"It's the most wonderful time of the year," a song originally sung by Andy Williams in 1963, would later become the background music for a Staples back-to-school supplies commercial. Which version is more memorable? That depends on the context in which you hear the song (shopping for holiday presents or back-to-school supplies) and the generation you belong to. Parents of school children will instantly understand the Staples reference because back-to-school shopping can be a daunting experience (parents, you know what I am talking about). Even though they are in a generation that grew up with the song being played during the holidays, the more recent back-to-school context and the emotions that it conjures up are likely to be their primary reference going forward. The point is that when you can create a new frame of context on an already established reference, you create a new awareness. This is the stuff of legendary marketing campaigns.
OK. So why did we open this newsletter with a reference to that commercial? Because the world of digital has gone through the same metamorphosis, but on a much grander scale. "The most wonderful time of the year" has become a cultural reference for the holidays and now also, for back to school. Likewise, digital has become a cultural phenomenon among every generation all over the world. Digital went from an innovative alternative delivery channel to a primary channel in a matter of months because there was no other way for consumers to conduct business. And there are no signs of digital losing its foothold. According to a recent American Bankers Association and Accenture PLC report
, 68% of Baby Boomers now favor digital interaction. Pre-pandemic, 55% of that segment preferred digital interaction.
Stories pop up about how consumers are returning to physical retail. Still, when you look at the efforts that merchants like Walmart and Home Depot go through to create eCommerce channels, it is evident that digital is critical to their consumer strategy. Now you are probably thinking, "I have heard this all before." Fair enough, but the point is to look at what is emerging in front of us and how that will impact financial institution business models.
Let's take, for example, artificial intelligence. “You mean chatbots?” No, I mean artificial intelligence. Chatbots are reactive. Artificial intelligence is proactive. When a consumer asks a financial institution chatbot a question, the response is based on the questions and answers created for its library. Consider Alexa or Google Home as a reference. They are voice-enabled assistants that appear to answer basic questions like a financial institution chatbot. Still, these voice assistants are gathering those questions into a database with your name on it. In Alexa's case, your questions and purchases are run through algorithms to make recommendations to you. These recommendations are presented in the form of personalized cross-sell offers when you log into Amazon.
But… There is another marketing principle we need to talk about: providing the consumer with TOO many choices. Back to our example of Amazon, there are likely to be 10-20 products recommended for you when you log in. Amazon has done an admirable job of presenting that information in frames that include historical purchases, but the screen is still pretty cluttered. Too many choices, even in personalized marketing, is still a shotgun marketing approach.
Before we leave the topic of Amazon, let's talk about their cross-channel upsell efforts. If you are an Amazon Prime member, watch Amazon Prime TV, subscribe to Amazon Music and have a Kindle subscription, then Alexa makes recommendations for selections in ALL of those channels. The algorithm is not only looking at your purchase behavior but your entertainment behavior as well. That is the value of your database to Amazon and to you. Amazon benefits from increased sales and Prime memberships, and you benefit from convenience. It does appear that consumers will give up privacy for convenience.
Even with all of the fantastic work that Amazon has done, digital is moving beyond them. Consumers want more convenience, and AI is the way they will receive it. MUM really is the word. Well, words. Before, I mentioned that chatbots are reactive, and they need to be proactive. Chatbots are essentially a form of search, but, as we stated earlier, they are limited to a question/answer library. Google is working on the next generation of search, MUM, which stands for Multitask Unified Model. Just look at the name and think about the benefits to consumers. Multitask and Unified.
When we think of traditional search, that process is like peeling an onion. You enter a search term and receive an answer. Based on that answer, you enter another search term and receive another response. The process gets repeated until you arrive at the answer you are looking for. The Google search algorithm even tries to help you when you fat-finger a search term by asking you, "Did you mean….."? But, again, these are reactive responses based on your question(s).
Just like the Staples commercial and like digital becoming the primary consumer channel, MUM will change the contextual reference and consumer expectation of a search query. Google provides the example
of a person who hiked Mt. Adams (more power to them) and then wants to hike Mt. Fuji. Instead of asking, "hiking Mt. Fuji”, “compare the Mt. Fuji hike to the Mt. Adams hike”, or “prepare to hike Mt. Fuji" (all of which may be peeling the search engine onion), the person can simply ask, "I’ve hiked Mt. Adams and now want to hike Mt. Fuji next fall; what should I do differently to prepare?" Think about the power of the response coming from the answer. The searcher will be presented with the exact information to prepare for the Mt. Fuji ascent by asking ONE question. THE EXACT ANSWER. A detailed explanation with specific steps to solve a complex need is provided when asked just one question.
If you think that sounds like an article out of Fast Company (cool things on the fringe to consider but not likely to be mainstream), you might be right. For now. But, think about the transition of financial institution websites to online banking and then to mobile banking. If you asked someone about mobile banking in the early 90s, they would have called that a fringe idea.
So what does all of this have to do with financial services? Chatbots simply answer preprogrammed questions. What happens when the chatbot is asked a question and the response is not in the library? There are limitations. On the other hand, AI can look at the data about the member available in a data warehouse and offer a predictive response. Think about approving a loan application using all of the data available, including credit score, credit report, length of membership, average daily balance, payment performance on past loans, etc. Now take that one step further. Consider the information about the member available in the data warehouse and a 360-degree view of them through aggregation partners. Now, consider what an application like MUM could do. Imagine your member asked the question: "I am interested in buying a car for my daughter." Instead of responding about a loan application, car loans, or a rate page, etc., the answer returned would be: "You and your daughter qualify for a $20,000 car loan and based upon current car loans in your daughter's age group, here are the popular cars other members have purchased.” Think about the power of that response when compared with a chatbot. There is no comparison.
In the future, using artificial intelligence, perhaps "the most wonderful time of the year," will be the success of a loan campaign. And, if you offer business accounts or are considering offering business accounts, think about the complexities of those questions. Small business owners are pushed for time, and when they have a financial need, the institution that can solve that need the fastest and with the least amount of effort on the business owner's part will win the business. There is no upsell in the world of advanced AI; there is need fulfillment based on the available data. In other words, "meeting member needs" is solving the entire complex problem, and not just smaller individual options, in the process to address the need. An intuitive AI model does not present a plethora of choices, hoping one will stick. It provides the best option and the rationale behind that decision.
Consumer digital preferences have shifted from "give me information" to "give me recommendations based on predictive modeling." For example, instead of a basic numeric value response to the question "What is my balance?" a better response could be: "Based on your current balance and expected upcoming payments based on your history, you should deposit an additional $250 in your checking account." AI and predictive modeling work in tandem to assist with everything from account maintenance to increasing the number of products/services per household.
If you are considering a chatbot, take your research one step further and look for companies that offer chatbots and AI. That will put you closer to closing the gap of solving complex member needs. AI has the potential to become a significant driver for PFI status. Digital innovation is changing consumer expectations. You read that right. Consumer expectations are altered by solutions that make their lives easier. What expectations are being set for your members by their digital experiences elsewhere? It's no longer "the early bird gets the worm" because, in the world of digital, one search shows there are a lot of early birds. The companies that answer the question "what complex problem and detailed solution can I solve for the worm" will be the digital winners.
From our Connect family to yours, happy holidays!