How Much Tech Can Your Money Take?
March 14, 2019
There isn’t a single aspect of our lives that hasn’t been impacted by technology. Largely positive, these changes have made so many tasks easier, from hailing a cab to buying our groceries. There are even some things we no longer have to do at all, like know how to spell. It’s all taken care of for us.
But, how much do we really want taken care of for us? Aren’t there some things we really don’t want to forget or to automate?
What about managing money... how much of that do we want to hand over to the supercomputers, algorithms and artificial intelligence (AI) bots?
Let’s take a look at the pros and cons of three banking technologies in particular. Then, you decide: How much tech can your money take?
To win favor with a generation of customers who experienced their first Facetime the day they were born, banks have begun engaging with them via video. Rather than staff multiple branch locations, financial institutions are experimenting with the idea of keeping all their human resources in one physical location. Customers around the city, state or region can still interact with their bankers face-to-face, but they have to do it via streaming video.
It may be a good idea in theory, but what about in practice? According to one survey, 88 percent of customers who used video tellers were satisfied. Sounds good, right? But consider how that compares to the percentage who were satisfied their bank branch experience overall – 93 percent.
A group that studied the satisfaction gap concluded it had something to with perceived wait times.
But, do we think maybe people just miss the humanity and the confidence that comes from interacting with people face-to-face… without a screen in between?
To be sure, human-to-human banking is not dead. In fact, we may be experiencing a bit of resurgence. The roll out of banking “cafés” that offer free money coaching is perhaps evidence of that.
One of the more prevalent use cases for AI in banking, robo advisors first came on the scene a few years back. Since then, they are becoming quite prevalent. So much so that popular consumer financial sites have begun ranking their top picks.
The upside to the innovation is that an entirely new segment of consumers can now afford financial advice because robo advisors do not have the same asset minimums often required by human financial investment advisors.
The most pressing downside may be the lack of history. Simply put, advice from computer algorithms has not yet proven to be successful. No doubt, there are individuals and companies with complex financial situations not well suited to automated guidance. Time will tell, of course. The question now, are your investments strong enough to withstand the guinea pig treatment?
New FICO Score Models
Coming early next year, FICO will allow borrowers to ask lenders to look at an entirely different score to assess their creditworthiness. Called the UltraFICO score, the number will be based on a big data analytics model pulling intelligence on behaviors not traditionally calculated by FICO. So, this would be looking at things like checking account balances and utility payment histories.
For some consumers, the UltraFICO Score is expected to be as many as 20 points higher than the traditional score. While 20 points isn’t necessarily a significant jump, it could move a particular borrower into a different pricing or credit line segment.
A lot remains unknown about the UltraFICO. For instance, we’re not sure yet exactly how consumers will ask lenders to consider it; and we don’t know if or how the score may be applied to loans already in place. Could an existing credit cardholder, for example, request a credit line increase based on his or her new UltraFICO score?
The other thing to consider here is that UltraFICO ultimately means more consumer data flowing through a system already under constant assault from cyber criminals. How might more payment, financial and behaviorial data exposure increase the risk of identity theft and other big data threats?
Technology in banking is one genie who is definitely not going back into his bottle. How much we pay attention to that genie and what he advises is the real question. While automation, hyper-personalization and increased access all bring with them great pros, it’s the wide swath of cons we haven’t yet considered that I’ll be watching for in 2019.