Relationship Banking in a Digital Age

One area of growth and innovation is in the use of so-called artificial intelligence techniques to support “natural” conversations, though text, voice, and/or graphics, between people and artificial agents that more or less pose as people in enacting a service. Amazon’s Alexa and Apple’s Siri are well-known examples, through financial service-specific versions have also launched. Bank of America’s Erica is perhaps the most well-known version, but credit unions are also getting into the “virtual assistant” or “conversational agent” game, from Michigan State University Federal Credit Union’s Fran, to Royal Credit Union’s Val, to University Credit Union’s Royce.

Virtual assistants are not simply a new channel to access services. They require that we forge new social norms — about privacy and security, work and leisure, and especially the intimacy and empathy of human-technology relationships. How do people experience such systems? How do they expect them to behave?

We are already intimate with our smartphones. These personal and personalized devices are our constant, daily, bodily companions. Add an always-available virtual assistant to chat with, and our relationship with our phones — especially in a time of social distancing — becomes even closer. In financial services, virtual assistants promise to enhance personalization, especially when it comes to personal financial management and financial well-being. Take BofA’s Erica. Via your smartphone, she can help you plan a spending path, manage your expenses, alert you to when bills or other recurrent payments are coming due, give you your FICO score, and even provide rudimentary credit counseling.

The “intimacy” offered by virtual assistants rolled out by big banks is threatening to credit unions and community banks precisely because these organizations have historically prided themselves on the quality of their customer service and their knowledge of their members. If interactions with financial digital assistants are to replace person-to-person conversations with customer service agents, is the credit union system back in a familiar position of trying to play catch-up with the big banks and their big pockets?

Not entirely. For example, consider another dimension to the intimacy of smart devices: constant data collection, surveillance, and sale to third parties, often without the user’s knowledge or explicit consent. Companies want to imagine that as our intimate partners new AIs will evolve towards a lifelong, genuine, and beneficial connection, but they also tend toward insidious inescapability. Despite their female voices, Alexa and Siri could eventually come to be viewed like a bad ex-boyfriend who’s always creeping around, or at least a friend who we mostly enjoy the company of but can never really trust.

Indeed, in a report on the future of banking technology, Accenture reminds us that “black-box personalization” is all too common but leaves consumers feeling “out of the loop and out of control.” That feeling is the opposite of the promise of personalization, which ought to offer opportunities for transparency, participation, and agency over one’s experience.

The origins of the English word “intimate” are instructive. The Latin intimāre means “to put or bring into, drive or press into, to make known.” It even once meant “to declare war.” Intimacy today implies familial closeness. But we have to remember that intimate partner violence is so challenging to address because of that closeness, and the ability it confers on an abusive partner to do real harm.

Contrast intimacy to another word we’ve heard a lot in discussions of AI: empathy. To empathize is to project oneself into another’s circumstances so as to be changed by that other person’s state of mind or feeling or circumstances. Empathy is a useful term of credit unions. Credit unions live by the philosophy of people helping people, and in fact, credit unions emerge not from intimate relationships so much as affinity relationships. We may not be family, but we all share something in common.

How can credit unions and community banks choose empathy over intimacy in designing digital financial services that meet their mission and elevate their value proposition and market differentiation?

In the short term, here are some ideas to consider.

• Step 1: Put technology to work in facilitating curbside service. Do you have digital signature capability for completing loan applications, or do members still need to come to your branch to complete a transaction? Accelerate technological solutions to reduce even curbside visits. Facilitate remote conversations ahead of required visits to minimize contact time but maximize relationship-building and opportunities to impress and even delight members. With online pre-work out of the way, the curbside visit itself can offer a personal and caring, not clinical, feel.
• Use technology to improve human-based service delivery. Online analogs may always pale in comparison to real human-to-human connection. Find ways to use technology to protect, make use of, and enhance the customer-facing staff. How might you use automation not to replace human service interactions but instead give consumers a map to guide them through your website and digital systems? How can technology be used to prioritize consumers who need to talk to staff so that limited time can be made as mutually satisfying as possible? And what back-office tools or dashboards can you provide staff to allow them to “see” and serve consumers better?
• Focus on the hand-off. The transition from automated to human interactions is the most critical point in your service value chain — the make-or-break moment that, done right, will drive loyalty and, done wrong, will produce disengagement and churn. Here’s baseline: anything a consumer has offered up about themselves and the job they are seeking to accomplish to an automated system must be available to the human service rep that consumer is now talking to.
• Put financial well-being at the heart of your service value proposition. In moments of uncertainty and flux, people need tools to help them plan and prepare, and the best tools offer both personalization and contextualization: personalized products and contextualized delivery and guidance. Demand for personal financial management (PFM) will thus continue to grow into the future. PFM provides consumers a financial well-being toolbox with budgeting and expense-tracking technologies, income smoothing and savings apps, bill negotiation, loan repayment and credit management and repair, and investment and portfolio optimization. Putting PFM at the center of credit union offerings and operations gives credit unions the opportunity to deepen relationships by connecting different parts of consumers’ financial lives.
• Use remote channels to facilitate member communication preferences. One strength of remote channels is their ability to provide as much or as little engagement with members as they desire. Sometimes members prefer to not involve a human. The privacy and perceived anonymity of mobile banking can provide a welcome alternative for members from having to have uncomfortable conversations with customer service agents.
• Find ways to bridge “digital divides.” Credit unions and community banks have long been at the forefront of financial inclusion efforts, but they will be challenged to ensure that access to digital banking and payments services is equitable and their benefits communicated clearly to members. One survey of U.S. adults at the end of March 2020 found that while 73% of respondents overall reported being more likely to use digital financial services during the pandemic, that percentage fell to 64% for households with incomes under $50,000 and 62% for consumers with a high school education or less. It is unclear whether these disparities are due to differences in internet access, awareness, or distrust in digital channels, but they indicate the potential for a gap in financial service provision that could deepen patterns of inequality. We know that access to high-quality broadband internet is not evenly distributed. In 2019, the FCC estimated that 5 million U.S. Americans live in digital deserts. They are disproportionately elderly and poor, and they tend to have lower levels of education and live in rural areas. We must meet members where they are. Consider creating compelling “low tech” solutions for users of pay-as-you-go phones or for consumers living in conditions of low-quality broadband connectivity. Look for ways to better handle member communication (when appropriate) through email, text messaging, or direct messages on social media. When it comes to technology access, one size does not fit all.
  
  

  How Does State National's Focus on Technology Impact Credit Unions?