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How to create a personal banker for everyone

AI-powered knowledge management technology can improve customer financial wellness, grow balances and drive product sales.

Sep 21, 2022 / Consumer Banking

Financial wellness has been prominent in bank and credit union mission statements for years. Now, financial firms are investing millions on new capabilities and financial wellness-focused fintechs have raised millions.

We are also seeing new solutions, including innovations like gamified financial education and cards that round up purchases and invest the spare change. But the overwhelming number of tools, calculators and articles present consumers with choice overload, the behavioral science principle that says having too many options prevents people from deciding. Individuals may default to a single solution, checking the mental financial wellness “to do” box, when they are likely doing too little.

The reality is that it takes years of savvy decisions and discipline for someone to improve their financial situation. Many people will fail on their long-term financial journey without someone to understand their goals, set targets, specify actions and recommend products. To realize the mission of improving customer financial well-being and helping customers achieve their financial goals, banks and credit unions need to provide personal bankers for all their customers/members.

A personal banker for all? How could this help customers while satisfying the cost-conscious bean counters and mollifying the risk-averse compliance team?

I created a team of financial coaches at a megabank that helped more than 75,000 customers. The team had high customer satisfaction ratings and an impressive list of success stories, including one featured in the annual report, but we used bankers and a primitive technology that made it difficult to scale.

A way to scale the model, while keeping finance and compliance happy, is to leverage knowledge management technology powered by artificial intelligence.

Knowledge management has been available for 20+ years in customer service to support contact center agents and customers directly via chat bots. These technologies, particularly the ones that include step-by-step process guidance and AI-powered conversational capabilities, are perfectly suited to providing needs-based product recommendations and financial guidance.

Automated personalized guidance is possible because foundational guidance (roughly 20% of financial advice universe) will help 80% of a banking institution’s customers.

Most people, even many in the affluent segment, are working toward one of three priorities: Saving money for a specified purpose, like buying a home or retirement; reducing their debt burden; or improving their credit score to be able to borrow.

Achieving the first two priorities is about keeping expenses below income. There are a couple of dozen best practices for doing this. Earning a strong credit score and qualifying for credit products similarly requires following a few basic practices, including paying bills on time.

If the actions needed to achieve our financial goals are relatively straightforward, why do many people struggle? It is because knowing which action to take and then changing the relevant behavior is hard. A virtual banker can provide much of the same critical guidance as humans:

Prioritizing: To stay focused, people should work one priority at a time. A virtual banker can help people pick the logical top priority.

Goal setting: Psychology 101 dictates that goals are critical for driving behavior change. A virtual banker can help people select achievable targets based on where they are in their journey. For example, savings targets can be based on percentage of income, starting small and growing as customers make progress.

Advising: The secret of delivering financial advice is to keep it bite-sized. A virtual banker should provide no more than three actions. This approach keeps people from feeling overwhelmed.

Products: The virtual banker can also recommend financial products based on a customer’s needs. These product recommendations can be made in the context of the general financial advice or as a stand-alone function.

Many firms assign a personal banker to their affluent customers because it is effective. Technology advances now make it possible to provide a personal, albeit virtual, banker for all. Providing this type of holistic guidance can improve customer financial wellness, grow balances, and drive product sales.

Evan Siegel is vice president of financial service AI at eGain.