Artificial Intelligence (AI). Does this phrase conjure up images of rogue robots enslaving humans? If so, you may not be alone in your thinking. AI is a term that’s been misused and misunderstood. I’m here to clear that up today.
Cinch and many other FinTech startups use a type of AI called machine learning. At a recent FTC FinTech Forum I went to on AI, the experts describe the process as feeding data into an algorithm that looks for patterns and makes predictions. Here’s another simple definition and example of using machine learning to predict what board games will be rated the highest on BoardGameGeek showing you how unscary AI can be.
In fact, AI is embedded into several aspects of your life. You just might not have realized this yet. AI can and will continue to benefit consumers including those in the FinTech space. To dispel that myth that AI is an enemy lurking in the shadows, here are some concrete examples on how AI will serve you.
Chatbots: Millennials and others no longer want to go into the bank branch, wait in line, and talk to a customer representative about issues that require a quick fix. Nor do they want to call in and be put on hold. That’s why chatbots have become so popular. These bots can answer simple questions. Initially, they’re pre-programmed with responses. As they receive more input data, they steadily improve their responses to customers. Complex questions can fall outside of the parameters of what a bot can answer. This means humans are still very necessary, but their role becomes more specialized and customers can make more efficient use of their time and expertise. In Japan, Softbank has gone so far as to develop Pepper, the world’s first robot with human emotions. A bank in Japan introduced Pepper for the first time to experiment with how the bot could be used in combination with humans to best improve the customer banking experience.
Fraud prevention & detection: Areas in the financial industry are dependent on a set of complex rules. Humans have to manually review hoards of data. Human error in this process in inevitable. In some cases, the false positive rate of risk detection – the rate that humans accidentally detect a case of fraud – is as high as 60%. As financial services become more complex, and more people have access to these services, the amount of data banks are dealing with is increasing. The issue of human error will only become more critical. This is why smart systems can be so useful for consumers. They can increase the accuracy with which fraud is detected, and ensure that cases of fraud that are currently being missed are now captured. In the credit card space, for example, MasterCard traces card usage, and endpoint access. The company can then determine the most common points where a card is compromised, and prevent fraud.
Process Analytics for Improving Customer Journey: There are several inefficiencies that customers face along their journey with a bank. Process analytics allows banks to analyze data for inefficiencies throughout the customer journey using social media, and the bank’s internal data. The bank may even use a type of analysis called sentiment analysis to analyze text and determine how specific features or experiences affect your customer experience. It goes without saying that this customer-centric approach is intentionally embedded within FinTechs. 53% of financial institutions believe they’re fully customer centric while 80% of FinTechs believe the same according to a PriceWaterhouseCoopers report.
Predictive Analytics for Personalized Recommendations: The financial services industry can now make sense of your behavioral patterns and other data to make recommendations that are personal to you. They can recommend services that you might use through matching algorithms. They can also determine how you can improve your financial health based on your past behaviors of those of people with a similar profile to you. Customers of services such as consumer banking, advisory services, retail financial planning and wealth management advice will all benefit from this customization. In fact, new customers in the 25 – 35 age range are demanding this personalization. They want things explained to them in a way that they can quickly make sense of, and that they can act on.
Democratization of Banking Solutions: Banking services that were previously affordable to many are now available. One such service is wealth management. Wealth management advisors have been primarily targeted for people with a lot in assets. Let’s say your bank balance is much less. Previously, your options were limited. Now, you have access to bot advisors that will provide you with quality advice. In addition, 70 million people currently live outside of the financial system. They spend 10% of their disposable income on unnecessary fees and interest rates. FinTechs can lower the cost of basic transactions by up to 90%.
Now, do you believe me when I say AI can benefit you, the consumer?