Business transitions can prove painful. Consider the automotive industry, as carmakers take drastic steps to shift toward development of self-driving cars. By contrast, progressive banks and credit unions face a more promising path. With the introduction of smart money tools for digitally fluent consumers, providers can transition toward “self-driving finance.”
They may have no choice, if they wish to survive. Consumers, accustomed to experiences with Amazon, Netflix, and Starbucks, demand rapid fulfillment of requests, personalized solutions, and constant attention from their financial providers. With the wealth of data possessed by banks and credit unions, consumers not surprisingly expect providers to know them, value them, and reward them for their relationships.
Given the rise of digital and challenger banks, traditional banks and credit unions must find new ways to maintain their share-of-wallet and customer trust. Technologies that integrate artificial intelligence and big data analytics provide financial institutions with unprecedented visibility into their customers’ financial dynamics, enabling the kind of personalized service which they crave. This underscores that automation in banking is about far more than generating new cost efficiencies. In an Accenture survey, 86% of bank executives agreed that implementation of AI solutions brings a competitive advantage beyond cost savings.
While technology offers an innovative means of delivering on consumer expectations, building their trust in automated solutions is an evolutionary process.
Once again, the automotive industry provides an instructive comparison. Public skepticism toward self-driving vehicles must be overcome to achieve widespread deployment of fully autonomous cars. However, the gradual deployment of semi-autonomous assistive driving features — like traffic-adaptive cruise control and lane-keeping assistance — has won over many consumers. In a recent survey, 55% of consumers indicated that they want the next car they lease or buy to come equipped with semi-autonomous technology.
Key Takeaway: As technology improves, people’s trust increases. A similar process is underway in the financial sector, where consumers are seeking solutions that enable them to seamlessly and efficiently make decisions that improve their financial outlook. According to research from Accenture, seven in ten consumers worldwide said they would welcome AI-driven advice for banking, insurance and retirement planning.
The Path to Autonomous Banking
“Self-driving banking” may never replace the human interaction required for complex financial requests. However, it already plays a vital role in helping consumers manage their finances today — and capabilities are improving at a rapid rate. One example to watch is Royal Bank of Canada’s AI app, called NOMI, has already produced well over 400 million insights for users since its launch last year, and demonstrated gains in digital engagement and balances.
The progress of self-driving finance can be traced along a maturity curve with increasing levels of autonomous capabilities, leading someday to complete automation. As with all multi-stage projects, rewards can be realized at any stage along the journey.
1. Data. Things begin with customer data enrichment, categorization, and visualization. These capabilities are typically offered by traditional Personal Financial Management tools that capture transactional and financial data and present them to consumers in a visually enhanced way.
2. Insights. More advanced financial institutions are deriving illuminating insights, with AI-enabled algorithms highlighting notable events and actions on a consumer’s financial journey to offer improvements to day-to-day financial management. For example, if someone is paying for two music streaming services, an alert allows them to choose to unsubscribe from one, saving some money every month. Notably, self-driving finance comes with a predictive element as well, giving consumers a heads-up on major upcoming charges, improving financial decision-making, and helping customers avoid overdrafts, unnecessary charges, and fees.
3. Advice. Having established a deeper understanding of the consumer, tech-savvy institutions can apply the next level of self-driving finance to generate personalized advice. This can help consumers in achieving their longer-term financial goals, whether they aim to boost their savings in a specific account or pay down debts. Analyzing an individual’s cash flow patterns, it can generate a predicted monthly budget, factoring in recurring expenses as well as average costs of groceries and other essentials. It could also help set and meet a monthly savings goal.
4. Automation. Finally, having learned the preferences and ultimate objectives of the consumer, automated financial services will be able to coordinate activities directed towards a single, or even multiple financial goals (e.g., savings, investment, debt management) simultaneously, with minimal to no daily intervention from the customer required. Autonomous banking will find savings across multiple customer accounts, moving money across them to protect against overdraft, and even pay off prioritized debts when excess funds are available.
The goal at every level of financial automation is providing a more stable financial outlook for the consumer. That said, the benefits are not constrained solely to the them — banks and credit unions that embrace self-driving finance stand to gain as well. Financial institutions that have embarked on their journey to financial automation are already seeing higher customer satisfaction and increased digital engagement, as well as growth in new accounts and balances in existing accounts.
Autonomous banking will pave the path toward more sustainable and successful financial futures for consumers, without commonly relying on individual knowledge or accessibility of a banker.
While financial institutions and their customers — like drivers across the globe — are looking toward the day when they can take their hands off the wheels and trust that they will arrive safely at their desired destinations, there are practical steps they can take today to get themselves and their customers closer to these goals.
This article originally appeared in The Financial Brand