Rising competition and consumer expectations mean community financial institutions must operate more efficiently while delivering modern, personalized services. Meanwhile, advances in AI, open banking, cybersecurity and regulatory change are reshaping the industry and creating new opportunities for those who adapt.
CSI recently surveyed banking leaders nationwide about how they are preparing for the year ahead. Their responses revealed cautious optimism and a focus on strengthening core capabilities while adopting new technologies.
Foremost Challenge in 2026: AI
Leaders increasingly view AI through a dual lens: a powerful driver of efficiency and automation across operations, but also a potential catalyst for fraud, scams and operational risk. Naturally, it remains a top concern for many in 2026.
Institutions are gaining greater confidence in where AI can deliver real value, from automating routine tasks to strengthening security and supporting relationship-driven work. That confidence is most pronounced among larger community institutions, with 97% of banks holding $5 billion to $10 billion in assets saying they understand how AI can be applied in banking.
As a result, the conversation has shifted from whether to adopt AI to how to integrate it responsibly. Success will depend on data readiness, governance frameworks and aligning AI use cases with existing workflows and risk management practices.
Secondary Challenge in 2026: Cybersecurity and Data Privacy
While the average cost of a financial services data breach declined from $6.08 million in 2024 to $5.56 million in 2025, cyberattacks still carry serious financial, reputational and regulatory consequences for institutions of all sizes.
To remain secure, institutions must continue to prioritize investments in advanced monitoring and proactive threat-detection tools. Foundational practices, such as employee training and ongoing risk assessments, also remain essential to strengthening overall cyber resilience.
Bankers’ Top Technology Investments
The report shows that 2026 technology investments will be spread across multiple modernization efforts, signaling a balanced and diversified approach.
Leading Investment in 2026: Efficiency Drivers Like Automation or AI
Efficiency technologies remain the top investment priority, with 37% of bankers citing automation or AI as critical to improving operations, especially in improving back-office processes.
As community banks face increased competition from all sides, they look to AI and automation to do more with less. Conversational AI is gaining momentum, but many institutions are still searching for its most valuable use cases.
The real differentiator ahead will be how prepared institutions are to use their data, both to support AI initiatives and strengthen decision-making.
Secondary Investment in 2026: Data Analytics/Actionable Insights & Digital Account Opening
Many institutions recognize the value of analytics but are still working through data silos and integration challenges that limit the insights that can be gained. AI and clear analytics dashboards can be useful tools for turning data into action.
Smart use of data helps institutions understand account holder behavior and identify areas to better serve them, including customizing offerings and promoting them digitally. Interpreting data to create a personalized experience also helps institutions solidify relationships and decrease attrition.
Continued focus on digital account opening suggests that even institutions with established solutions see opportunities to streamline onboarding and back-office processes, with open banking increasingly serving as an enabling layer that accelerates integration.
Bankers’ Top Opportunities for 2026
Bankers are strategically engaging with consumers and embracing transformative trends that promise to redefine banking operations and customer service in the years to come.
Greatest Opportunity in 2026: Harnessing the Power of AI
AI is increasingly top of mind for executives as they explore ways to transform operations, drive efficiency, fight fraud and sharpen decision-making.
AI-powered tools present a unique opportunity to level the playing field against big banks by offering assistance and smart automation. Generative AI applications, in particular, hold the promise of hyper-personalized, around-the-clock service, allowing banks to leapfrog their capabilities and retain a competitive edge. From virtual assistants to content creation tools, the applications of generative AI are vast, offering financial institutions newfound agility and efficiency in meeting customer needs.
Secondary Opportunity in 2026: Digital Assets
20% of bankers surveyed named digital assets (including stablecoins, tokenized deposits and cryptocurrencies) as one of their top opportunities, signaling growing curiosity about how these technologies could fit into future banking models. While most institutions remain in the early stages of exploration, interest is being driven by potential use cases around payments, efficiency and new revenue streams as the market continues to evolve.
While interest in these assets grows, the regulatory landscape for stablecoins and tokenization is still evolving. At the end of 2025, the FDIC released its first rule for the recently passed Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Most near-term applications remain limited, primarily in cross-border transactions, and any strategic engagement will require careful analysis and strong compliance frameworks.
Navigating the Road Ahead for Community Banking
As community banks move through 2026, strategic focus and adaptability will be essential. While challenges remain, 86% of bankers report optimism about the future, signaling confidence in the industry’s direction. By strengthening foundational capabilities and embracing emerging technologies, institutions can position themselves not just to adapt, but to compete.
This article only scratches the surface. For a more complete picture, read the 2026 Banking Priorities Executive Report.
