
The reports author, Ron Shevlin, predicts that the use of AI in financial institutions will be both under- and overstated due to confusion over the varied AI taxonomy. Nonetheless, smaller financial institutions, still grappling with remaining competitive amid high interest rates, will likely continue to seek a technological advantage through AI-powered solutions or fintech partnerships that enhance customer experience.
As AI keeps advancing, one thing is clear - the adoption of chatbots in the banking sector will grow. And this trend has some solid implications for the future of customer service and internal operations in financial institutions. Credit unions early adoption of AI chatbots may give them a competitive edge over community banks, as they can offer more efficient and personalized services to their members. Of course, the responsible implementation of AI chatbots will be crucial to avoid potential legal and reputational risks. Financial institutions therefore must ensure that their AI systems are transparent, unbiased, and compliant with regulations. Looking ahead, the collaboration between financial institutions, technology providers, and regulators will be paramount to establishing best practices and guidelines for the safe and effective use of AI in banking. So watch this closely!
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