AI Across the Entire Bank

There has been no doubt that artificial intelligence (AI) is a major focus in the financial services industry over the past year. While AI might still be relatively new for smaller and mid-sized banks, larger institutions have already been utilizing it extensively.

For instance, JPMorgan Chase CEO Jamie Dimon recently highlighted how his bank uses AI for decades, with an expansive team of over 2,000 experts including data scientists and machine learning specialists. This team has helped implement AI solutions across various areas like marketing, fraud detection, risk management, supported by a substantial $12 billion annual technology budget.

Bank of America has similarly invested in AI to enhance services such as its chatbot Erica, among other initiatives aimed at improving programming through advanced technologies.

AI is clearly having a significant impact throughout the entire bank,” Gaughan said. It’s not just a buzzword—it is an initiative that affects multiple functions from front-office to back-office operations.”

These offices are crucial for ensuring processes and products work efficiently. AI can enhance AML verification, Know Your Customer (KYC) procedures, fraud prevention, and even credit scoring.

Banks have also started integrating AI into their accounting and IT systems, broadening its impact across the organization.

Leaders will need to manage both knowns and unknowns as they invest in AI,” Gaughan noted. Tech investments at banks often require significant upfront costs with unclear returns at first, making it harder to quantify beyond potential cost savings.”

Despite this, these are not one-size-fits-all solutions that can be easily implemented without careful planning.

Banks will continue seeking top talent—both internally and externally—to navigate the complexities of AI implementation.

Tech talent competition is fierce,” Gaughan said. The large number of AI experts required at JPMorgan Chase indicates just how much support banks are looking for, and this need extends beyond a single institution.”

Modernizing Cores for the New Payments Era

While AI garners much attention, it is not the only technology banks should prioritize. As customers demand modern payment solutions like open banking and instant payments, many institutions need to upgrade their core systems.

However, determining the scope of such an upgrade isn’t always straightforward. Many banks still feel comfortable with legacy core systems that have worked reliably for decades.

While these existing systems suffice now, those that haven’t updated over the past decade will struggle to adapt to new financial innovations.

The ecosystem has expanded, and your core needs to integrate better,” Gaughan explained. A ‘fix it if it ain’t broke’ approach won’t work in the long term, especially when consumers expect more advanced features like real-time account management.”

Large banks have already modernized their systems, but beyond top-tier institutions, others will increasingly rely on vendors for support.

These vendors can assist with integrating a wide range of APIs and payment rails. They also help streamline business processes and provide guidance on adopting new technologies.

Regardless of whether banks manage modernization in-house or seek external assistance, it is crucial to start the process now.

Payments modernization might not be a top priority for smaller institutions,” Gaughan acknowledged. But with over 9,000 financial institutions across the U.S., competing effectively requires offering these capabilities.”

Open Banking Puts Developers in the Spotlight

The fragmented U.S. financial landscape has propelled efforts to adopt elements of open banking, a model widely embraced in other countries.

While this model might seem like an ideal fit for the U.S., policymakers have generally opted for market-driven adoption rather than regulatory mandates.

The UK’s approach was more regulator-led because there are fewer banks,” Gaughan noted. It’s easier to implement standards when you have less competition.”

Still, open banking is gaining momentum in the U.S. The Financial Data Exchange now reports over 94 million customer accounts using its open banking standard, up from just 21 million three years ago.

This increased adoption has highlighted developers as key technology decision-makers.

Developers are creating new financial tools by pulling together APIs and data,” Gaughan stated. They need to ensure these connections meet evolving standards.”

Attracting developers requires rethinking a bank’s marketing approach, focusing on understanding both financial services and technology compliance.

Building these technology-driven communities will necessitate a reassessment of how banks market their products,” Gaughan concluded.