Money20/20 is the world’s largest fintech conference. Because banking is always cited as a use case of bots, I wanted to share my thoughts on what’s happening in the space.
My single biggest takeaway from Money20/20
Intelligent conversational software will eliminate the cognitive load required to plan and manage a person’s financial life. These intelligent systems will “think” and “act” to optimize long-term financial health by:
- Calculating the risk of and building resilience to financial shocks (unexpected required expenses)
- Ensuring access to responsibly designed and fairly priced products that build wealth
- Using conversation to encourage and guide better day-to-day money habits
Consumer Financial Health in America
The Center for Financial Services Innovation (CFSI) has been leading the conversation about financial health for over 10 years and is the nation’s leading authority on the subject. According to their latest study, 57% of Americans are struggling financially. And it’s not hard to see why.
Student loan debt is a gross epidemic. The shackles of debt are holding down bright minds and preventing them from investing in their long-term financial health now. After paying for necessary expenditures, such as rent, a car payment, and groceries, most people have very little discretionary cash to save or invest.
More people than you think are living on the edge of a financial cliff, and a good high-paying job doesn’t guarantee financial health. A full one-third of people who are not financially healthy earn more than $60,000 a year. One financial shock such as an unexpected car repair, medical deductible, or funeral can send someone tumbling down. Those who lack an informal financial support network to help them out when times are tough are most at risk of falling into a cycle of debt, or worse, losing their home.
The “gig” economy is an ever-growing part of the workforce and it’s coming for us all. Planning for and managing cash volatility is crucial. Many people are struggling to make dollars “stretch,” as a great friend of mine once described his situation.
Who’s Building Intelligent Conversational Software
Banks, mostly. Despite warnings from financial analysts that “bots aren’t ready to be bankers,” the largest banks have been steadily rolling out bots, catalyzing a shift in how customers are empowered to manage their own financial lives.
In the last few months, major banks, including American Express, Capital One, Bank of America, and Mastercard, have released chatbots that use voice and text to provide financial information to their customers.
I like to think they are wising up to the financial struggles of Americans, but it’s more likely just internal innovation teams playing with the latest in technology. I mean… #botsarehot right now.
It All Boils Down to Data
While more and more banks are releasing bots, it’s important to remember that institution-specific bots are only useful to users who keep their entire financial life within a single institution.
Take Bank of America’s bot, Erica, for example. In their demo, Erica “talked” with a user about her typical spending and offered an insightful recommendation. Yet the recommendation from Erica didn’t factor in spending on any accounts NOT held at Bank of America. So is it really that useful? I don’t think so.
The bottom line is, you can’t use AI to streamline the financial decision-making process if you only see a slice of a person’s financial life; your models need all the data. And I mean ALL the data. Credit cards, student loans, primary checking accounts, and increasingly, third-party apps like Digit and Acorns, all hold clues to the financial puzzle. These account structures aren’t typically housed within a single institution. According to a recent study, 46% of Americans bank with more than one institution — a result that is reflected in our own user data (50%). Not to mention all the other data needed to establish context behind a wide range of financial histories. As the Consumer Financial Protection Bureau director Richard Cordray said, “We believe consumers should be able to access this information and give their permission for third-party companies to access this information as well.” This probably sounds commonsensical to you, but there’s a lot going on in terms of how banks share/don’t share the puzzle pieces (data) that comprise a person’s financial story.
Who Else is Building Intelligent Conversational Software
In addition to banks, there are an increasing number of fintech companies that have released chatbots to help consumers understand and manage their finances:
- Abe (I work here.)
We are all using conversation in some form or fashion to, as I like to say, help people be better with their money.
Chat as an Interface
While interfaces have always driven the technologies consumers adopt, it’s important not to mistake the hippest tech trend for innovation. Just because users CAN ask a question related to their financial lives doesn’t mean they WILL.
You must measure the efficacy of your product — are you REALLY moving the needle on a person’s financial health? That’s all that matters. Otherwise, you’re just pushing a product to earn revenue from your affiliate partners.
The lasting engagement of chat technology is yet to be determined. Apps still work just fine for a lot of people. However, there are supporting stats such as how much people message and how often people check their phone, that suggest chat interfaces may have staying power. But it’s still early days. For instance, when one of our users engages with Abe, they generally ask three questions: What’s my balance? What are my last ten transactions? What can I spend today?
I’ll Close with This
Banking as a brand is suffering right now. According to a 2016 banking report published by Accenture, “eroding customer trust and satisfaction” is the most immediate challenge facing banks. Additionally, 66% of us view our banking relationship as purely transactional. To most of us, banks are only a necessity for cashing a paycheck, nothing more.
Extracting every last dollar out of a customer isn’t good for business in the long term, and this is the second time in the past six months I’ve listened to major decision-makers at large banks discuss financial health and how to “make financial lives better.” I agree with most of this dialogue and see an incredible opportunity for banks and fintech companies to evolve and do more to serve the customer. I get jazzed every time I talk with one of our users about how they manage their financial life and what tools they want our team to build.
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