With the help of artificial intelligence and predictive analytics, banks are learning to use their ever-growing data hoards to help you make better financial decisions.
Bank of America will let mobile banking customers use its new digital assistant, Erica, in March. Besides helping consumers complete routine tasks like transferring funds, Erica will offer financial advice tailored for each user.
If you have a low balance and you’ve spent a lot of money, Erica might warn that you are in danger of overdrawing your checking account. Or she could share opportunities to save additional money.
Institutions around the world are exploring predictive banking and looking for ways that it can increase engagement and improve the customer experience.
With predictive analytics, banks use data to make predictions about consumer behavior and offer personalized suggestions, says Caroline Dudley, managing director in the banking practice at Accenture, a global professional services firm.
Better finances through data
Wells Fargo has made providing customers with advanced digital tools a top priority. In February, its 17 million mobile users with consumer deposit accounts found themselves with a new predictive banking feature. Customers were given access to real-time data that provided insights into their financial habits.
The new feature may quiz you on how much you’ve spent at your favorite grocery store. Or send you a message that you don’t have enough money to cover an upcoming bill payment, prompting you to transfer money from your savings account.
“This is one tool of many that we’re launching to help customers manage their financial health,” says Katherine McGee, head of digital product management for Wells Fargo Virtual Channels. “There’s a lot of data in your account activity. This is a way to make it useful so that a customer can make better decisions.”
Wells Fargo confirmed that these new mobile capabilities are powered by Personetics, a company providing banking solutions that anticipate what consumers might need in the future. Personetics also powers Royal Bank of Canada’s predictive banking features: NOMI Find & Save, a free automated savings tool, and NOMI Insights, which gives customers customized tips and alerts.
“NOMI learns a client’s transaction patterns, finds the extra dollars that it thinks they won’t miss, and then sets them aside automatically,” says bank spokesperson Jeff Lanthier.
Finding the right people for the right offer
Banks have had access to big data for years. But consumer expectations are driving the shift we’re seeing in the kinds of products and services they are offering, says Dudley from Accenture.
“In their engagement across other industries, customers are seeing their needs being anticipated,” Dudley says. “So they’re expecting in their financial lives that their financial needs are anticipated as well.”
Companies like Saylent are trying to help banks make sense of their data resources by identifying the customers they should focus on. Saylent gives customers tools to target people that are shopping for a car loan or a mortgage. The platform will be used by institutions like BankFirst Financial Services, a community-based institution headquartered in Mississippi.
Using data to predict which consumers are ready for products like mortgages is something Chase will also be doing, said Gordon Smith, co-president and co-chief operating officer, at the bank’s annual investor day.
What it means for you
Most financial services are geared toward hands-on customers who don’t mind actively managing their money with Excel spreadsheets, says Emily Brauer Gill, director of brand and communications at Varo Money, a banking app designed for hands-off customers.
“Hands-off people want their money to be managed for them, automatically,” Gill says. “They want a bank they can trust to solve their everyday financial problems with one tap.”
Predictive banking has a lot of potential for anyone trying to improve their financial lives with minimal fuss. Tracking expenses and pinpointing areas of improvement on your own can be difficult. If your banking app can do that for you, it could save you time and money.
If your bank doesn’t use predictive technology in a way that helps you manage your finances (and you’re opposed to moving your checking or savings account to a bank that does), you could turn to an app instead. Look for personal finance apps like Digit and Dave, which predicts when you’ll end up with an overdraft and loans you money.
But customers don’t like using multiple apps, says Eran Livneh, vice president of marketing for Personetics. And due to conflicts over consumer data sharing rights, there could be a limit to the amount of information that a certain personal finance app can provide.
If you’re going to use an app, it’s wise to question whether using it is safe, particularly if you’re unfamiliar with it.
“The challenge for consumers to replicate what their bank can offer is in trusting their financial data to third parties — something we’ve found in our research that customers are hesitant to do,” says Dudley from Accenture.