In 2012, a WBJ review found less than half of Central Massachusetts banking institutions had a mobile banking app. Today, you’d be hard pressed to find a bank or credit union that doesn’t have its own Android and Apple apps, as it’s become second nature for banking customers to deposit a check or move money […]
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In 2012, a WBJ review found less than half of Central Massachusetts banking institutions had a mobile banking app.
Today, you’d be hard pressed to find a bank or credit union that doesn’t have its own Android and Apple apps, as it's become second nature for banking customers to deposit a check or move money from one account to another via their smartphone. A 2024 survey by the American Bankers Association found 55% of banking is conducted via mobile app, while a further 22% is via the web.
With apps now ubiquitous, local banks are looking to AI and other emerging technologies in order to keep innovating. Leveraging the power and technology of larger fintech firms can help local institutions compete with larger banks while keeping their local roots, said Kate Gallo Megraw, chief operating officer/chief information officer at Auburn-headquartered bank Webster Five.
“We leverage fintech partnerships and internal innovation to really compete at scale,” she said. “We are not necessarily trying to be a bigger bank, but we're just trying to allow our customers to be smarter and faster.”
The emergence of AI offers opportunities, but local banks are aware of the potential pitfalls of rolling out AI-backed technology in a rush to stay ahead of the curve. Despite its virtual presence, the human touch remains a key aspect of mobile banking, said Michael Welch, CEO of Whitinsville-based UniBank.
“We're really at a national focal point of how we define banking and financial services,” he said. “There are a lot of people getting lost in the cyber world, and a lot of collateral damage along the way. We’re doing well by balancing the person with the technology, and that’s what the customers who are gravitating towards us appreciate.”
Keeping up with tech
E-banking emerged in the days of dial-up internet, long before smartphones. But as these devices have become an integral part of customer’s everyday life, the importance of adding new features to mobile banking apps has become paramount, said Jamie Conaghan, senior vice president of marketing and digital at Marlborough-based Main Street Bank.
“Mobile needs to be first when looking at financial services and fintech,” she said. “We've embedded certain things within that mobile banking app, like credit score monitoring, credit report access, and money management tools. It’s really about making it a one-stop place and partnering with fintech, so that we can offer that fully-integrated experience.”
For business customers, Main Street Bank has partnered with ZSuite Technologies, a Boston-based firm. This relationship has allowed business account holders to instantly create sub-accounts without coming into a branch, helping keep track of money coming in-and-out by allowing funds tied to particular projects or departments to be kept separate from the main account.
“A good use case for ZSuite would be property managers with multiple tenants," Conaghan said. “They have multiple deposits from tenants, like security deposits. They can manage and see all those separate deposits, but it all flows up into one main account they can then manage.”
While other banks have decided to put virtual banking kiosks in their branches, Main Street Bank has instead added Video Connect, a feature allowing customers to speak to a banker directly from the app.
“This is in contrast to some financial institutions putting virtual terminals in their branches,” Conaghan said. “We took the opposite approach: If people are going to a branch, they're going in order to talk to a person. But if there's somebody who wants to embrace that technology, they can do it from the comforts of their own home or office.”
Webster Five has teamed up with New York-based fintech Spiral, whose features allow banking customers to round-up debit card transactions. This leftover change can be deposited into a savings account or donated to nonprofits.
“Maybe it's the YMCA, maybe it's the Worcester Housing Alliance,” Gallo Megraw said. “If you spend $20.98, those two cents are going to go to a cause you care about. It's a nice piece of technology that enables my customers to hit multiple goals.”
Far from something that’s only benefited big national banks, new technology has helped local banks level the playing field, Gallo Megraw said.
“I don't find fintech and AI to be a threat,” she said. “It's really a multiplier for community banks, and it's going to be what brings us into the next wave. Strategically, I think most community banks have certain areas they're trying to grow, and so you naturally need to find partners that are going to enable you in a precise way.”
Tools in the toolbox
As the importance of technology to local banks has grown, so have their technology departments. While bigger fintech firms can help local financial institutions navigate the modern age of banking, local boots on the ground are still needed, said Welch.
“Our tech department 10 years ago was maybe a person or two,” Welch said. “Now, we’ve got almost 20 people in our tech department. Their job is helping run cybersecurity, with software development, and interacting with the appropriate third-party vendors who can help us invest and scale something that would take us a while on our own.”
Like the rest of us, Welch has had that frustrating moment of needing over-the-phone assistance from a company, only to be stuck trying to communicate with a computer who refuses to connect with a human operator. He used this as an example of how the human touch is still a critical ingredient, even as AI offers potential for banks to make their operations more efficient.
“l view it as a tool in the toolbox,” Welch said of AI. “If we're going to do a loan on a commercial building, our team can use it to gather information on the property. So it's a tool in the background to assist, not to make decisions. We're very clear that humans are making that decision, not a machine.”
Implementing AI is a balancing act, Conaghan said.
“With AI, it’s part of certain syntax already,” she said. “We’re at a stage where we’re trying to look with open mindedness, but also with that safety and soundness mindset, making sure we address all the potential risks and concerns.”
Gallo Megraw sees the most potential for AI in tasks like answering straightforward questions from customers during off-hours or to assist with fraud detection.
“I know we all kind of hate interacting with the chatbots of the world, but anyone that's used Claude, or ChatGPT, or Copilot, the experience of those interactions with AI has improved dramatically,” she said. “Sometimes all the customer needs is to know what is the closest branch to them. AI is a great use case of getting that information to them quickly. In community banking, we're really looking to enhance our relationship model and not replace it.”
Eric Casey is the managing editor at Worcester Business Journal, who primarily covers the manufacturing and real estate industries.
