The local branch is where franchising lives and where the real customer impact happens. But how can community banks navigate the complex world of artificial intelligence while maintaining compliance and security?
In a recent episode of the AI Sherpa Podcast, host Jack Munson spoke with WSI's Chief AI Officer, Robert Mitchell, and WSI Consultant Eric Cook from Michigan about the intersection of AI and community banking.
The Banking AI Dilemma
Community banks face a unique challenge with AI adoption. Unlike major banks with dedicated AI teams, local institutions often lack the resources to develop comprehensive AI strategies. Yet they possess decades of valuable customer data that could drive meaningful insights and business growth.
As Eric Cook, a WSI Consultant and former banker of 15 years, explains, "There are so many community banks that are fearful of this, and rightfully so—as a bank, you don't want your money or those that are the custodians of your money, just jumping into any new technology and putting that at risk."
Starting Safe with AI in Banking
For community banks, the first step is identifying AI applications that don't involve personally identifiable information (PII). Eric recommends focusing on:
- Strategic planning activities
- Creating educational content for customers
- Analyzing contracts, vendor documentation, and underwriting materials
- Handling compliance-related paperwork
As Eric mentioned, "What is it that's not adding value to your customers' lives by building that personal connection with them and figuring out a way that we can get artificial intelligence to do some or maybe even all of that?"
The Data Lake Opportunity
Beyond these basic applications, there's also a more advanced opportunity: creating secure data lakes of banking information.
"The use case that we're talking to banks about now is creating a data lake of all of their resources inside of their organization. Of course, it's very secure, vectorized, and behind a firewall," explains Robert Mitchell.
Banks typically have customer data spread across multiple disconnected systems. By consolidating this information securely, they can leverage AI to generate powerful insight, such as identifying mortgage holders without chequing accounts who live within a certain radius and meet specific credit criteria.
The Need for AI Consultants in Banking
Why can't banks figure this out themselves? Simply put, the risks are too high.
"AI is still so new for so many people in business that imagine the disaster that could happen if someone at a bank started sharing information with ChatGPT or other places without a consultant," notes Munson.
Robert smartly compares it to legal counsel: "[This data is] too complex, and there's a lot of risk involved. You need a guide. You need a Sherpa... Every month [AI] changes—the knowledge base that I had last month wouldn't apply to what's happening this month."
Policy Development is Critical
Even banks that aren't ready to deploy AI must develop clear policies. Eric compares this to the early days of social media: "We wrote policies for banks whose policy was, 'We will not be on social media,' but they had to have a policy at least."
Simply blocking AI tools from the company network isn't sufficient. Employees will likely use these tools on personal devices and then transfer information into the bank's systems. Without clear guidelines, employees may unintentionally compromise sensitive information.
The Competitive Advantage
For WSI Consultants, AI advisory services provide a new way to start relationships with potential clients. "We have advisory services and conversations going right now with banks that don't have any relationship with us otherwise," notes Cook.
And clients are becoming more sophisticated in their AI needs. Robert observes, "I'm getting people reaching out saying, 'I know exactly what I want to do with AI. Can you make it happen?'"
Looking Forward
The AI landscape continues to evolve rapidly. The group points to developments like DeepSeek, an open-source model that performs comparably to ChatGPT, which is driving down prices across the industry. They also highlight the potential of voice agents that sound indistinguishable from humans for handling appointments and customer service.
As AI capabilities expand, community banks that work with knowledgeable consultants will be positioned to leverage these technologies while maintaining the security and compliance their customers expect. Connect with your local WSI Consultant to help you get started!
