By using data to forge personal relationships with their customers, financial institutions enable people to make smarter, safer financial decisions—while becoming trusted financial advisors, protectors, and activists.
In today's highly digital world, Jason Osborne, global head of consumer and commercial banking at global professional services firm Genpact, doesn't want banks to think of their competitors as other banks. “Banks should be comparing themselves to technology companies…disruptors like Netflix, Amazon, and Uber," he says.
That's because those companies offer straightforward, personalized services that are relevant, easy for consumers to use, and cater to their immediate needs. They do this, largely, by using customer data to inform customer engagement—something banks should be doing, as well. “The new money is data," Osborne says, and banks have lots of it. “So, banks have a very serious responsibility to keep and protect that data, but they can also use that data for good."
For banks, using data for good might mean becoming their clients' trusted advisor on budgeting and saving, helping them avoid detrimental spending habits, and protecting them from bad actors, all through services that are as seamless to interact with as Netflix's homepage. With 72% of consumers reporting that they're more likely to remain loyal to companies that “lead with a purpose", it's essential for banks today to shift their focus from delivering financial services to—as Osborne puts it—enabling financial betterment. In addition to helping customers lead financially healthier lives, this means banks must focus on good causes—like equity and environmental sustainability—with their investments.
To do all this successfully, banks can make use of advanced technologies such as artificial intelligence (AI), machine learning, and cloud services to learn their customers' behavior and help them make smarter and safer financial decisions at every turn.
Anticipating customers' needs
For Tina Eide, executive vice president of fraud and banking product risk at American Express, financial betterment comes down to “access, education, and growth." Consumers have come to expect extreme convenience from the businesses they interact with online, and banks are no exception. “We've seen more demand for easy and quick digital experiences, from application to account payment," Eide says. That has translated to investments in offerings that “show customers we've got their backs," she adds, citing a digital financial-planning product Amex codeveloped with BodesWell.io as one example.
AI can help personalize these offerings for individual customers, anticipating their needs by predicting their activities. Banks know “what you spend, where you spend, what you borrow, and how you borrow," Osborne says. All they need to do is use that information to make life easier and better for their clients.
That could take the shape of knowing—based on credit card transaction history, for example—that a certain client makes regular trips from the U.S. to London, like Osborne does, and takes a black cab to his hotel. Recognizing his geolocation from his phone, Osborne's bank would be able to welcome him to London as soon as his plane touches down at Heathrow and advise him that could save £30 by taking an Uber to his hotel instead.
Banks can also improve customers' lives—and earn their support—by offering crucial assistance in times of need. During the pandemic, Genpact worked with one bank to analyze the notes customer-service representatives took during routine customer calls to find those who might need financial assistance. “We identified about 20 keywords and phrases, ran them through our AI engines, [and] then created models to proactively offer hardship programs to customers that had loans they were struggling to pay back," Osborne says.
A multi-tiered approach to financial betterment
Financial betterment isn't just about helping individual customers. It's also about taking actions that improve society overall, like funding female founders to support gender equity and avoiding investments in the fossil-fuel industry to promote sustainability. Goldman Sachs did the former by investing in the Female Founders Fund, which puts money into technology companies started by women—a crucial mission when, as of September 2021, only 2.2% of all venture capitalist funding this year has gone to women-led teams. Meanwhile, Citigroup chose policy over profits when it imposed restrictions on firearm sales for its gun-selling clients in 2018 following the school shooting in Parkland, Florida.
Banks also help at the societal level by working harder to stop financial crimes. “Attack methods, technology, and skillsets have evolved over the years on both sides of the fraud equation," Eide says. “From theft of login credentials at scale, to vishing, phishing, and malware attacks, the ways in which fraudsters are operating has become increasingly sophisticated."
To combat fraud, she explains, American Express takes a multitiered approach, which includes educating customers on how to stay safe and proactively notifying merchant partners about possible bad actors. Machine learning aids in this effort through models that can identify and analyze emerging threats at various weak points, like online checkouts, where more and more fraud is taking place. “In 2020 alone, our machine-learning algorithms conducted real-time monitoring of more than 112 million credit cards in more than 100 countries. Our relentless focus on eliminating fraud has helped the company maintain the lowest U.S. fraud rates among the major networks," Eide says.
Genpact uses its proprietary, cloud-native, financial-crime software, called riskCanvas™, to help its clients weed out fraud. For example, as part of the U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act, Primis Bank used riskCanvas™ to analyze and mitigate the risk of about 2,500 paycheck-protection loans in just two months—around 40% more loans than it would have been able to issue otherwise. “This was a life-or-death situation for many small businesses," says Dennis Zember, CEO of Primis. “It didn't seem right to turn them away." The project uncovered a loan fraud rate of 3%, which was about 2.5% higher than non-payment protection program (PPP) loans. “We were able to identify fraudsters who were trying to get PPP money they shouldn't have access to and get loans into the hands of the small businesses that legitimately needed it to stay afloat," Osborne says.
With all the data and advanced technologies at their disposal, banks are becoming more than repositories of cash for their customers—they're also becoming trusted financial advisors, activists, and protectors. “It's clear that banks are in a position to enable financial betterment, not just at the individual level," Osborne says, “[but] at the community level and the global level, as well."
This article was first published in Fast Company.