ABA Banking Journal: Three Myths About AI in Banking
It's not just about cost-cutting and generative AI.
July 3, 2025 | David Sosna
There’s growing interest in AI adoption across industries, and banking is no exception. Many in the field are testing the waters, seeking ways to put the technology to effective and productive work.
But banking has unique characteristics that can challenge efforts to gain value if not hard ROI from these investments — principally its highly regulated environment and correspondingly risk-sensitive nature.
Like the Hippocratic Oath, the immediate priority for banks seeking to use the latest AI innovations should be: “First, do no harm.”
A brief history of AI in banking
AI in banking is not a new phenomenon. Financial institutions have relied on artificial intelligence for decades, initially through rules-based expert systems for credit scoring, fraud detection and risk management in the 1980s and 1990s. The rise of machine learning, big data and cloud computing in the 2010s spawned increasingly sophisticated models to power personalized recommendations, chatbots and algorithmic trading.
The introduction of ChatGPT in late 2022 brought generative AI into public consciousness, accelerating efforts to tap into generative AI. Financial institutions have been moving beyond pilot programs to implement these advancements at scale, in customer service, risk management, and operational efficiency.
But the road to success can be littered with failed efforts. Increasing sophistication and automation carry increased risks. Also, common myths and misperceptions might confuse about what to expect and misdirect investment and efforts.
As a serial entrepreneur and CEO who has built companies that applied data and analytics to solve problems, I have seen tech and trends come and go. I have been closely watching the rapid advancements in GenAI and agentic systems, and the potential of his technology to transform banking truly intrigues me.
To reap the rewards, it is important to counter myths with a more realistic sense of what is achievable. I thought I would share a few that we keep running into, with the hope that a better understanding will lead to better results.
Myth 1: AI mostly helps in cutting costs
Many think that AI is primarily for cost-cutting, whether that means reducing headcount (the elephant in the room, rarely said aloud), or increasing back-office efficiency. In reality, the most interesting applications emerging are about growing revenue. For example, AI can be used to personalize financial products, predict customer behavior and optimize marketing, which can boost sales and customer loyalty, according to this CMSwire piece.
Another option is to scale relationship banking with AI. GenAI and agentic architecture can help banks to scale efficiently and cost-effectively by automating routine tasks, uncovering client needs, and equipping bankers with the right insight and guidance for advising, cross-selling and upselling clients.
There’s a big opportunity here, considering that small and midsize business banking generates about $150 billion annually, or roughly 17% of the overall U.S. banking industry’s revenue. There are more than 30 million U.S. SMBs. A McKinsey study concludes that SMBs are increasingly seeking a blend of robust digital tools and strong relationship management when choosing their primary bank.
Ultimately, it’s not about replacing staff, as there just aren’t enough of them; it’s about helping them be more efficient and scaling their efforts to deliver quality advice.
Myth 2: AI replaces banker insight and knowledge
Some think that gains for AI will mean losses for people (yes, that jobs concerns again); and that insight provided by tools like GenAI can compete with and erode the need for human insight.
In reality, it will likely be some time (if ever) before AI can replace the high-touch service and personalized communication that builds trust and fosters relationship-building. Sure, it can empower bankers with critical info and increase their efficiency. AI can be used to scale relationship banking and helps address the talent gap for this role.
It can do this by helping users access information and glean useful insight, from internal and external data sources. The models learn over time and can provide guidance based on institutional knowledge of relationship management best practices.
Of SMBs surveyed, 47% said that dedicated relationship manager support is a key decision-making factor. AI can scale this support and help banks better meet the needs of these customers.
Myth 3: It’s all about GenAI
As the saying goes, when you have a hammer, everything looks like a nail. Here, the hammer is GenAI. Its most famous version, ChatGPT, lit a fire under AI adoption and fueled the innovation race that brings us to today.
One could be forgiven for thinking that GenAI can be applied everywhere to solve all related AI problems. It’s your consumer-friendly AI assistant that seems to get smarter and more versatile every day.
While GenAI may be the low hanging fruit, banks should take a hard look at other kinds of AI solutions and use them where appropriate for the best results (to say nothing about avoiding the risks that GenAI can introduce, in the form of hallucinations and security holes)
Here are some examples:
Agentic AI systems autonomously plan, decide and act toward a goal. They are increasingly replacing or integrating with earlier robotic process automation technology. Unlike RPA, which follows fixed rules and scripts, agentic AI employs multi-step reasoning and can interact with systems and data sources in real time. In banking, it can automate relationship management tasks, assist in responding to customer queries, and orchestrate workflows (say, for onboarding or compliance resolution).
