There’s a buzz of excitement rolling in like spring thunderstorms. Some industry players have raincoats, some have umbrellas, but then there are those who have generators and a backup food bunker. The ones with the generators and bunkers are ready for anything. They have prepared and continue to equip their existing staff, committees, and boards for an inevitable financial shift.
Take for instance non-depository applications. These applications have taken an entire generation by storm. Many TradFi organization are trying to figure out how to compete. They are asking themselves. Do we need an app? Do we need better social marketing campaigns? Do we need NIL athletes? Do we need more creative community engagement?
The funny thing about this is the answer maybe “Yes” to all. It is estimated that a staggering $84 trillion will transfer from Baby Boomers and older generations to Millennials and Gen Z by 2045. 11 trillion of that moving by 2033.
So, institutions must ask themselves this early. How do we compete with the Fintechs of the world who are dipping their toes in the trillion-dollar pie. The last thing needed is an upheaval of solid institutions that people have grown to trust over time. It’s my belief that credit unions provide a foundational benefit to many communities and their longevity going forward must include easy-to-use technology. This technology is for the future members, while still providing the face-to-face experience for the traditional non-tech members.
To perfect this balance means you have future-proofed your institution. Part of that may have something to do with AI.
AI is everywhere—optimizing workflows, improving customer service, and enhancing fraud detection. However, one critical challenge AI faces is keeping pace with regulatory changes that shape how financial institutions can leverage technology. The financial industry is highly regulated, and as AI takes on greater responsibilities, compliance teams must ensure it operates ethically, transparently, and within legal boundaries.
Fintechs are redefining the financial landscape by leveraging technology in ways that traditional financial institutions have struggled to match. They have built their success on three key pillars:
- Streamlined user experience
- Alternative data underwriting: Consider income flows, cash reserves, and transaction history, they can approve borrowers that traditional institutions might overlook.
- Open banking infrastructure
While AI has the potential to transform financial operations, it also brings compliance challenges that institutions must navigate carefully. Regulators are paying close attention to AI’s role in decision-making, consumer interactions, and risk management. Key areas of concern include:
- Bias in AI: If AI algorithms are trained on biased data sets, they could result in discriminatory lending practices—raising compliance risks under Fair Lending laws, the Equal Credit Opportunity Act (ECOA), and Regulation B.
- Data privacy & security: AI relies on vast amounts of consumer data, which raises concerns under the Gramm-Leach-Bliley Act (GLBA) and state privacy laws. Institutions must ensure robust data governance to protect consumer information.
- AI-driven decision transparency: Regulations like the Consumer Financial Protection Circular 2022-03 emphasize that financial institutions must provide clear explanations for AI-driven credit decisions. Institutions should ensure AI models are explainable and auditable to remain compliant.
Implementing AI isn’t just about increasing efficiency—it also requires a strong governance framework to meet compliance expectations and maintain consumer trust.
While it is important to move with the times and find suitable technical integrations that meet the needs of your members. It’s equally important to exercise due diligence on the various tools out there and understand the internal expectation needed for it to perform multiple levels of efficiency.
Technology is here to stay. Don’t be afraid of the speed in which it is traveling because this will become the new norm. Waiting has already become an inconvenience. This is why you see success in social platforms that can feed you several different experiences in short intervals.
If your institution is exploring new systems/tools in preparation for the financial paradigm shift, here are a few tips I can share.
- Understand your goals.
- Understand your budget.
- Understand integration versatility.
- Understand if the need is met.
