Technology is increasingly integrated into our day-to-day activities, from GPS to services like Amazon Alexa and Google Now that delight us with personalized experiences powered by machine learning and artificial intelligence (AI). Let’s face it, we’re coming to expect that kind of service from all our digital providers.
Many financial institutions, in contrast with tech companies, have taken a more conservative stance to powering their digital banking experiences. It’s understandable—there are greater repercussions to offering wrong financial predictions than getting the wrong topping on the pizza.
Helping the overwhelmed
The challenge for banks is that forward-looking insights and personalized guidance are becoming a prerequisite to conducting digital business with consumers. So even though AI technologies are not fully mature, banks should nonetheless start exploring them.
What’s the angle? The reality is that many consumers are overwhelmed by juggling their day-to-day finances. For example, most consumers spend very little time analyzing their spending patterns. They don’t note spikes in expense categories. Many consumers also don’t know that their credit card balance is impacting their credit score.
Ultimately, consumers typically don’t have the time (or are unwilling) to pay attention to their finances. Therefore, financial institutions that serve as a trusted partner for consumers—by curating their financial data and coaching them along their financial journey—will go a long way towards deepening customer relationships and building loyalty.
Remember that just providing digital assistance and insights is not the only way of communicating with consumers. The best experience is a combination of digital and personal interactions. Finding the right combination will allow banks to offer scalable, personalized experiences for consumers. This requires clear delineation between the types of useful, straightforward insights that can accurately be identified and delivered through digital channels versus more complex decision making that is best delivered by a human representative of the bank.
Arriving at the right blend
Banks and other financial services providers have several ways to offer critical support to these consumers.
1. Start with push versus pull interactions. When exploring concepts around virtual assistants, consider beginning with a “push.” That is, use interactions “pushed” via mobile, in-app, or email notification that allow the bank to communicate only when you have something insightful to share.
Beginning simple and basic will allow you to grow the complexity of the insights over time.
With pull interactions, the consumer may initiate any question through a blank chat box, although the service may not always understand or provide the correct answer.
2. Associate insights with actions. To make the insights more impactful, find ways to make each notification something that the consumer can take action upon. For example, an insight may indicate that the consumer spent significantly more on entertainment this month than over the previous six months. The logical action to follow? Creation of a budget or a plan to save for a goal.
3. Add a feedback loop. To ensure that notifications are relevant, accurate and useful, add a feedback loop. Doing so provides consumers with an easy way of letting you know if the information you provided was useful and accurate. Once the bank has a clear picture of what helps, it can then focus on providing more of what consumers find useful.
4. Layer insights with financial education. A recent study conducted by the FINRA Foundation indicates that two-thirds of Americans were unable to pass a basic financial literacy test.
A mismatch exists here: While many desire to be more informed, they won’t necessarily seek out financial education.
Provide the education in context. If you’re notifying a user about their credit card spending, add some contextual education about credit card personal best practices. Contextual financial education can empower consumers to take positive steps towards achieving financial wellness.
5. Personalize the experience. Segmentation based on consumer attributes such as income bracket, spending behavior, or zip code is critical to offering relevant insights to create a more engaging and personalized experience for consumers.
For example, data from a user’s primary checking account can provide guidance from data about consumers’ income and expenses, where they shop, what merchants they frequent, discretionary vs. non-discretionary expenses, and more.
This information can be used to determine the types of insights and digital tools that best meet their needs.
6. Engage consumers early. Once consumers form financial management habits they’re accustomed to, it’s generally harder to make them change.
Consumers at a younger age, who are just starting on their financial journey, will find value in intuitive solutions that help them to develop smart financial management habits. This is a great time to start building long-standing relationships with consumers. They are newer to the topic of financial wellness and are more open to trying out options until they find the one that works best for them.
7. Focus (initially) on the immediate. Don’t overwhelm the consumer. Information overload is never a good thing. Start sparingly. Figure out what types of messages and insights meant the most to them. Build the experience and recommendations progressively.
Leveraging breadth and depth of data
In summary, when building personalized and predictive banking experiences, keep in mind that consumers are craving personalized insights and recommendations on how to manage, improve, and achieve their financial wellness goals.
Consumers trust banks with their data; banks in turn should leverage that data to help guide them. Banks have the great advantage of housing large amounts of transactional data, that if analyzed and mined correctly, can offer powerful financial management tools. Machine learning and data analytics techniques are improving in leaps and bounds and increasingly, technology service providers are offering out-of-box solutions that can help your bank get started. The time to start experimenting is now.
About the author
Katy Gibson is the vice-president of product applications at Envestnet|Yodlee. She has more than 20 years’ experience in developing technologies and products that help users improve their financial wellness. Envestnet|Yodlee is a leading data aggregation and data analytics platform powering cloud-based innovation for digital financial services.