Machine learning discerns patterns from historical data to make predictions or decisions, for example in credit scoring and fraud detection.
Predictive analytics uses statistical models and machine learning to forecast future outcomes, for product recommendations and cash-flow forecasting,
Anomaly detection identifies unusual patterns for real-time fraud monitoring.
GenAI is just one form of the technology; there are other types of AI that provide substantive results.
David Sosna is a serial entrepreneur with over 20 years of experience building innovative fintech startups, including Actimize, Personetics and Sympera AI.
ABA Banking Journal: Budget bill narrowly passes Senate, moves back to House
July 1, 2025
Senate Republicans narrowly passed the GOP’s One Big Beautiful Bill Act today. The bill now heads back to the House for final approval. President Trump has indicated that he wants to sign it into law by July 4.
The vote was 51-50, with Vice President J.D. Vance breaking a tie. Republican Sens. Susan Collins of Maine, Rand Paul of Kentucky and Thom Tillis of North Carolina joined Democrats and voted no.
Over the weekend, the American Bankers Association and the state bankers associations sent a letter in support of several key tax-related provisions in the bill. ABA and the state associations thanked lawmakers for including a narrow version of the Access to Credit for Our Rural Economy, or ACRE, Act, which would reduce the cost of credit in rural communities.
The associations also expressed their support for several tax provisions that the bill would make permanent, among them: the Section 199A deduction that levels the playing field for Subchapter S banks; the enhanced estate tax exemption that protects family-owned businesses (including banks) from having to liquidate to pay estate taxes; the New Markets Tax Credit that banks use to support growth in distressed communities; immediate expensing for R&D costs; bonus depreciation; and basing the Section 163(j) interest deductibility calculation on EBITDA instead of EBIT.
Also welcome, the associations said, were provisions to strengthen the Low-Income Housing Tax Credit and reducing the CFPB’s funding cap to promote accountability at the regulator. ABA’s HSA Council also noted with approval the inclusion of a measure expanding health savings account access.
ABA Banking Journal: Fighting fraud on the frontline
Customer inquiries and complaints are important tools for detecting scams, but structural barriers in the bank may prevent them from being fully utilized.
June 30, 2025 | Walt Williams
Like many banks, the Nebraska-based Security National Bank has a customer service line that takes complaints and questions, and that line is often at the forefront of the bank’s efforts to protect its customers from fraud and scams. Lindsay Lindmier, VP and director of financial crimes at Security National, works with the bank’s compliance officer to monitor the complaint line for potential fraud.
Some scams are easier to tease out than others, Lindmier says. For instance, the bank sometimes gets calls from customers saying they were contacted by bank representatives with hard-to-understand foreign accents.
“We’re in the Midwest and since we don’t outsource, that would be a red flag for us,” Lindmier says. “We’d look further into that and contact our customer and make sure that they didn’t provide any information” to the caller.
Not all fraud is so easy to spot. Scams are growing increasingly sophisticated and the tactics used by scammers are always evolving.
Frontline staff are often the first line of defense for banks, but communications barriers and a general lack of awareness about warning signs mean consumer complaints suggesting fraud may not reach the people who monitor such things.
Solutions to the problem include fraud training, having a clear process for escalating suspicious complaints, and removing obstacles to communications between frontline and risk and compliance staff, according to bankers and risk experts.
Security National Bank is a smaller bank, so Lindmier — who spoke during a panel on monitoring customer calls during last year’s ABA/ABA Financial Crimes Enforcement Conference — says its size allows her more direct connections with other departments than at larger institutions. Still, her team puts in the extra effort to be visible to frontline employees. Team members attend the bank’s branch delivery division meetings, where they spend five to 10 minutes updating call center staff and others on the latest developments and trends in fraud and scams.
“They have one at least every two weeks, and we tell them, ‘This is what we are seeing. This is what we need you to send to us in addition to everything we told you last time we met, add this to the list,’” Lindmier says.
Fraud “evolves so quickly,” she adds. “The typologies change and the red flags change. The best way we can do it is rather than sending emails — because we all know that inboxes get flooded — is standing in front of them and letting them know what we’re seeing.”
