March 11, 2019

Self-Driving Finance: Get on Board or Get Left Behind

As consumers in the on-demand era come to expect more from their banks, financial institutions confront a new banking landscape in which they face a stark choice: embrace rapid digitization, or face the prospect of competitive decline in the new era of financial automation and self-driving finance.

Such transitions can prove painful; the automotive industry is a case in point, as automakers like GM take drastic steps to shift their focus toward the development of new products. But progressive Banks face a more promising path. With the introduction of smart financial tools geared toward today’s digitally-fluent consumers, banks can ensure a seamless – and financially fruitful – transition toward self-driving finance.

The Evolution of Customer Expectations in Retail Banking

With the wealth of customer data possessed by banks, customers expect banks to know them, value them, and reward them for their relationships. Accustomed to best-in-class retailers and service providers such as Amazon, Netflix and Starbucks, consumers have grown to demand rapid fulfilment of their requests, personalized solutions, and attention to their unique needs and goals.

With the introduction of digital and challenger banks, traditional retail banks must find new ways to maintain their share-of-wallet and earn customers’ 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 customers crave– underscoring that automation in banking is about far more than generating new cost efficiencies. In an Accenture survey, 86 percent of bank executives agreed that the implementation of AI solutions brings a competitive advantage that extends beyond cost.

Who Will Customer Trust to Drive their Finances?

While technology offers an innovative means of delivering on customer expectations, building customer trust in automated solutions is an evolutionary process. Once again, the automotive industry is an instructive comparison. Public skepticism toward self-driving vehicles must be overcome to achieve widespread deployment of autonomous cars, but the gradual deployment of semi-autonomous assistive driving features – like traffic-adaptive cruise control and lane-keeping assistance – has won many consumers over. In a recent survey, 55 percent of customers indicated that they want the next car they lease or buy to come equipped with semi-autonomous technology.

A key takeaway: As technology improves, customer trust increases. A similar process is underway in the financial sector, where customers are seeking solutions that enable them to seamlessly and efficiently make decisions that boost their financial outlook. In an Accenture survey, seven in 10 consumers worldwide said they would welcome AI-driven advice for banking, insurance, and retirement planning.

Source: Accenture

 Autonomous Vehicles to Autonomous Banking

Self-driving banking may never replace the human interaction required for complex financial requests, but it can already play a vital role in helping customers manage their finances today – and capabilities are improving at a rapid rate. For customers of banks who are advanced on their AI-powered journey, the benefits are becoming clear;  the Royal Banks of Canada’s AI app, called NOMI, has already produced well over 200 million insights for users since its launch last year, and demonstrated gains in digital engagement and balances.

Like self-driving cars, self-driving finance progression can be described along a maturity curve with increasing levels of autonomous capabilities, leading to the envisioned state of complete automation. As with all multi-stage projects, however, rewards can be realized at any stage along the journey.

Stage 0 – Data: The initial stage is customer data enrichment, categorization, and visualization, capabilities typically offered by traditional Personal Financial Management tools who capture transactional and financial data and present to consumers in a visually enhanced way.

Stage 1 – Insights: More advanced financial institutions are deriving illuminating insights, with AI enabled algorithms highlighting notable events and actions on a customer’s financial journey to offer improvements to day-to-day financial management. For example, if a user is paying for two music streaming services, bringing this to the attention of the customers allows them to make a choice to unsubscribe from one of them, saving them money every month. Notably, self-driving finance comes with a predictive element as well, giving customers a heads-up on major upcoming charges, improving financial decision-making, and helping customers avoid overdrafts, unnecessary charges, and fees.

Stage 2 – 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 to aid customers 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 such as rent, internet or scheduled debt repayments, as well as average costs of groceries and other essentials, and help set and meet a monthly savings goal.

Stages 3 and 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 bank’s customers. That said, the benefits are not constrained solely to the customer – banks 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, 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 banks 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.