With artificial intelligence (AI) trending toward the mainstream, financial institutions have an opportunity to reinvent how they deliver personal finance management (PFM) tools and create an interactive experience that will help consumers take control of their overall financial health.
Over the last few years, financial institutions have tried to shift digital banking platforms from transactional to engagement platforms that help customers manage their finances and reach their financial goals, and that enhance their banking relationships with additional products and services over time. As a result, many financial institutions over the last five or so years have worked on integrating PFM capabilities such as budgeting, spending categorization and savings goals into their online and mobile banking experiences. Although there was an initial allure, as is usually the case with new financial technologies, many customers played with it, set up initial budgets, and created savings goals – then their interest fizzled away.
Aite Group conducted a study to see how consumers are using digital banking channels and how AI and virtual coaching could fill the consumer-interest gap. The survey was conducted using data from Q4 2017, involving 5,174 U.S. consumers. These consumers indicated that they have an account with a U.S.-based financial institution or financial services provider, including a checking or savings account, credit card, prepaid account or investment account. The surveyed consumers also logged into their primary financial institution’s website or mobile site at least a few times per year and shared or had the primary responsibility for managing their household finances.
According to Aite Group research, the largest market trend indicates that consumers are using the digital channels as their everyday banking channels. Financial institutions are under pressure to meet rising customer demands for better digital experiences. Based on this trend, more data fuels consumer insights. Banks are confronted with fierce competition and more demanding customers.
These market trends are shifting consumers’ channel preferences, that now have moved from the branch and contact center to digital channels – online and mobile. New and emerging touch points are being introduced, pressuring financial institutions to find new ways to engage consumers. Other industries, such as the retail sector, have already impacted customer expectations and set new standards in the area of customer experience.
New touch points create a new data stream that can be used to gain better insights, to better serve consumers and to help consumers meet their financial goals. Consumers are confronted with an increasing number of options when choosing a financial institution, and a large number of organizations jockey for their attention. Further, their options are not confined to only banks and credit unions as nontraditional players enter the space. Banks are pressured to roll out new products quickly and to look for ways to differentiate themselves.
Improving the Online Banking Experience
Based on Aite Group’s study, more than 75 percent of 22- to 49-year-old consumers indicate they are interested in using a virtual financial wellness coach.
The survey defined the virtual financial wellness coach as “a new online tool that allows you to understand your financial picture.” The virtual financial wellness coach would help a consumer accomplish and track many financial goals. They could see where money is being spent, get account balance projections and understand how much can be spent based on upcoming income and expenses.
This tool could also be used to set up savings goals, create a plan to achieve a goal and monitor progress toward the goal. The coach could compare expenses to the expenses of other people to see where spending could be optimized, and give real recommendations, information and advice on how to improve overall financial health.
According to the survey, interest in the virtual financial wellness coach is driven by age. The age brackets that showed the most interest in the virtual financial wellness coach were 22- to 34-year-olds and 34- to 49-year-olds. Aite Group suggests that financial institutions look at these age groups as their target markets for building virtual financial wellness coach capabilities.
Based on its research, Aite Group recommends that financial institutions also build experiences that are centered first on making users aware of their financial activity. Once consumers become aware of how they are spending money, these companies can begin layering in more data to provide them with insight into their finances, then provide them with actionable advice on how to meet their savings goals and reduce debt.
Financial institutions should also consider the role that chatbots and interactive assistants can play in resurrecting the concept of PFM, according to Aite Group’s research. Interactive conversational touch points could be the format that finally increases consumer engagement in this topic. This could also help these companies understand behavioral and attitudinal factors that could possibly limit the usage of a virtual financial wellness coach.
The biggest hurdle that banks and credit unions face in getting consumers to use such online tools is to help them understand ways to manage their finances that are new and better than the ways they do it today. It will be important for financial institutions to educate customers on security and on how their information will be used by the virtual financial wellness coach.
David Albertazzi is a senior analyst at Aite Group focusing on retail bank channels and core banking technologies. Tiffani Montez is a senior analyst at Aite Group focusing on digital client experiences and card issuance. To learn more about Aite Group’s research coverage of retail banking and payments, please contact Aite Group at info@aitegroup.com.
