Bank Forward - October 2026
Your mid-month pulse on the signals shaping community & regional banking.
by Jim Perry, Senior Strategist
Who controls the customer relationship? Who gets to compete in banking? And who's accountable when technology—or the systems we've trusted for years—fails? Behind those questions are some of the assumptions that have shaped banking for decades. And increasingly, they're being put to the test.
The launch of increasingly capable personal AI agents has unsettled bank investors by raising questions about consumer loyalty. More fintechs are pursuing banking charters, while an established regional bank is acquiring a fintech to accelerate its own growth. And two of the country's largest financial institutions have been hit with extraordinary anti-money-laundering penalties, just as regulators begin scrutinizing the risks of autonomous AI.
The common thread is control. Not simply control over technology, but over the decisions, capabilities, and customer connections that will determine who succeeds in banking. Here are three signals worth your attention.
Signal #1 | The battle to become your customer's preferred AI agent
What's happening
On September 22, shares of major banks, insurers, and other financial companies fell sharply following the introduction of Meta's Muse personal AI agent. JPMorgan Chase and Wells Fargo each declined more than 3%, while the broader market was relatively flat.
What rattled investors wasn't an immediate loss of customers or deposits. It was the possibility that AI agents could begin undermining something financial institutions have benefited from for decades: consumer inertia.
Think about how many people stay with their bank because changing accounts, comparing alternatives, and moving their money simply isn't worth the effort.
Now imagine an AI assistant that can do much of that work for them.
And Meta isn't alone. OpenAI has introduced Dots, xAI has launched Grok Bot, and Google continues to expand Gemini's agentic capabilities. These products aren't identical, but they're competing for a similar role: becoming the AI assistant that helps us research, compare, decide, and increasingly act on our behalf.
The race isn't simply to build the smartest chatbot. It's to become the assistant consumers trust to manage more of their everyday lives.
But banks aren't necessarily going to surrender that control. During JPMorgan Chase's earnings call this week, CEO Jamie Dimon said the bank won't allow outside AI agents to directly access customer accounts and initiate transactions, citing security and liability concerns. At the same time, JPMorgan is developing its own AI-powered cash management capabilities. The battle isn't just about who builds the preferred assistant. It's also about who controls what that assistant can do.
Why it matters
Inertia isn't loyalty. A customer who hasn't changed banks in 15 years may be genuinely satisfied. Or switching may simply never have seemed worth the trouble. AI agents could change that calculation by making alternatives easier to discover and act upon.
The competitive battleground is moving toward the decision layer. Whoever becomes a consumer's preferred AI assistant could gain significant influence over which financial products are considered, recommended, and selected—even without becoming a bank.
Being discoverable is no longer enough. Banks and credit unions need to consider not only whether AI-powered tools can find and understand their products, but whether those tools can identify a compelling reason to recommend them. During Wells Fargo's earnings call this week, CEO Charlie Scharf offered a reason not to overreact. Banking involves more than rate shopping, and the arrival of AI agents doesn't mean consumers will suddenly move their deposits en masse. But the direction of change is worth watching. As the effort required to compare and switch providers declines, the distinction between a customer who stays and a customer who actively chooses you becomes increasingly important.
Questions for your leadership / board
If customers could effortlessly compare and move their banking business tomorrow, how many would actively choose us again?
If AI agents accelerate deposit switching, how much runoff could we absorb before facing a liquidity problem?
As customers begin using AI agents to manage their finances, who should control what those agents can access and do on their behalf?
Signal #2 | The boundaries of banking are being redrawn
What's happening
Fintechs increasingly want their own banking charters, and some established banks are looking to acquire the capabilities fintechs have built.
This week, Upgrade announced that it has applied to the FDIC and Nevada regulators to establish an industrial bank. The company, which has delivered more than $53 billion in credit to over 8.5 million customers, says the proposed bank would give it greater funding flexibility while complementing its existing partner-bank arrangements.
Upgrade joins a growing number of fintechs and commercial companies pursuing industrial bank charters. These state-chartered, FDIC-insured institutions provide a pathway into banking that differs from the traditional bank holding company structure.
Meanwhile, Valley National Bancorp is moving in the opposite direction.
In late September, Valley announced an agreement to acquire Bluevine, a digital small-business banking platform, for approximately $340 million. The proposed acquisition would bring Valley roughly 175,000 active small-business customers, $2.1 billion in digitally sourced deposits, and established payments, lending, and financial-management capabilities. Valley would also gain the technology talent and infrastructure behind those capabilities, accelerating its digital and AI strategy while reducing some dependence on outside providers.
One company wants to become a bank. Another bank wants to acquire what a fintech has built.
At the same time, the regulatory framework itself is being challenged. On October 2, the Independent Community Bankers of America (ICBA) sued the OCC over its authority to grant national trust bank charters to cryptocurrency companies. According to the complaint, the OCC has approved or conditionally approved 21 national trust charters during the current administration, at least 13 involving crypto companies.
At the heart of the lawsuit is a question of regulatory parity. ICBA argues that these companies can gain advantages of a federal bank charter without assuming the same obligations as traditional insured banks. The OCC maintains that existing law permits a broader range of trust-related activities.
