Americans are stressed out. That was the conclusion SunTrust reached three years ago when conducting research on financial stress in the U.S.
“Eighty percent of Americans lie awake at night [due to] financial stress,” Ken Meyer, SunTrust‘s chief technology officer for consumer banking, told the audience at a Fast Company panel sponsored by the Atlanta-based bank in Austin, Texas, last month. “Roughly 40% of Americans don’t have $2,000 in emergency savings. That number grows to 60% with millennials.”
Those insights provided the inspiration for onUp (onward and upward), an initiative to bolster consumers’ financial confidence, for which SunTrust provides free tools, information, and advice on onUp.com.
The panelists went on to discuss how technology—particularly AI—can help reduce our financial worries through education, better vetting for loans, and sparking more reliable savings strategies.
Ed Doran, head of product development at Microsoft Research, which devises technological solutions to complex global problems, understands that financial anxiety is a widespread issue. He blames, in part, outmoded procedures for screening credit seekers, which unnecessarily prevents them from taking advantage of opportunities that banks provide. “There’s about 40 million Americans who are qualified to get credit but can’t because the current models either don’t have enough data or can’t identify these people within the larger risk pool,” he says. Once rejected, customers might be permanently shut out of the credit system.
Other customers simply are unable to benefit from bank offerings specifically designed to create peace of mind, such as retirement accounts. “When we stared Honest Dollar in 2015 it was simple,” said the company’s founder and CEO who goes by the mononym Whurley. “We wanted to democratize the process [of saving for retirement] and the [access to financial] knowledge.” At Honest Dollar, a Lyft driver or a barista could open a retirement account for a dollar, unlike the minimum-savings amount required at other banks. Honest Dollar also stopped penalizing people for withdrawing money from their accounts for emergencies. Most significantly, Honest Dollar educated customers to make them better understand their financial status.
“We got teased in the financial industry,” Whurley said. “They used to call us brutally Honest Dollar,” for the company’s practice of starkly assessing its customers’ financial realities in order to impress upon them the need for a retirement account. “Nobody wanted to have that conversation: ‘I am poor.’ But what we found was not everyone was as bad off as they thought. There’s a lot of people who think they’re living paycheck to paycheck, but when you go through the finances, you say, ‘Well, actually, you go to the bar every weekend and you spend $400.’ ” (The audience in Austin could relate.)
GIVING AI A HUMAN TOUCH
What is needed to ease pecuniary stress, the panelists agreed, is fair access to credit, more accurate risk models, and greater transparency. While AI might help financial institutions solve these problems, what’s first required is for them to understand people better.
SunTrust partnered with behavioral economic researchers at Duke to understand when and how to help people improve their personal finances. For example, would a simple nudge to clients checking their paycheck deposit motivate them to set up an automatic transfer to savings?
Transparency and communication are pivotal to reducing financial anxiety. For example, customers feel more at ease if they are kept regularly informed of their status in seeking a loan. “Buying a home is extremely stressful,” Meyer said. “But being provided real-time status on your mobile phone or your tablet? That at least gives you an opportunity to manage through that experience of stress in a much more seamless way.”
As useful as such tools are, most customers don’t want to completely lose touch with a human guide. The AI interface builds that bridge. When a customer completes an online application on SunTrust’s LightStream platform, someone from the bank will follow up with a phone call asking additional questions. “And it’s not about your credit score and needing another pay stub,” Meyer said, “but truly understanding what you are trying to purchase and why you are trying to purchase it.” The data gleaned online helps connect a customer-service rep to consumers quicker.
AI can also resurface people who have been abandoned by the credit system. “We’re doing a partnership with ZestFinance,” Doran said. “By using more powerful models and more capable platforms, we can identify that population” that was at first rejected, but actually would be a good risk.
INVISIBLE TECH IS GOOD TECH
Whurley pointed out that AI could also assume educational tasks that have been neglected. “We don’t teach people in middle school and high school how to balance a checkbook or how the credit system works,” he said.
And what about the barfly who feels like a billionaire until he gets the credit card bill? Whurley says AI technology can help with that too. “Say I’m leaving work, and I’m using geolocation,” he explained. “I’ve opted in. The system could say, ‘Hey, it looks like you’re going to the bar again, and every time you do, you drop $400. Why don’t you get Netflix and a pizza instead, and here’s how we could redistribute those other funds.’ You can change people’s habits.”
The fintech developments are coming fast. Microsoft has been working on chips that will enhance financial data security and push AI to the edge. “We have new things that can run on a tiny, tiny chip—super cheap, super power-efficient,” Doran said. For example, a sensor placed in a factory machine can decipher when the system begins failing and needs maintenance. “If you’re a small-business person, you won’t have down time. If you’re an insurer, you have a much more accurate risk model, so premiums can be lowered. That’s good for small business.” Doran said they’re also exploring new forms of encryption. “It allows you not only to encrypt your data, but you can also run AI over the encrypted data without ever decrypting it. These are new ways to keep things really safe.
“A lot of the technologies we’re investing in, you may never see,” Doran continued. “They live in the server farm. They’re in the hardware rebuild, in the new kinds of encryption we invented. If you don’t see it, that’s still okay, if it gives you the trust you need and the regulatory compliance you want.”
While behind-the-scenes innovations such as these may not make headlines, they do allow for a more seamless, satisfying customer experience. “We’re really focused on providing more automation, more artificial intelligence in our teammates’ hands, to be able to service and spend more time with clients,” Meyer said. Thanks to technology, he added, “banks are in a position now more than ever to really help people with this struggle around financial confidence.”
This article was created for and commissioned by SunTrust.