Fintech Is Defensetech

Banking is critical infrastructure. Branches are disappearing, turnover is brutal, and the cost flows into every fee, loan, and mortgage. AI is the fix.

Matthew Vega-Sanz

14 min read

There is a class of industry in America that exists to protect and maintain critical infrastructure—systems so essential that their failure would cascade through the economy and destabilize the world. These Critical Infrastructure Providers include companies like Lockheed Martin protecting the airspace, Palantir mapping threats before they materialize, and banks and financial institutions controlling the mechanism without which no business is funded, no payroll is met, no home is purchased, no economy functions, and no American Dream is built. All of them should operate under the same dual mandate: a moral obligation to protect the people who depend on them, and a fiduciary obligation to deploy the best available technology and talent to do it.

The defense contractors take this pretty seriously. They spend billions on R&D, hire the best engineers and analysts on earth, and deploy technology so advanced that most of it is classified. The banking industry, which administers the literal plumbing of the American economy, staffs its frontline with people earning barely above fast-food wages, arms them with core systems that were architected before the internet existed—many of them over thirty years old—and then everyone acts confused when six in ten small business owners can't get a loan and twelve million Americans live in banking deserts.

Over the last fifteen years, the banking industry has collectively spent more than $9 trillion maintaining and layering onto legacy technology,[1] VCs have poured $500+ billion into fintechs,[2] global banking revenues now exceed $6.5 trillion annually,[3] and the industry's efficiency ratio—the share of revenue consumed by operating costs—has barely improved, hovering between 55% and 65% for over a decade.[4] The number of FDIC-insured banks has fallen from over 6,800 in 2013 to roughly 4,460 today,[5] and nearly 15,000 branches have closed since the 2012 peak.[6]

The standard explanation is interest rate cycles, regulation, consolidation, fintech disruption. Those are real. But the deeper problem is simpler: the industry has failed to deploy modern technology in the functions where it would actually matter, its workforce is churning faster than it can be rebuilt, and the industry's plan for dealing with this is to keep hiring more bodies while closing more branches. The inefficiency inflates the cost of every loan, every wire, every account, and every transaction, which inflates the cost of every mortgage, every small business, and every dollar you move. The fix is not more hiring. The fix is AI in the exact functions where humans are structurally not staying. This is, given what banking actually does and what happens when it stops doing it, a public safety argument.

The Bodega Problem

A lot of people are worried about the state of the country right now, and a popular data point in those conversations is that the world's most important financial hub is currently run by a communist. People usually respond with some version of "How did this happen?" followed by anxiety about the American empire being vulnerable to outside threats. My reaction tends to confuse people because I tell them the empire has been making itself vulnerable for years, from the inside, through the compounding dysfunction of systems like banking. And then I explain it using a bodega.

A bacon-egg-and-cheese at a Manhattan bodega cost about $4 in 2019. Today it's $7 to $8, and once you add a coffee and tip you're at $12 to $14. The instinct is to say "inflation" or "corporate greed" and move on with your day. But the mechanics are more specific than that, and banking is threaded through every single one of them.

The bodega owner has a business bank account and, almost certainly, a small business loan. The average community bank now spends 11% to 15.5% of payroll just on regulatory compliance—up over 60% since the financial crisis—and that cost gets baked into every fee, every rate, and every service charge passed to the business.[7] Small business loan approval rates have collapsed: in 2019, 62% of applicants received full funding; by 2024, that number was 41%.[8] The ones who do get funded wait weeks or months while a process that could take minutes with modern technology crawls through manual underwriting, physical document gathering, and back-and-forth that the industry says consumes an average of 24 hours of paperwork per application.[9] For every loan that gets denied or delayed, a business either doesn't open, doesn't expand, or passes the friction cost through to the customer.

Then the bodega's landlord has a commercial mortgage. The average bank efficiency ratio—the percentage of revenue eaten by operating costs—has sat north of 60% for most of the last decade.[4] That overhead lands in the spread between what the bank pays depositors and what it charges borrowers. The bodega worker's personal banking isn't much better. Americans still paid an estimated $12.1 billion in combined overdraft and NSF fees in 2024.[10] The average out-of-network ATM transaction now costs $4.86, and the average minimum balance to avoid monthly fees on an interest checking account is $10,705—up nearly 5% year over year—which effectively means banks charge you for being too poor to avoid being charged.[11]

Now do the math on the person buying the sandwich. A New Yorker earning $100,000 takes home about $79,000 after taxes, spends close to $40,000 on housing, which leaves roughly $39,000 for everything else. Bank fees, higher costs passed through from inefficient lending, and the compounding friction of a financial system that hasn't fundamentally modernized its operations in decades all eat into that number invisibly. When 37% of Americans can't afford a $400 emergency expense, and the financial system they depend on is spending 42% of executive time on compliance paperwork instead of serving them—up 75% since 2016—the system is failing the people it was built to protect.[12] This is why I genuinely believe that modernizing banking systems is a matter of national defense. And why fintechs and financial institutions should be viewed as defense companies.

