How AI is reshaping banking from verification to financial modeling

The financial industry‘s growing embrace of artificial intelligence is reshaping banking experiences for consumers and transforming internal operations for institutions. As digital banking becomes the norm with 92% of Americans avoiding physical branches, financial organizations are leveraging AI to streamline identity verification, enhance customer experiences, and power traditional financial modeling. This evolution marks a critical inflection point as the industry determines whether emerging AI technologies will incrementally improve existing systems or fundamentally transform the financial landscape.

How AI is changing banking today: Credit unions and financial institutions are implementing AI to streamline customer authentication and enhance the banking experience.

• MSU Federal Credit Union already uses AI to recommend optimal payment methods for members’ favorite stores and plans to expand capabilities further.
• The credit union aims to replace traditional identity verification methods with biometric face scans, eliminating the need for physical branch visits for large wire transfers or document signatures.
• Benjamin Maxim, MSUFCU’s chief digital strategy officer, notes this would be “way more efficient and effective than asking 20 questions about your account.”

The big picture: AI has been integral to financial services for decades, with applications evolving from basic automation to sophisticated predictive technologies.

• Banks have used automated credit scoring and fraud detection systems since the mid-1980s, followed by machine learning adoption in the early 2000s and AI-powered FinTech in the 2010s.
• Lauren Clement, VP of emerging technology at Prudential Financial, explains: “AI has been used for a very long time, particularly when it comes to financial modeling, risk modeling, underwriting, that kind of stuff.”
• These longstanding AI applications laid the groundwork for today’s more advanced implementations across the financial sector.

The industry at a crossroads: Financial institutions face a pivotal question about how emerging AI technologies will reshape their business models.

• The sector must decide whether generative AI and large language models will simply enhance existing processes incrementally or fundamentally transform financial services.
• Current AI tools at companies like Prudential enable financial advisers to conduct enhanced searches with greater speed and detail while maintaining human oversight.
• Human advisers still serve as the “main deciders” on which AI-generated search results to implement in customer interactions.

Key challenges: Despite significant advancement potential, the financial industry faces three major hurdles to broader AI implementation.

• Legacy systems often contain siloed older documents that create barriers to AI tools requiring clean, accessible data.
• Regulatory frameworks remain unclear and inconsistent across different jurisdictions.
• Industry leaders struggle to effectively explain their AI implementations and establish reliability metrics for these systems.

Where we go from here: Experts predict AI will eventually become so embedded in financial services that it will no longer be discussed as a separate technology.

• Maxim compares AI’s future to smartphones, suggesting that within “five to 10 years, AI is going to be that” ubiquitous and seamlessly integrated into daily financial operations.
• This normalization would mark the maturation of AI from a novel technology into an essential, invisible infrastructure component of modern banking.