Creating Financial Wellness Using Artificial Intelligence

The fintech industry is growing rapidly, thanks to advances in mobile technology, artificial intelligence, and machine learning, but there are still gaps in what financial institutions provide in the areas of financial wellness and personal financial management (PFM) for consumers.

We recently hosted a webinar with speakers from Aite Group and Envestnet® | Yodlee® on creating financial wellness using artificial intelligence.

What we have learned is that while customers are initially interested in budgets and savings tools, their engagement drops off after the first few interactions. They get bored or confused, as most PFM dashboards are written with the financial expert in mind, and not the average consumer who doesn’t spend day after day poring over financial information.

There is a way to keep digital banking customers interested by using AI to deliver specific, personalized insights to help them take better control of their financial health.

In our webinar, we covered recent research from Aite Group that showed which consumers want financial tools; how to use AI to drive financial health and help consumers be proactive about their finances; and what consumers think about virtual financial wellness coaches (VFWCs).

We asked moderator Mike Sisk, contributing editor to American Banker, to lead the discussion with Tiffani Montez, Senior Analyst at Aite Group, and Katy Gibson, VP of Product Applications at Envestnet | Yodlee.

Tiffani started by giving a preview of Aite Group’s newest research report, Building Personal Financial Management in 2018: What Banks Need to Know.

Their initial goal was to explore customers’ attitudes toward financial matters, determining their awareness of financial management, and their willingness to use a VFWC. They asked over 5,000 people questions about financial management activities and interests, and Tiffani shared some of the results.

First, they were surprised to find that a majority of all respondents in each of the separate age groups have used some kind of PFM in the past.

  • 71% of 22 – 34 years old;
  • 62% of 35 – 49 years old;
  • 56% of 50 years and older.

They also found that, based on how comfortable or stressed people get when paying their standard bills versus worrying about money and their financial situation, there are plenty of opportunities for financial institutions to help consumers plan to pay bills that are larger than they expect, as well as find ways to get help in creating a savings plan, understanding how savings helps improve financial health, and getting a way to actually meet these goals.

Finally, Aite Group asked respondents about their willingness to use virtual financial wellness coaches (chatbots and online assistants). The areas where they could help include:

  • Seeing where consumers are spending money, getting account balance projections, and understanding how much they can spend based on upcoming income and expenses.
  • Setting up savings goals, creating a plan to achieve them, and monitoring their progress.
  • Comparing a consumer’s expense to the expenses of people like them to see where they may be able to optimize their spending.
  • Get real recommendations, information, and advice on how to improve overall financial health.

When respondents were asked if they would be willing to use a VFWC, they found that 79% of 22 – 34 and 77% of 35 – 49 year olds were moderately to extremely interested in using one, while 62% of people 50 and older are moderately to extremely interested in doing so.

Based on the research, Aite Group concluded that it’s important to build experiences that are centered on making users aware of their financial activity. Once they’re aware, you can begin layering in more data to give them insights into their finances. Then you can provide them with actionable advice to meet their savings goals and reduce debt.

After Tiffani finished, Katy Gibson shared what our own research has shown as we’ve actually developed our own virtual financial wellness coaches (VFWC).

First, we’ve found that people like a dashboard setup because it organizes and visualizes financial data for a holistic financial picture. On the downside, it’s missing critical components of financial coaching, like understand how they’re doing or what they should do next.

Unfortunately, most tools on the marketplace work well for expert users who can draw their own conclusions about what they’re doing, but they’re not optimized for the non-expert users.

So what we did was systematically look at the tools to see what is missing. We looked at the four steps of Forrester’s Financial Coaching Model: 1) What do I have? 2) How am I doing? 3) What should I do? 4) Do it.

By looking at the marketplace, we found that there are plenty of PFM apps that will cover steps 1 and 4, but that there are big gaps around steps 2 and 3, Diagnostics and Guidance.

So we dug a little deeper to figure out what people are looking for in that area. What we found is that people want actionable diagnostics that measure their financial health, ideally in real time. They want dynamic calculations to track behavior change in real time. And they want personalized insights and recommendations for next steps.

As we developed our own VFWC, that became a big area of focus for our team. We wanted intuitive, easy-to-use interactions for consumers where the AI did the heavy lifting. Users said they needed help organizing day to day finances and taking a more proactive view of their finances, so cash flow projections became a big part of our work.

Next, consumers want a financial health check to give a diagnostic look across spending, saving, borrowing, and planning, and to recommend next steps. So we made it so when users’ behavior change, their scores also changed in real time.

Finally, peer benchmarking and insights are also important. This uses advanced AI techniques to identify behavior patterns, predict future behavior, and peer benchmarking insights, and then the system can make a comparison between the user and a “healthy person” who makes the same amount of money, lives where the user lives, and then look at the user’s spending to find any outliers compared to the healthy spenders.

These are very promising results, and we encourage financial institutions and fintech developers to think about new solutions that rely on a lot of personalized guidance. It’s key to making financial experiences more engaging and useful for your users. If you can master these two areas — diagnostics and guidance — you can earn more loyal, healthy users who are more willing to turn to you for additional financial products as their needs grow and change.

To learn how to leverage artificial intelligence to deliver specific, personalized insights to help customers take control of their financial health, register for the on-demand webinar. You can also download a PDF of the slides here.