Artificial Intelligence (AI)
AI is increasingly viewed as a practical tool for driving value, even as many institutions continue to balance its potential with important questions around governance, risk and customer perception. Community banks and credit unions have greater confidence and clarity about where AI could make an impact: automating routine tasks, strengthening security and freeing staff to focus on relationship-driven work.
The power and potential of AI is not lost on respondents, reflected by consistent responses across all asset sizes. Larger institutions report higher familiarity: 97% of institutions holding $5B–$10B in assets agree or strongly agree that they understand what AI is and how it can be applied in banking.
Institutions that adopt AI will have a significant competitive advantage.
Understand what artificial intelligence is and how it can be used in banking.
Are optimistic about the potential of AI in banking.
When asked how AI could help their financial institution, the most-chosen benefits were:
Cybersecurity
Advanced Data Analytics
Financial Crimes Prevention (e.g., Fraud, AML)
Customer Service
Customer Engagement (e.g., Chatbots, Virtual Assistants)
Back Office Operations Efficiency
▶︎ Institution Variance: Banks 38% | CUs 21%
Account Opening and Onboarding
Lending Automation
Personalized Marketing and Product Recommendations
Despite excitement and optimism surrounding AI, it also raises important questions for many respondents:
AI should augment, not replace, human judgment in banking.
Trust AI-driven decisions and outputs in banking.
▶︎ Institution Variance: Banks 78% | CUs 59%
Are concerned about how customers will perceive the use of AI in banking.
Believe AI poses regulatory/compliance risks for financial institutions.
Are concerned about the potential of AI in banking.
- This is a substantial decrease from last year, when 83% reported concern.
Industry Insight
Recent global research from IBM and the Ponemon Institute reveals that AI adoption is outpacing security and governance. Nearly all (97%) organizations reported experiencing an AI-related security incident, often tied to insufficient access controls. 63% had no AI governance policies to manage AI or prevent the rise of shadow AI.7
The takeaway is clear: move quickly but govern carefully. AI deployed without proper controls and oversight policies raises the risks of data disclosures and unchecked shadow AI.
Shadow AI is the use of AI tools or applications by employees or end users without formal approval or oversight from the IT or governance teams. These unsanctioned activities can create security, compliance and operational risks for an institution.
Expert Perspective
AI offers real value in data-heavy areas like fraud prevention and security, but it’s not magic. Effective use still requires careful, unbiased training, intentional implementation and ongoing oversight. Adoption alone doesn’t guarantee results; its impact depends on how it’s used and how well it’s integrated into daily operations.
Strong governance is essential, especially in the absence of regulatory clarity, because AI systems can interact with sensitive data across the institution and introduce new risks if not properly controlled. Rather than broad access, effective governance ensures AI systems use the right data for the right purposes, with clear restrictions and continuous monitoring to prevent bias, unfair outcomes or blind spots. Community banks and credit unions should also weigh build-versus-buy decisions carefully and resist the temptation to chase “flashy” tools that distract from core priorities.
When implemented thoughtfully, AI can increase efficiency and deliver measurable value while keeping risk in check.
“AI is the best and worst thing for our current banking environment.”
Source: Survey Participant