Everyone Is Leaving and the Branches Are Disappearing

The commercial banking industry employs roughly two million people in the United States.[13] Turnover among nonofficer bank employees—the tellers, the loan processors, the customer service reps—runs at nearly 20% annually.[14] Among frontline staff, burnout is pervasive: nearly one in three bank employees report wanting to leave the industry entirely.[15] The average analyst or associate in financial services now holds their position for just 17 months, down from 30 months in 1995.[16]

Meanwhile, the physical infrastructure is evaporating. Between 2017 and 2025, the national branch network contracted by 14.8%, dropping from 86,469 branches to 73,649.[17] Branch foot traffic has declined over 55% since 2019.[18] In 2025 alone, more than 320 branches were marked for closure in the first thirteen weeks of the year.[19] The number of FDIC-insured banks has fallen from over 30,000 historically to roughly 4,460 today, and only six new banks were chartered in all of 2024.[5]

Banking deserts—areas with effectively no branch presence—increased by 217 between 2019 and 2023, and the number of Americans living in them grew by 760,000 to 12.3 million.[20] The hardest-hit communities are disproportionately low- and moderate-income, meaning the people who need banking the most are the ones losing access to it.

Rather than rethinking the model, or automating the functions that demonstrably cannot retain human beings or justify a physical footprint, the industry's response has been: close branches, consolidate, and hope digital adoption papers over the gaps. Two-thirds of banks admit they lack a strong employee value proposition for digital talent.[21] Four percent of millennials expressed interest in working in financial services.[22] The branding is so atrocious that when Wells Fargo got caught opening millions of fake accounts, when SVB collapsed in 48 hours, when Credit Suisse evaporated—millions of people responded not with sympathy but with "of course they did." That is what a collapse in institutional trust looks like for a system that society literally cannot function without.

If Raytheon ran missile defense this way—closing radar stations, churning through operators every 17 months, and hoping the ones who stayed could figure it out—it would be out of business in a quarter and someone would probably go to jail. Banking gets to do it indefinitely because nobody thinks of it as critical infrastructure, even though it is.

AI Rewards the People Who Stay in Banking

This is where AI enters the picture, and before anyone casts me as the technologist who wants to gut the workforce, you should know that I actually think we're going to see an era of global job creation and a jump in employee satisfaction like never before. AI backfills functions that are already falling apart. It gives the people who stay better tools, faster processing, larger portfolios, higher earnings, and the ability to stop spending half their week on manual compliance tasks and paperwork that could be automated in an afternoon.

The compliance burden alone is staggering. Between 2016 and 2023, employee hours dedicated to regulatory compliance increased by 61%.[12] Banks increased compliance-related IT spending from 9.6% to 13.4% of their IT budgets over that same period.[12] Banks globally spend over $206 billion per year on compliance.[23] And yet, in 2024, regulators still issued $4.3 billion in U.S. fines for compliance failures.[24] The humans aren't failing because they're incompetent. They're failing because the volume, velocity, and complexity of the work has outpaced what manual processes and legacy systems can handle.

And then there's the cost math. The industry's efficiency ratio has hovered between 55% and 65% for years—meaning for every dollar of revenue, over half goes to operating expenses.[4] Compliance alone eats a double-digit share of annual revenue at many institutions.[7] If the industry compresses even a fraction of that operational drag through AI-driven automation of compliance monitoring, loan underwriting, fraud detection, and customer service, it would be the single most significant reduction in the cost of banking in a generation. Banks wouldn't need to close more branches or raise more fees or deny more loans. They could increase margins, lower costs, expand access, and actually win back some of the trust they've hemorrhaged—all at the same time—by implementing AI and reinvesting the savings into the people and communities that actually need it.

Small business lending alone represents a market where AI could shorten approval timelines from weeks to hours, expand credit access to the roughly 59% of applicants who currently don't receive full funding,[8] and reduce the 24-hour paperwork burden that drives small business owners to higher-cost alternative lenders.[9] The technology exists. The question is whether the industry has the will to deploy it.

The Duty to Deploy in Banking

I started this piece with Lockheed Martin and I want to end there, because I do believe that banks and financial institutions should be viewed as Critical Infrastructure Providers required to abide by the same mandate as defense contractors. Both have a moral obligation to protect the people they serve, and a fiduciary obligation to use the best available technology and talent to do it. Failure by CIPs to abide by both those dual duties opens us all up to existential threats.

For those who still believe I'm being hyperbolic, remember that banking determines whether Americans can start businesses, buy homes, make payroll, access capital, and participate in the economy. When that system becomes inaccessible—when 12.3 million Americans live in banking deserts, when small business loan approvals drop 21 percentage points in five years, when the industry closes 15,000 branches while spending $9 trillion on technology that doesn't materially improve outcomes—the cost of failure is measured in shuttered businesses, denied opportunities, widening inequality, and the slow erosion of the economic mobility that holds democracies together.

Every day that this technology is not implemented opens the door to rising costs, declining access, and increased civil unrest. We have a duty to put this technology to use, and you can rest assured that the Gail team will be doing its best to contribute.

If you have questions on how to implement AI into your own business, feel free to shoot me an email at Matthew@meetGail.com or to even shoot me a text at 786-219-7367. I will give you my honest opinion on new tools or the best way to get started on your AI journey—even if it means recommending you to a provider that isn't Gail, as my sole goal is just making sure that my kids don't have to pay $50 to wire themselves lunch money.

Published

About Gail

Founded in 2024 by Michael and Matthew Vega-Sanz, Gail provides specialized AI solutions designed exclusively for the financial services sector. Headquartered in Miami, Florida, Gail also maintains offices in San Francisco.

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