Japan’s Financial Services Agency is looking to develop an original artificial intelligence model that it can then provide to regional banks to improve efficiency and the security of their operations, the Financial Data Utilization Association (FDUA) said on Friday.

The government agency has entrusted the FDUA, which promotes the use of data and technology in the financial field and is made up of around 440 companies in the industry, to develop the technology.

The FDUA is looking to conduct empirical research on regional banks using AI models in their operations, particularly in the customer-facing services, after building a conversational AI agent that can handle a wide range of inquiries from customers.

The aim is to improve customer convenience as well as reduce the workload of bank employees, with banks tending to be understaffed, especially in rural areas.

The FDUA will feed frequently asked questions, regulations and instructions on procedures for various documents into the AI model, which customers can then interact with.

According to the FDUA, regional banks have been gradually adapting AI into their workflow, but the technology had primarily been restricted to internal operations given the risk of hallucinations, or when AI generates inaccurate content.

The project aims to address such risks by compiling use cases and guidelines through its empirical research and sharing its findings with the regional institutions in the near future.

A survey conducted by the association in October 2025 showed regional banks are interested in having an AI agent help with customer service.

However, many raised concerns over the lack of a system and guidelines in place to actually implement the technology — an issue the FDUA is looking to help solve through its research.

The FDUA will hold an information session with relevant parties in May. The aim is to have the research results ready by March 2027, after which it plans to start implementing the systems at banks.

It is looking to have around 100 financial institutions involved in the research. Regional banks such as the Bank of Yokohama and Shizuoka Bank have already signed on to the project, and the technology behind the AI model will be developed by major information technology company NTT Data and Signate, a leading AI company.