T Amid the AI Hype, WHAT SHOULD YOUR BANK DO? BY MILTON BARTLEY, IMAGEQUEST There has been much excitement over how artificial intelligence can improve efficiency and productivity. Every conference, regardless of the host and theme, includes a session or sessions on AI, and articles everywhere trumpet its promise. AI tools can analyze large volumes of data in real time and provide immediate decisions or guidance on subjects from creditworthiness to fraud detection. They can automate routine tasks, including compliance reporting, data entry and email or chat support, freeing your team to focus on strategic initiatives. AI tools can even write reports, generate presentations and craft custom marketing images. But while current market fervor may prompt jumping on the AI train, we want to caution our community banking friends to consider these points first. REGULATORS HAVE YET TO ISSUE REQUIREMENTS SURROUNDING THE USE OF AI But they are certainly discussing it. The Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the Senate Banking Committee all commented last summer on their concerns about the use of AI. The main fears center around potential discrimination in lending and criminals using AI to impersonate customers. In October 2023, President Joe Biden issued an executive order on safe, secure and trustworthy artificial intelligence. This new directive will likely boost efforts already underway to police the use of AI with an emphasis on preventing privacy and discrimination-related concerns surrounding personal data and financial transactions. In January 2023, the National Institute of Standards and Technology, the nation’s leading authority on standards and technology specific to the nation’s economic security, issued a new Artificial Intelligence Risk Management Framework and a companion playbook. This is the first comprehensive attempt at industry OPERATIONS & TECHNOLOGY guidance, and it is an effective tool. The framework, however, will likely be updated as organizations evaluate its effectiveness. An ABA Banking Journal report quoted Acting Comptroller of the Currency Michael Hsu as urging banks to be cautious in implementing AI products. Hsu urged bankers to talk with their regulators as they consider AI products “rather than engaging with them afterward.” That is sound guidance, even if regulators at this point are, at best, only in the comment stage with any requirements around AI. We know the marketplace is ripe with competitors who may have the means to introduce AI products, so we assume your bank will introduce AI products. But before you do, consider our second point. DEVELOP A CLEAR AI STRATEGY FOR YOUR BANK What problems do you think AI can solve at your bank? How can AI help your bank? What exactly would AI help you do faster or more accurately? The Large Language Models that have garnered marketing cache (e.g., ChatGPT, Bard, Perplexity) use deep learning algorithms that can recognize, summarize, translate, predict and generate content using large datasets. But there are dozens, if not hundreds, of niche AI products that solve particular business problems. Consider where you need help with bottlenecks or unsatisfactory customer experiences. What is routine and time-consuming? Where do you need answers quickly about trends? And decide if an AI tool can fill that gap in your business process. 52 HOOSIERBANKER
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