PayThink: An interpersonal gap requires a digital response

By Brandon Rembe, SVP of Products, Envestnet | Yodlee

Originally published by PaymentsSource

The health and economic crisis stemming from the coronavirus pandemic is unprecedented, and the trajectory of our economic recovery will be determined in no small part by the actions financial institutions and fintechs take now as they help communities and consumers navigate the volatile financial landscape.

To empower consumers during this crisis period, the industry must now more than ever embrace digital tools that can support the financial management process. With interpersonal interaction limited or cut off, millions of people are relying on these tools—from tailored analytics to sophisticated data insights to AI-enhanced customer service—to inform their decision- making.

In an environment that is hyper-focused on spending and income, it will be extremely important for financial service providers to help customers understand their comprehensive financial picture to reduce panic selling and financial mismanagement.

Financial service providers that will handle this crisis effectively are those who can utilize personal and historical context to provide next-step recommendations to their customers. Data without context can make things look worse than they are and counterproductively heighten concern.

By deeply embedding analytics into their platforms, financial services providers are able to provide higher levels of personalized data insights about the financial picture of businesses and individuals alike. Additionally, peer benchmarking is an important tool that can help inform financial decisions by allowing people to see the impact of the crisis across different industries, geographies and demographics.

Consumers and institutions are depending on these platforms to evaluate their spending, saving and investing habits to help them reach their financial goals. But data is only as powerful as its application, and in the wake of coronavirus, customers will increasingly call for insights about income-stream changes, expense tracking, and next step recommendations on how to proceed with addressing financial decisions.

If customers don’t receive hyper-personalized, contextual, and tailored recommendations based on their individual financial pictures, it could lead to higher levels of distrust, financial miscalculations or worsening economic conditions during an already difficult time.

Given concerns about government stimulus fund delays and doubts about the technology being used for delivery, lenders are in a position to provide entrepreneurs, small businesses and individuals with loans and financial assistance. In this new operating reality, lenders must leverage data insights to more effectively evaluate their client’s comprehensive financial picture.

As the tax deadline and some bill payments have been postponed, there will also be an increasing focus on credit maintenance and the use of alternative data to enhance credit scoring models and add benefit to consumer’s credit. In today’s business environment, a FICO score is no longer a full representation of an economic environment. This is particularly relevant for gig economy and non-traditional workers without steady income streams who will need access to alternative lending options over the coming months.

Lenders are also using their data insights to provide businesses loans and financial assistance. Through the CARES Act, lenders are providing paycheck protection, economic injury grants and debt relief programs to support small businesses. Ultimately, the effectiveness of these programs will depend on the use of data insights to provide tailored packages that address the needs and circumstances of their recipients.

Another key area of innovation adoption is the application of conversational AI into customer service systems that can help manage higher call volumes and provide customized interactions based on the needs of each customer.

It will also be important to increase awareness about the proliferation of fraud during this time as bad actors attempt to take advantage of the disruption caused by coronavirus – especially in the domain of account verification.

While the lasting impacts from the coronavirus crisis extend far out into our future, there have been signs of public- and private-sector collaboration. There has also been an increased demand for government agencies and market players to work together to create more comprehensive economic oversight. Governments and central banks all over the world have activated fiscal and monetary stimulus measures to offset the disruption, and the U.S. government’s stimulus efforts aim to provide much needed relief to businesses, communities and individuals.

As these stimulus programs are enacted, financial service providers will play a key role in maximizing the programs’ effectiveness by helping businesses and individuals make informed financial decisions on the road to recovery. Although the challenges may seem daunting, financial institutions and fintechs must focus on identifying meaningful opportunities based on the financial priorities of consumers and businesses to help them weather these difficult times.