Financial Literacy in the era of Digital Assistants

Financial literacy at its core is a simple concept of understanding how money works. How money is made, managed, saved, invested and also expensed, allowing people to handle their money better. Surveys show that most financial consumers are unable to choose and manage a credit card efficiently, and lack of financial education to get out of the debt cycle trap. Alarmingly,  this is just the tip of the iceberg that points to a much bigger problem that dominates society.

Here are a few statistics to put things in context. 8 out of every 10 worker in America lives from one paycheck to the next. Another one, 4 out of 10 don’t have any emergency savings. This is true not only for the lower-income groups but also for households with over $100,000 in annual income. All of this whilst, the unemployment rate is at a record low.

This is the survey result from Bankrate where they asked respondents, how they would deal with an emergency that cost $1000

Over the years schools have introduced financial education as a part of their curriculum. But financial education can’t be limited to a classroom, it needs to happen across various life stages, like when you buy a car or a house, or during retirement, or when you save to send your children to college.

The best way to offer this financial education is through the banking digital assistant. Digital assistants are present across every channel where the customer is, it can offer financial advice in a non-intrusive way.

Also read: interface Powered Digital Assistant Increases Customer Acquisition by 5x for a Texas-Based Credit Union

Financial institutions have all the transactional data about their customers. They can glean a lot of intelligence out of the data in real-time. The AI-enabled digital assistant can read the data, process and understand patterns, and personalize the suggestions to help customers reach financial goals. All this can be done as a one-to-one conversation, whereby the customer never feels vulnerable. For example, the AI-enabled digital assistant can offer savings advice to its customers in the following manner, “Hi Jane, I see you’re paying a loan with XYZ bank. If you refinance your car with us, we could save you $100 per month, and you can put that towards your savings goals.”

This is not awkward for the member, it’s a personalized suggestion. Moreover its non-intrusive, because the customer is already logged on to their account. They are essentially getting the right information at the right time. Information that is actionable and puts them in a better financial position. By letting the customers take the decisions, financial institutions can empower them.

In the long run from the financial institutions’ perspective as well, this would be beneficial. According to a statistic, banks can generate as much as $300 million in profits on every $100 billion in assets by implementing AI software that will bring their clients financial wellness. It will ensure customer loyalty and stickiness to the product. It could also act as a key differentiating factor between Financial institutions that offer personalized advice versus those that don’t.

In conclusion, financial literacy through digital assistants has ramifications beyond just educating customers. It can have a positive compounding effect on customer savings, bank profits, customer retention, and brand building. It is a clear win for all parties.

Also Read: 13 REASONS WHY your bank needs AI chatbot

AI Transformation