Understanding Human Behavior and AI in Banking

Most of my banking clients consider predicting human behavior to be crucial to their success. It’s an essential part of our risk management and strategic planning. Historically, understanding what your competitors, clients, and even regulators might do has helped us navigate the complex financial landscape.

This concept, which some philosophers like Dan Dennett call the “intentional stance,” is about anticipating actions based on understanding others’ intentions. If you see a competitor making certain moves, it’s prudent to think, “If I were in their shoes, what would I be aiming for?” While not infallible, this approach has served humanity well in business and beyond.

Practical Applications in Banking

In banking, you often use different stances. The physical stance is straightforward: predicting that specific financial instruments will behave in expected ways. The design stance is about understanding systems and processes—like expecting an ATM to dispense cash correctly.

But imagining others’ intentions is the most complex and now increasingly relevant stance. For instance, when you analyze market movements or client behaviors, you often think about their underlying goals and strategies.

The Role of AI in Modern Banking

AI and advanced analytics are revolutionizing our industry. These technologies seem almost human in their decision-making capabilities, making it easy to attribute human-like intentions to them. Even our own researchers and analysts sometimes treat interactions with sophisticated AI systems as if they’re dealing with another person. However, we must remember that despite its impressive capabilities, AI does not have intentions or desires.

Strategic Implications

It’s vital for community bank CEOs to understand these nuances. While AI can enhance decision-making and operational efficiency, it’s not a substitute for human judgment and accountability. We must balance leveraging AI’s capabilities with clearly understanding its limitations.

Predicting behavior and strategic thinking are as essential in banking as ever. But as you work to integrate AI into our operations, remain vigilant and clear-eyed about its role and potential. When the intentional stance becomes less useful, it’s time to pivot and adopt a different perspective to ensure you continue serving your clients and stakeholders effectively. 

Contact us for more on how our team can help!