How Bank-FinTech Partnerships Will Accelerate GenAI Adoption in Banking
Federal Reserve Governor Michael S. Barr predicts that collaboration between banks and FinTech firms will be a key driver in the adoption of generative AI (GenAI) in financial services, as outlined in PYMNTS. Speaking at the Federal Reserve Bank of San Francisco on April 4, Barr highlighted how competition and cooperation between these sectors will shape the future of AI-powered banking.
FinTechs as Catalysts for AI Innovation
Barr noted that FinTech companies are uniquely positioned to integrate cutting-edge AI due to several advantages:
- No legacy systems: Unlike traditional banks, FinTechs aren’t burdened by outdated infrastructure.
- Agility: Financial and time constraints push FinTechs to adopt AI for fast, efficient solutions.
- Specialization: With a focus on single products, they can optimize their tech stack for AI.
“As GenAI technology continues to develop, there’s a good chance that FinTechs will help drive widespread GenAI adoption in financial services,” Barr said.
Banks Bring Data and Trust to the Table
While FinTechs excel in innovation, banks provide crucial elements for AI success:
- Rich customer data – Essential for training large language models (LLMs).
- Cross-business insights – Banks can analyze trends across multiple services.
- Established trust – Strong regulatory frameworks and customer relationships ensure credibility.
“These attributes of FinTechs can make them symbiotic with banks,” Barr explained.
Collaboration or Competition? Both Drive AI Adoption
Barr suggested two paths for AI integration:
- Partnerships – Banks and FinTechs combine strengths for better AI solutions.
- Competition – FinTech innovation pushes banks to adopt AI faster.
Regardless of the approach, Barr emphasized that regulators and risk managers must understand AI to ensure safe adoption.
“These changes will require broad-based curiosity from regulators, FinTechs and banks — combined with education and investment — to create a culture of awareness on the opportunity and risks of the technology,” he said. “Equally as important is leadership, to establish appropriate governance over AI and provide appropriate direction on priorities.”
Challenges Remain, But Partnerships Offer Solutions
A recent PYMNTS Intelligence and NCR Voyix report, “Is AI the Master Key to Banking’s Next Era?”, confirms that while AI has transformative potential, banks face integration hurdles. The study also found that alliances with FinTechs can accelerate AI adoption, reinforcing Barr’s outlook.
The future of AI in banking hinges on collaboration. FinTechs bring speed and innovation, while banks contribute data and stability. Together, they can unlock GenAI’s full potential—provided regulators keep pace with the technology.