Wells Fargo goes digital, artificial intelligence like inflation deposits

Banks today are caught between ongoing digital change and a challenging macro environment.

With the release of Wells Fargo’s second-quarter 2024 earnings on Friday (July 12), deft navigation of both, as well as staying on top of compliance and risk management, were found to be top of mind for financial institutions and their leadership.

“Our efforts to transform Wells Fargo were reflected in our second quarter financial performance,” said the bank’s chief executive Charlie Scharf on Friday’s earnings call. “However, the economy is slowing and there are persistent headwinds to still-elevated inflation.”

While the company’s second-quarter revenue and earnings came in above analysts’ expectations, Wells Fargo’s net interest income disappointed to just $11.92 billion, a 9% year-over-year decline.

The continued environment of higher rates for longer has required banks to pay more interest to attract and retain customer deposits.

Shares of Wells Fargo are up more than 22% this year, but the bank’s stock fell on Friday after news of its quarterly report and a slightly downbeat fiscal year outlook.

Financial institutions Tap into digital experiences to drive growth

The banking industry is undergoing a profound transformation, with financial institutions racing to invest in digital solutions and deliver powerful end-to-end experiences to meet the evolving needs and expectations of their customers, as well as fend off competition from competitors. young people.

“As part of our efforts to improve the branch experience, we are also increasing our investment … improving technology, including a new digital account opening experience, which has been positive for both bankers and our customers. We continue to see strong growth in mobile users, with active mobile customers up 6% from a year ago,” Wells Fargo told investors on Friday’s call.

“One year after launching Fargo, our AI (artificial intelligence) powered virtual assistant, we’ve had nearly 15,000,000 users and over 117,000,000 interactions. We expect this momentum to continue as we make further improvements to provide our customers with additional self-service features and value-added insights,” company executives added.

By using advanced technologies, enhancing security and prioritizing the customer experience, banks are positioning themselves to meet the demands of the modern consumer while maintaining the trust and reliability that are the hallmarks of traditional banking.

“When we think about AI, we divide it into different categories. There is traditional AI and there is GenAI. We have a large number of use cases already embedded across the company with just traditional AI. And that’s in marketing, it’s in credit decision-making, it’s in the information that we provide to bankers as well as wholesale to the consumer, about what customers might be willing, or might be willing to have a discussion about. , and so it’s business as usual. for us,” Scharf said.

Read more: Payments leaders debate the transformative future of banking

Given the rate environment, treasury management is also emerging as a key area of ​​focus for both financial institutions and their customers.

“In commercial banking, we are focused on growing our Treasury Management business, adding bankers to cover segments where we are under-penetrated and offering clients our investment banking capabilities and markets, and we believe we have significant opportunities in the years to come.” the following. We continue to see significant opportunities for the small business banking franchise to be a more significant source of growth,” Wells Fargo said.

The company’s commitment to embrace digital investment and innovation could help attract more small businesses. That’s according to PYMNTS’ latest intelligence in “Technology Expansion Preferences of Main Street SMBs: An Engine for Growth,” a collaboration with i2c, which finds that small and medium-sized businesses (SMBs) prefer financial institutions that offer complex payment solutions with sophisticated features.

“Banks are starting to understand the speed at which technology has changed the world,” James Butland, vice president of payments and UK managing director at Mangopay, told PYMNTS in his comments on the changing trends.

“The challenge that a traditional bank has is that they sit on 150, 200 years of legacy infrastructure and maybe 60 years of legacy technology,” Butland added. “So banks have had a hard time innovating quickly.”

However, Scharf told investors in May that the bank could do more corporate lending and trading if regulators lift the asset limit they imposed.

“Our commitment and the progress we are making to build an appropriate operational and compliance risk management framework is fundamental,” Scharf said Friday.