“Future of Banking: Powering Progress, Protecting Trust” Conference Explores Implications of Technological Change

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On May 14, 2026, the Federal Reserve Bank of Kansas City hosted its third annual “Future of Banking” conference. The one-day event gathered bankers, policymakers, researchers, and industry leaders to discuss trends and innovations across banking and financial services, particularly those of importance to community banks. This year’s conference theme, “Powering Progress, Protecting Trust,” included topics such as digital assets, fraud prevention, AI, and the future of community banking. Sessions explored how banks are adapting to rapid technological change while continuing to meet the needs of businesses, consumers, and local communities. As Federal Reserve Bank of Kansas City President Jeffrey Schmid noted in his opening remarks, “Many of the innovations that will define banking in the coming decade are already proven, operational, and creating opportunities for early adopters” (Schmid 2026). Discussions throughout the day highlighted ways community banks can harness payment innovations and AI to further deliver on their relationship-based model while navigating some of the challenges technological change can present, such as new avenues for fraud.

The Federal Reserve Board’s Vice Chair for Supervision, Michelle W. Bowman, stressed the need for supervisory and regulatory support for community bank innovation before providing an update on supervisory and regulatory priorities (Bowman 2026). Drawing on her experience as a community banker and state bank commissioner in Kansas, Bowman noted that the Tenth District’s community banking culture fosters innovation through its variety of banks, emphasizing that regulation must be appropriately tailored to community banks’ unique business models. She highlighted community banks’ distinctive competitive advantage, noting that their “personal connections in the community create deep local knowledge, enabling lending decisions based not solely on credit scores, but on relationships, history, and character—elements that no algorithm can replicate.” Bowman also outlined a refocused regulatory stance that prioritizes supervisory attention on material financial risks rather than procedural matters. She highlighted updates to standards for issuing Matters Requiring Attention (MRAs), explaining that under the new approach, MRAs will be issued “when a deficiency, if left unaddressed, would create a significant probability of significant harm to the bank’s financial condition, or has already caused significant actual harm.” Bowman stressed that genuine collaboration between supervisors and bankers is critical to developing regulatory frameworks that enable well-managed institutions to adapt to changing conditions.

One major change community banks will need to adapt to is the rise of digital asset technologies, which have grown from speculative enthusiasm toward practical utility. The panel discussion covered four digital product categories: blockchain technology, crypto assets, payment stablecoins, and tokenized securities. Payment stablecoins and tokenized deposits emerged as the most compelling near-term opportunities for payment modernization. Panelists also noted that domestic solutions, such as FedNow, can accommodate most community bank instant payment needs, while digital asset infrastructure offers cross-border settlements that are faster and cheaper than traditional international settlement options. However, panelists also acknowledged that most community banks currently lack clear customer demand or use cases for digital assets. Despite limited current demand, panelists stated that competitive pressure is mounting as fintechs capture market share with modern payment experiences. A critical first step when considering digital asset solutions for customers is education, with panelists recommending that banks leverage industry associations, study vendor solutions, and experiment with digital asset technology to build practical familiarity. Strategic considerations include whether to tokenize deposits, partner with stablecoin providers, or adopt third-party solutions, though evolving regulatory guidance and operational complexity complicate these decisions. Ultimately, panelists encouraged banks to view digital assets as strategic infrastructure modernization rather than merely emerging technology.

As digital assets transform payments, they also introduce new fraud risks. Panelists noted that while payments fraud mechanisms have evolved, the fundamental architecture remains the same: Fraud has always been someone pretending to be someone else. However, the speed and complexity of fraud have increased, fueled by the use of AI. For example, fraudsters are using AI to create synthetic identities and counterfeit checks that are challenging for financial institutions to detect. Given the pace of technological change, institutions experience similar pain points in addressing fraud regardless of their size. Response time is often critical to prevent fraud and recover funds, and swift action can be supported by improved information sharing. Better information sharing can also aid law enforcement and regulatory bodies in detecting trends earlier. In addition, vectors beyond banking—such as social media and other telecommunications—often serve as a primary entry point for fraudsters. However, financial institutions play an outsized role in the responsibility for detection and deterrence. Panelists agreed that accountability outside of the financial system will be key to combatting fraud in the future. International cooperation is also important for developing global policy solutions to cross-border payment fraud. One panelist expressed what success in addressing fraud looks like in the future: “What we want is an efficient, risk-based, and tailored-for-purpose regulatory structure.”

While AI is a catalyst for increasing the speed and complexity of financial fraud, it also serves as one of the most promising opportunities for combatting fraud. Community banks can leverage AI to enhance customer products and experience, streamline back-office operations, and strengthen security against bad actors. Despite these benefits, some banks have been hesitant to adopt AI technologies due to budget constraints and regulatory uncertainty, with most using traditional, rules-based systems rather than newer agentic or generative tools. Panelists noted that additional clarity from the regulatory agencies on generative or agentic AI could further support innovation and adoption. Panelists also emphasized that community banks exploring the use of AI should seek trusted partners (such as core providers), ensure alignment between risk and technology functions, and maintain strong data governance, which includes making sure the tools are fit for their purpose and deliver solutions for customers. Rather than changing the competitive landscape between different sized banks, panelists largely agreed AI will “lift all boats” with the technology eventually democratizing. Instead of adopting AI aggressively to compete with fintechs, successful banks will integrate AI with purpose and intention to drive better outcomes for their customers, as trust remains paramount in the community banking model.

Across all sessions, an overarching theme was that banks need to stay aware of both the promise and peril of technology. While community banks and their customers do not have clear use cases or demand for digital assets yet, the need for instantaneous payments is increasing. However, bankers should remain aware of the threat that digital assets pose to their deposit franchises. Panelists also agreed that fraud, exacerbated by developing technology, is a persistent worry and the costs of fraud are rising. The panelists also agreed that banks’ usage of AI is growing and will likely accelerate rapidly as bankers look for new use cases and as younger employees bring in more experience with AI tools.

The day also included some discussion on succession planning and the role technology plays in recruiting and retaining new talent. Panelists discussed how talent pools are often thin in many rural markets and attracting qualified employees can require increased labor costs. Younger workers typically look for organizational vision, mentorship, and space to learn and grow, including clear development and growth opportunities, in potential employers. By fostering a culture of purpose, community banks can bridge technology expertise gaps. Attracting younger workers will allow banks to advance their relationship-driven model—a distinctive advantage in the market—while leveraging today’s cutting-edge technologies to enhance efficiencies and strengthen growth.

Discussions throughout this year’s “Future of Banking” conference highlighted the dynamic landscape for community banks, from evolving regulatory priorities and digital assets to the rise of AI and persistent fraud risks. The future of community banking will rely on adaptability, proactive risk management, and a continued focus on trust, ensuring that community banks remain resilient and relevant in an era of rapid change.