Technological advancements are transforming how banks interact with customers, leading to a growing demand for personalization, speed and relevance. According to our proprietary NextWave research, the average consumer maintains four to five financial relationships and expects always-on availability. Nearly two-thirds (65%) want digital self-service tools to manage investments and finances independently. For community and regional banks, this shift creates a competitive landscape where success will favor those that prioritize digital transformation.
In the race to innovate, community financial institutions have a distinct advantage: their reputation for personalized service. By adopting artificial intelligence (AI), banks can significantly enhance various aspects of financial self-service experiences. Consumers are showing a willingness to embrace AI in banking:
- Seventy percent expressed comfort with AI resolving customer service issues based on their preferences.
- Sixty-eight percent are receptive to AI-driven financial planning guidance. This acceptance indicates a shift in consumer behavior, underscoring the importance of integrating AI into banking strategies.
- Sixty-seven percent would consider transactions suggested by AI to help them reduce debt.
This growing acceptance of AI reflects a broader trend where consumers increasingly expect technology to play a central role in their banking experiences. With customers becoming more comfortable with AI, banks have an opportunity to leverage these insights to enhance their service offerings. To thrive in the AI era, banks should focus on four core competencies, including:
- 1. Digital payments. Implement integrated solutions that facilitate smooth transactions for both personal and business needs, including the growing ecosystem of embedded buy now, pay later providers.
- 2. Liquidity access. Offer financial planning support and products that improve liquidity for both anticipated and unforeseen circumstances. Customer experiences should be consistent across channels.
- 3. Digital identity. Effectively manage digital identities associated with customer profiles to enhance user convenience. This requires tools to reduce friction, increase personalization and allow for secure self-management.
- 4. Personalized financial ecosystem. Provide customized digital experiences and resources at pivotal moments in the customer’s financial journey by combining daily money management, financial literacy and planning into a cohesive platform.
These capabilities build a customized, technology-enhanced framework for relationships that enriches the customer experience throughout their financial journeys. Though the blueprint to success is clear, banks still face significant challenges, with legacy systems being the greatest hurdle to digital transformation. A recent EY technology benchmarking survey identified these outdated systems as the primary cause of IT project failures. To navigate these obstacles, community financial institutions should seek to establish strategic partnerships with agile fintechs and digital-first providers.
Moreover, community financial institutions should not take the loyalty of their customers for granted. Our NextWave research found that 41% of consumers somewhat or very seriously considered changing their primary banking relationship in the past year. That number rose to 62% among Generation Z digital natives.
Technology has profoundly disrupted the financial services industry. Those that adapt quickly will thrive in this new era of banking. By focusing on personalization, speed and relevance, community and regional banks can not only enhance their service offerings but also secure their place as leaders in the financial sector.
The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization. US SCORE no. 28624-251US
