Capra Bank CEO Sees Huge Upside for AI and Risk Assessment

At this point in artificial intelligence’s (AI) relatively brief life, we’ve heard a lot of different angles to the banking story. It has been called a job killer and a job creator. It has established itself as an excellent fraud detection application but needs human intervention to keep it on track. It even got an entire section in this year’s letter to JPMorgan Chase’s shareholders from CEO Jamie Dimon, taking a higher-priority spot than the bank’s migration to the cloud.

But you will find no hedging about AI from Lynn “Tut” Fuller, CEO and founder of Capra Bank. The Dubuque, Iowa, community bank just celebrated its first anniversary and grew from $50 million to $300 million during that period.

Fuller — a veteran of 15 years in the financial services industry, including a stint at Heartland Financial — sees huge potential for AI in banking. And leading that potential is the technology’s ability to handle risk assessment and management without having to add headcount or risk human error in a critical part of the business.

“I think in banking you’re dealing with an inherently unlevel playing field,” he told PYMNTS recently. “Because we’re in a world with a lot of complex rules and regulations that change frequently. And with a situation like that, only those who can afford armies of people and resources are going to win. And that’s probably why a lot of great communities have lost their community banks.

“What AI has done is bring one very skilled risk professional in to confidently monitor and manage the processes and procedures better than any small army of risk professionals. And it comes through, like, 13 years of risk data supplied by risk professionals.”

The human element in risk management is fraught with bias and occasional costly errors, according to Fuller. The bank he has founded prides itself on implementing cutting-edge integrated tech platforms, tailored to its target market segments, and pair those with proven banking talent that is locally empowered.

Fuller is confident in his bank’s future, partially because the pandemic has taken the need for intensive branch presence off the table, in his view. For him it’s all about scaling within the structure he has set up for Capra, delivering the technology and tools of large banks, with the local decision-making and quick turnaround times of the best local community banks.

That ability to scale without losing high-quality risk assessment and management got a boost at Capra recently via Hapax, which has announced its new AI tool designed specifically for the financial services sector.

The Hapax system AI benefits from an exclusive dataset obtained through a partnership with CBANC, comprising over 20,000 documents, 10,000-plus hours of videos, and 230,000-plus in-depth conversations among bankers, featuring questions and validated answers. This dataset ensures the tool’s responses are both relevant and verifiable, addressing the industry’s unique challenges, especially in compliance and regulatory areas.

Already adopted by over 20 banks in a beta program, including Capra and American Bank of Commerce, Hapax has also secured over $2.6 million in funding from RHS Investments.

As Fuller said, the Hapax AI aims to democratize access to critical regulatory information, leveling the playing field between large and smaller financial institutions. According to Hapax, the biggest set of questions from the first users is around compliance. However, users are also rapidly demonstrating that the tool will be used across bank functions, with marketing, internal communications and policies, and vendor vetting all being potential applications.

Having AI on board will be a competitive factor for Fuller and his team. He also believes its availability will give community banks in general a chance to compete with larger institutions. For him, it also represents a full circle moment in his career, after attending medical school as well as business school at the University of Michigan and working at big companies from Bain to Heartland.

“I’m big on the community banking space,” he said. “And I think there are a lot of people who agree with me. Community banks are very necessary. And I don’t think that people understand the importance of them until they’re lost. And when I say lost, I mean I see lots of times where you can tell how good the community banks are in a town, just by driving through the town. And we must do something to reverse that.”