Fraud hotline
New Jersey-based Valley National Bank also emphasizes in-person interactions when it comes to keeping everyone up to speed about the latest developments in fraud, according to Richard Vitale, SVP and assistant director of fraud risk management, who also spoke during the panel.
“You have to get face-to-face with the business lines and convince them that the fraud team is an asset and an ally, that you can save them money,” he says.
The bigger problem for Vitale’s team can sometimes be too much communication, with team members flooded with requests to investigate customer complaints suggesting potential fraud.
As a result, he has worked to standardize the process, establishing a single email address for staff to contact the bank’s fraud team for follow-up on investigation requests. The team also set up an internal hotline and created an intranet-based fraud referral form that allows any bank associate to submit a report about suspected or confirmed fraud.
“We put a lot of data and a lot of time into what’s on our intranet page so that it becomes an element of self-service: Knowing what the hottest trends are and what are the latest forms you need to submit,” he says.
Keeping up with trends is important because frontline staff not only deal with customers who are getting scammed, but scammers posing as customers so they can exploit staff training to access sensitive information. Frontline staff are pre-programmed to provide a good customer experience, “and the fraudsters know that, so they’ll leverage it,” Vitale says.
He recounts one attempted scam in which a person posing as a customer said they had lost their account password and needed it right away because their dog was locked in a car. “In hindsight, what does your banking password have to do with this dog being locked in a car?” Vitale says. “It’s part of this five-minute conversation of doing anything they can to get a piece of information, scratch it down, and then we’ll hear the exact same person call again five minutes later.”
Getting to the ‘aha’ moment
Whether it is scams targeting customers or staff, banks should have a formalized escalation process. One compliance officer who asked that his institution not be identified says frontline staff are told to report suspicious activity to their managers, who will report any incident they can’t resolve to the operations team in their market. That team will then forward it to the bank’s fraud team.
“We have a very strong process that says this is what you should do,” the officer says. “And the tellers know they will not get in trouble for having to ask another question” of the customer.
In fact, the bank rewards tellers who identify fraud by recognizing them by name in reports to the bank’s board of directors. “The board sees that report and sees these are the individuals, these are the markets, that are saving money for our customers or saving money for the bank,” the officer says.
Whatever escalation process a bank has established, customer communication is important. Candler Eve, director of enterprise fraud risk management at MidFirst Bank in Oklahoma City, says slow response times and lack of customer follow-up can lead to repeat scams.
“We tend to be pretty aggressive with these,” Eve says. “My fraud investigators will call those people who are potentially scammed to ensure that they’re aware that this is a scam and try to go over the seriousness of it.
“If we don’t touch base, then they’re going to come back and get scammed again,” he adds. “No fraudster says, ‘You know what? I scammed this person. I think we’re good.’ That does not happen.”
MidFirst also doesn’t wait for the scams to happen. It has engaged in a number of public outreach efforts to educate the public about the threat. Eve has given several radio interviews about fraud targeting seniors, for example.
“We’re hoping that with every person who has that ‘aha’ moment, they are then telling their friends,” he says.
Frontline staff are often the first line of defense for banks, but communications barriers and a general lack of awareness about warning signs mean consumer complaints suggesting fraud may not reach the people who monitor such things.
Training and resources
Frontline staff have many roles — from customer service to processing transactions — and that can make it difficult for them to focus solely on fraud detection and reporting, says Julie Gliha, VP for compliance at the Iowa Bankers Association. A strategy she recommends is for banks to have clear guidelines for staff on what constitutes a complaint versus a customer service request as there can be very different paths for escalation.
“You want to give them definitions and examples of what would fall in each, and sometimes they do overlap. Having a defined complaint program is really important for the front line to ensure the right process is followed as quickly as possible,” Gliha said.
One struggle for banks is that staff turnover is greatest on the frontline, so training is a continuous education process. Gliha suggests creating resources such as videos and checklists that staff can easily access and reference to quickly identify and respond to fraud. But given how busy frontline staff are, she says that an in-person approach may work best, so she advises weekly meetings or short huddles with staff on what they should look out for.
“It is just that kind of connection that I think is needed because, otherwise, it is human nature to fall back into our daily routines,” she says.
Also, Gliha suggests making the threat that fraud poses personal so staff understand what is at stake for customers.
“I’m a compliance geek, right? I can talk to you all day long [on compliance] and in about 30 seconds of time, your eyes are going to glaze over,” she says. “You’re going to say, ‘Give me a checklist and let me know when I need to deal with it.’ But if I can say, ‘Has this ever happened to you? Has it happened to your mother? Your children? Your grandmother?’ I will have your attention.
