- Key insight: Banks' reliance on third-party software vendors and core providers may be eroding, according to Fifth Third consumer lending head Jay Plum.
- What's at stake: Rather than scrambling to prepare for an annual exam, AI will prompt banks to conduct 'mini reviews,' making the exam process much easier.
- Expert quote: "AI changes the nature of how you would manage that risk." — Jay Plum, executive vice president and head of consumer lending at Fifth Third Bank.
Jay Plum, Fifth Third's head of consumer lending, says AI is ending the annual "scramble" of preparing for bank exams and is shifting the power dynamic with core software providers by allowing banks to "out-code" and "out-compete" rivals and fintechs.
Fifth Third recently became the ninth-largest bank in the U.S. after its deal to acquire
In a wide-ranging interview, Plum, an executive vice president at the $294 billion-asset Fifth Third in Cincinnati, had plenty to say about how AI is fundamentally shifting relationships with third-party software vendors. His comments come amid the backdrop of Comptroller of the Currency Jonathan Gould
The OCC in November issued a request for information from banks about potentially "anticompetitive" issues in the core service provider market and is exploring how AI can level the playing field with banks. Plum thinks AI is shaping up as a game-changer, saying it could allow banks to potentially "out-code" their vendors and rival banks.
"AI changes the nature of how you would manage risk," said Plum. "If I can have programmers now using AI tools that can be five to 10 times more productive, all of a sudden it becomes possible for me to do some customization that could be very exciting and really change the differentiation between banks in customer experience."
Plum was quick not to overstate his case, noting that a focused software vendor "is going to be better than a bank doing it part-time."
But Plum's observation comes as many banking experts have come to view the emergence of agentic AI — algorithms that execute complex, multistep workflows and make decisions on their own — as
Zor Gorelov, a senior advisor at advisory and investment firm Klaros Group, said that banks will likely settle into a hybrid model — blending in-house software solutions and vendor-developed solutions side-by-side — for the foreseeable future.
"Banks can now use AI to build custom apps and automate internal workflows in days or weeks," Gorelov said. "But core systems are shaped by decades of highly specific and custom-edge cases and regulatory complexity. They cannot simply be 'vibed' into existence."
Plum said the power of AI will allow mortgage servicers to run every loan application through Fannie Mae and Freddie Mac seller guidelines and to regularly test them against Office of the Comptroller of the Currency and Consumer Financial Protection Bureau exam manuals.
"The exciting part will be on compliance," he said. "The possibilities literally are endless, and you have to pick and choose your battles."
Because AI-powered systems can analyze thousands of data variables, banks may be better able to identify loans that are more likely to default, reducing repurchase demands from the government-sponsored enterprises. AI also is expected to help lenders flag loan discrepancies early by identifying risks in underwriting, documentation and property standards.
"Why would I ever have a repurchase if I can take the seller guides and I can automate them?" Plum said. "Why would I not run every application through that before I go to closing and make sure that I've met all the criteria? Running the test more often — because we can — should mean a much tighter risk control environment and nothing but good things."
Plum has a broad portfolio at Fifth Third, managing a staff of 1,800 across mortgage, home equity, indirect auto, specialty lending and home improvement financing. Before joining the Cincinnati bank in 2021, he served 12 years at Huntington Bancshares. He was president of home lending at Citizens Bank, and worked at Provident Bank in Cincinnati. Plum started his career at the former Bank One.
One of the more transformational impacts of AI will be on bank exams, which can be a stressful annual event. Plum thinks exams can be turned into a continuous, automated process with much tighter risk controls. Banks can run "mini reviews" of their portfolio every week or even every night, which can change how risk is managed.
"All the banks that I've been with over the last 30 years, exam preparation is awful," he said. "You get your request letter and then you scramble to make sure: Do we have all the data? Do we notice any patterns in the questions they've asked? Can we get all the information that they're requesting?
"It's not crazy to assume dramatic changes are coming," he said.
