I think it’s safe to say that most people are not fans of change.
Whether an individual or an enterprise, change can be uncomfortable. And, risky. After all, we all prefer the familiar to the unknown and change creates uncertainty… and with it, fear. It can force us to abandon old and comfortable habits, face having to learn new things, and sometimes admit that the way we've always done something may no longer be the best way.
Decision makers in the financial services industry are not, unfortunately, immune. For decades, banks operated in a relatively predictable environment. By and large, their only competitors were other banks and the battle for share of wallet was fought, for the most part, “on the ground,” as it were, between retail branches. “Life was simpler then” as the saying goes and, well, it certainly was. Customers deposited checks, applied for loans, and conducted most of their financial lives within the four walls of the local branch and sometimes did so utilizing the bank’s online services.
Today, of course, financial institutions find themselves in a far more complex environment, made more complex by the fact that they must now compete with companies that don't look, or act, anything like banks. Fintech firms, payment platforms, digital wallets, and technology companies are all vying for a place in the banking services consumer’s financial life. At the same time, artificial intelligence is changing how businesses operate, how customers interact with them, and how decisions are made.
The new competition
Banks are no longer competing solely against other financial institutions. Consumers of banking services can send money through payment apps, apply for loans online, manage investments from their smartphones, and increasingly access financial services without ever stepping into a branch or speaking with a banker. In fact, they can do all of that without even engaging a bank.
Perhaps the most interesting of these new nonbank entrants is Elon Musk's vision for X. What began as the Twitter social platform has been steadily evolving into something much bigger and much different. Musk has spoken openly about transforming X into an "everything app,” i.e., a platform where users can communicate, shop, consume content, and manage financial transactions… all from a single interface. X Money, the company's developing payment platform, is intended to play a major role in that strategy.
According to an April article in Yahoo Finance, “the service, which Musk is calling X Money, will likely be similar to other digital wallets. As a user, you'll be able to fund your X Wallet from a bank account and send and receive payments to and from other users. Per various previews, it appears users can earn a generous 6% APY on their balance, and they'll get cash-back debit cards.”
AI is creating winners and losers
Another development generating equal parts excitement and anxiety? Artificial intelligence. Some business leaders see AI as a threat. Others see it as an opportunity. Which is it? I leave that to you. I do know, because I speak with bankers all the time, that it is certainly a cause of anxiety.
What I’m hearing is that the organizations that are gaining the most from AI aren't necessarily replacing employees. They're finding ways to help employees become more effective. They're using it to automate routine tasks, analyze information faster, identify patterns that humans might miss, and deliver customer experiences more effectively. Take call centers, for example:
As pointed out in The Financial Brand’s Beyond Efficiency: How Human-in-the-Loop AI Is Redefining the Contact Center, “let AI handle the repetitive questions that make up the bulk of contact-center work: capturing names, phone numbers, the reason for the call, etc. Removing these tasks allows human agents to focus on more complex, problem-solving interactions that draw on their knowledge and tools.”
In implementing AI, instead of building and managing these solutions in-house, many are engaging providers with whom they can partner. A recent ABA article, “Banks view doing nothing with AI as greatest risk,” confirms this:
“According to an ABA survey, banks are increasingly adopting AI but doing so cautiously, often relying on vendors and partners. The survey found that many bankers believe failing to adopt AI could leave institutions more dependent on outside providers and less competitive as AI becomes embedded in banking operations.”
Yes, they are doing so “cautiously.” I’m hearing that from our community bank partners, as well. Finding the right tech solution, and provider, can still be a challenging, anxiety-fraught process.
Lessons from Netflix
Remember when Netflix was a DVD-rental-by-mail company? Perhaps not. At the time, that business model was enormously successful. But instead of sitting back and simply enjoying their success, founders Marc Randolph and Reed Hastings recognized that streaming technology would eventually replace physical media.
At the time Netflix launched streaming, its DVD business was still profitable and growing. Rather than protecting the old business model, however, Netflix invested in the future… and a new model; even when doing so risked cannibalizing its existing revenue. And the company continues to transform itself. Artificial intelligence helps personalize recommendations, improve advertising performance, and better understand viewer preferences. Netflix's story is often cited in business schools because it illustrates a fundamental truth in the world of business: Successful companies that don’t disrupt themselves often have disruption forced upon them.
Amazon. Continually reinventing itself
Amazon is another great example. Most people think of this behemoth as an online retailer, but the company is really an innovation machine. Throughout its history, Amazon has repeatedly challenged its own assumptions about how products should be sold, delivered, and supported. The company has been investing heavily in artificial intelligence and automation for nearly three decades, using early forms of artificial intelligence and machine learning in the late 1990s to drive their personalized product recommendation engine. Like Netflix, Amazon’s success is built on a belief that many organizations struggle to accept: standing still is not an option. This from Amazon’s 2024 Shareholder Letter:
"If your mission is to make customers' lives better and easier every day, and you believe every customer experience will be reinvented by AI, you're going to invest deeply and broadly in AI."
Looking ahead
The irony is that while change is risky, resisting it is an even greater risk. Banking consumers increasingly expect instant service, personalized recommendations, seamless digital experiences, and convenient payment options. They compare their banking experiences not only to other banks, but to the digital experiences delivered by companies like Amazon, Netflix, Apple, and Google.
There will always be reasons to be cautious about change. New technologies create uncertainty, new competitors challenge established practices, and fear is a natural response. But in business, the greater danger is letting that fear keep you from taking action.
Bank Marketing Center
We’re Bank Marketing Center, the leading, subscription-based provider of automated marketing services to community banks. Our goal is to help bank marketers with topical, compelling communication with customers that builds trust, relationships, and revenue. And we do this through automating critical bank marketing functions, such as content creation, social media management, digital asset management and, of course, content routing. All of which contribute to a community bank’s ability to create and distribute content that drives business, without fear of fines, brand damage, or fleeing customers.
We also want to share what we know—and learn along the way—with all our community banking friends. Whether it’s content focused on the latest on AI technology, suggestions on how to attract and retain top talent, or the importance of data protection, we’re here to make bank marketing the best that it can be..
Want to learn more about what we can do for your community bank and your marketing efforts? You can start by visiting bankmarketingcenter.com. Then, feel free to contact me directly by phone at 678-528-6688 or via email at nreynolds@bankmarketingcenter.com. As always, I welcome your thoughts.