“Make it real so they are sensitive to it because you can get a little calloused over time: ‘Well, everybody’s fallen victim.’ You can’t do that when you’re face to face with somebody, and it may be their first or 10th time, but it is a very real crisis for them,” she says.
TOOLKIT
Help your frontline succeed on the front lines of risk and fraud with ABA’s revamped Frontline Compliance Training, free to all ABA member banks. Access it at aba.com/frontline.
CISA and the National Security Agency (NSA) published joint guide, Memory Safe Languages: Reducing Vulnerabilities in Modern Software Development, that identifies the main obstacles in adopting memory safe languages, provides practical solutions to address these challenges, and emphasizes critical factors for organizations aiming to shift towards more secure software development methods.
The document expands on recommendations for critical infrastructure organizations to implement to achieve better memory safety, such as language-level protections, library support, robust tooling, and developer training.
All member banks will be contacted by NFR (our publisher for the SD Bank Directory) in early July regarding updates your bank may have for next year's directory. Please complete the form and send it back to them so that our 2026 directory can be as current as possible.
The 2025 SDBA Agricultural Credit Conference brings together key professionals from the financial and agricultural industries to discuss critical issues related to agricultural financing and credit accessibility. This event provides a forum to examine emerging trends, tackle common challenges, and explore opportunities for collaboration that enhance the resilience and long-term success of the agricultural sector. Through expert presentations, engaging discussions, panel sessions, and a well-rounded exhibit hall, attendees will gain valuable knowledge on navigating agricultural lending challenges, managing risks, and seizing opportunities for growth in this essential industry.
Fraud Academy is a pioneering initiative designed to arm bankers with the skills needed to detect and combat fraud. Our unique program features insights from experts across the DEA, FBI, the Secret Service, law enforcement, AARP, and the financial industry, offering a robust education in fraud prevention from those who know it best.
With fraud costing every bank valuable time and money, our curriculum targets over eighteen types of fraud, including check fraud, elder fraud, cybercrimes, and introduces effective prevention tools. Equipping bankers with the knowledge to minimize fraud-related losses and protect your institution's bottom line. This two-and-a-half-day school will take a deep dive into the types of fraud most affecting financial institutions.
GSBC’s C-Suite School Takes Succession Planning to New Heights
Limited Availability for October 2025 Cohort | Apply by August 15
The Graduate School of Banking at Colorado’s Executive Development Institute for Community Bankers® (EDI) is a program for up-and-coming C-level executives whose work efforts influence the future direction of their banks. A dual curriculum of advanced leadership and advanced financial management strategies prepares participants for the challenges associated with leading a community bank in today’s increasingly competitive environment.
Building Visionary Leaders for the Long Haul
EDI turns succession planning from a vague concern into a confident, strategic advantage—ensuring the long-term success of community banks by developing leaders who are not only ready to take the helm, but equipped to lead with vision and resilience. EDI supports the development and skills of rising leaders through:
Intimate Peer Learning Environment of 10-15 Non-Competing Bank Executives
Executive Coaching
CEO Mentoring
Institution-Specific Projects on Talent Management, Enterprise Risk Management & Profitability
Participating in learning opportunities outside the bank can be challenging. Take advantage of the SDBA's extensive selection of webinars and on-demand training to enhance your banking expertise directly from your computer.
Sarah Maldonado, Vice President of Human Resources at the Texas Bankers Association
In this eye-opening episode of Banking Matters, Amanda Mattson sits down with Sarah Maldonado, Vice President of Human Resources at the Texas Bankers Association. They explore how banks can stay competitive in today’s rapidly evolving workplace. The conversation also unpacks what it really takes to attract—and keep—top talent. Sarah shares insights on rising employee expectations and the growing demand for flexibility, career growth, and meaningful feedback. Discover why the old HR playbook no longer works, and how banks must evolve their culture to thrive in the modern talent landscape.
All member banks will be contacted by NFR (our publisher for the SD Bank Directory) in early July regarding updates your bank may have for next year's directory. Please complete the form and send it back to them so that our 2026 directory can be as current as possible.
Fraud Academy is a pioneering initiative designed to arm bankers with the skills needed to detect and combat fraud. Our unique program features insights from experts across the DEA, FBI, the Secret Service, law enforcement, AARP, and the financial industry, offering a robust education in fraud prevention from those who know it best. 