While industrial banks and national trust banks operate under different regulatory frameworks, both developments illustrate how the boundaries of banking are being redrawn—and why the rules governing entry matter.
Why it matters
The economics of being a bank are changing. For some fintechs, owning a charter offers greater control over funding, operations, and customer experience. For established institutions, acquiring fintech capabilities may offer a faster path to growth than building everything internally.
Partnership strategies deserve another look. Valley–Bluevine illustrates how a bank can acquire digital distribution, an established customer base, and technical expertise rather than depending entirely on outside providers. That approach won't fit every institution, but the underlying build-buy-partner decisions are becoming more consequential.
The question isn't simply who gets a bank charter, but what that charter allows them to do—and under what obligations. ICBA's lawsuit raises questions about competitive parity and regulatory authority that could have implications well beyond cryptocurrency.
Questions for your leadership / board
How might new banking entrants change competition for our deposits, loans, payments, and customers?
Are we deliberate about which capabilities we build, buy, or access through partnerships?
Are we competing on a level playing field—and if not, what can we do about it?
Signal #3 | The cost of losing control
What's happening
Two major enforcement actions in less than a week offer a striking reminder that traditional compliance obligations remain firmly in focus, even as regulators begin scrutinizing emerging technology risks.
On October 8, the OCC imposed a $350 million penalty and cease-and-desist order on American Express National Bank for longstanding Bank Secrecy Act and anti-money-laundering deficiencies.
The findings were particularly revealing.
Regulators determined that the bank's risk assessment focused too heavily on its relatively limited deposit products while failing to adequately address risks in its much larger credit and charge card operations.
Weaknesses in staffing, internal controls, customer due diligence, independent testing, and training contributed to failures to adequately identify, evaluate, and report approximately $13 billion in suspected trade-based money-laundering activity over the past decade.
Then, on October 13, Bank of America was hit with more than $1.21 billion in penalties for violations of anti-money-laundering and sanctions requirements.
The enforcement actions included a $1.2 billion FinCEN penalty and a $750 million OCC assessment—the largest in the OCC's history—with the OCC amount credited toward the FinCEN penalty.
Regulators found that Bank of America had failed to adequately monitor trillions of dollars in transactions and properly escalate potentially suspicious activity. They also cited insufficient expertise among compliance personnel and longstanding deficiencies that persisted despite a December 2024 enforcement order.
These weren't simply failures to purchase the right technology. They were failures to identify risks, maintain effective controls, and correct problems that management and regulators already knew existed. And the timing is notable.
Reuters reports that the Federal Reserve and other banking regulators are stepping up their scrutiny of advanced AI, including autonomous systems used in cybersecurity.
Supervisors are asking how these systems are monitored, what authority they have, how their actions can be audited, and whether institutions can intervene or shut them down when necessary.
Why it matters
Having a compliance program isn't the same as demonstrating that it works. American Express failed to adequately align its risk assessment with its actual business activities. Bank of America failed to correct longstanding monitoring and escalation weaknesses despite an earlier enforcement order. Both cases illustrate the consequences of gaps between policy and execution.
Regulatory scrutiny is becoming more focused, not necessarily more lenient. A new OCC/FDIC rule taking effect November 2 emphasizes material financial risks and violations of law rather than every deficiency in policies or processes. But the extraordinary AML penalties make one thing clear: serious failures of oversight still carry serious consequences.
Autonomous AI introduces another layer of accountability. As AI becomes embedded in core banking, fraud prevention, cybersecurity, and other vendor platforms, institutions need to understand not just what the technology can do, but what it is authorized to do—and how its actions can be monitored, corrected, or stopped. AI wasn't responsible for these compliance failures. But the cases illustrate why effective oversight becomes even more important as institutions adopt technology that can operate with greater independence. And while the penalties involve two very large banks, the underlying lessons apply to community banks and credit unions as well.
Questions for your leadership / board
Are our risk assessments and monitoring systems aligned with how our institution actually conducts business today?
When control weaknesses are identified, can we demonstrate that corrective actions are effective—not simply that they were completed?
Do we understand which AI capabilities, including those embedded in vendor platforms, can take actions on our behalf—and who can intervene when something goes wrong?
Closing Insight | When Traditional Advantages Aren't Enough
For decades, community banks and credit unions have relied on personal service, local presence, and trust as their defining strengths. And those strengths still matter, particularly for customers and members with more complex financial needs. But the traditional advantages of community-based financial institutions are shrinking.
Technology is making it easier to compare and change financial providers. New competitors are gaining access to capabilities once reserved for banks. And the growing complexity of financial services is making it harder for smaller institutions to compete on every front. That doesn't mean their future is bleak. But the strengths that helped them succeed in the past won't necessarily be enough to make them preferable in the future.
The question isn't whether personal service and community trust still matter. It's whether your institution is giving customers and members a compelling reason to choose you today—and choose you again tomorrow.
Quick ask: Which deserves the most attention from community financial institutions right now—the rise of personal AI agents, the changing boundaries of banking, or the challenge of keeping increasingly complex operations under control?
Lots to consider this month. Comments always welcome.
