The shift from human capital to intelligent software

Carey Ransom is a SaaS entrepreneur, executive, investor and advisor, and a contributor to The FR, and has started, grown and/or led eight B2B and consumer SaaS companies during startup and growth phases. He is currently president of Operate and the managing director of BankTech Ventures, a newly launched strategic investment fund focused on compelling technologies for community banks—founded and funded by leaders in the community bank ecosystem.

As an investor in emerging technology companies that help banks automate and transform, I've witnessed firsthand the shift occurring in the financial services industry. The digital transformation of banks is not just a trend; it's a fundamental restructuring of how these institutions are structured, operate, compete and deliver value to their customers.

Historically, banks have been people-intensive organizations, relying heavily on human capital for everything from customer service to risk assessment and management. However, as we progress further into the digital age, this paradigm is changing. The traditional "tech budget" is evolving into a central pillar of banks' organizational and operational strategy, growing in size and importance as intelligent software becomes the new foundation.

I believe this shift will happen for several compelling reasons. First, advancements in artificial intelligence, machine learning, and automation will reach a tipping point where they can reliably perform many tasks traditionally handled by humans—often with greater speed, accuracy, and cost-effectiveness. Instead of software being used by humans, intelligent software will replace many of them and enable the best people to be significantly more efficient and effective. Second, customer expectations have dramatically shifted, with demands for instant, 24/7 service that only technology can efficiently provide. Finally, the competitive non-bank landscape has intensified with the rise of fintech startups and tech giants entering the financial services arena, forcing traditional banks to up their game.

As this transformation accelerates, bank leaders face some critical decisions that will determine their success in this new era.

  1. Reallocation of resources: Leaders must make bold decisions about reallocating capital from human-centric operations to technology investments. This means not just cutting costs, but strategically reinvesting in intelligent software solutions that can scale efficiently and provide long-term competitive advantages. Just as prior industrial businesses transformed their human capital and technology investments, banks will as well.

  2. Cultural and organizational transformation: Efficient organizations powered by technology will require a fundamental change in organizational culture. Bank leaders need to foster a customer-centric, tech-first mindset across all levels of the organization, emphasizing continuous learning and adaptation. This change may involve difficult decisions about restructuring teams and redefining roles to align with an operating model that looks more like a software company than a traditional bank.

  3. Strategic partnerships and acquisitions: With the rapid pace of technological advancement, banks may find it more efficient to partner with or acquire innovative fintech capabilities and companies instead of attempting to build all capabilities in-house. Leaders must develop a clear strategy for identifying, evaluating and integrating these external innovations into their core operations. At BankTech Ventures, we try to work with banks to assist them on this journey.

Banks that are able to successfully make these changes, including reallocation decisions, will emerge as the leaders in this new financial services landscape. They'll be characterized by lean, agile operations, enhanced customer experiences, and the ability to rapidly deploy new products and services for customers.

As an investor, I'm equally as excited by the opportunities this transformation presents. The companies that can provide banks with the tools and technologies to successfully make this shift—from AI-powered customer service platforms to advanced data analytics and insights for risk management—are poised for significant growth. Much of the future of banking is being written in code, and those that can help banks forge this new reality will reap big rewards.