Recently I received an email from American Express saying “It looks like you’ll be traveling out of the country soon and here are the things you should do.” My first response was, “How did they know that?”, but then I realized I had paid for my flight with American Express. It hit me like a bolt from the blue: My credit card company knows a lot about me, perhaps more than I realize, about my travel, spending habits, etc.
They knew what date I was leaving, the date of return, if I was flying first class on in the back. They knew if I had rented a car, booked a hotel room, or used AirBnB. They also know what I spend each month on restaurants and entertainment, Netflex and cable, phone, gas, and all my business expenses. They know what my total expenditures are each month. A couple of times when I’ve run up a large bill, I’ve received an email asking if I would like to get a business loan or if I would like an “extended payment option”.
What gets even scarier is my Kroger card. Kroger knows what I eat, what I drink, and what I take when I eat too much or drink too much. They know what I eat for breakfast, lunch, appetizers, and dinner. They know what kind of steaks I like, what wine I drink, what medications I take, whether I have athletes feet, jock itch, smelly arm pits, toe fungus, or bad breath. What I take to go to sleep and what I need to wake up. It doesn’t take long for a smart marketer to know what I need or want and what I will pay to get it. Extremely valuable information.
As I pondered this, I realized that banks from Wall Street to Main Street are privy to a wealth of information about their clients. How do they know so much, so fast?
The answer is simple: Artificial Intelligence, or AI.
For many of us, our knowledge of AI is limited to the film from a few years back starring Bruce Willis and Haley Joel Osment, The Sixth Sense.
But while the fintech world seems somewhat enamored with the roller coaster ride that is bitcoin, the rapid response from my credit card company, enabled by artificial intelligence, tells me that AI demands more thoughtful consideration.
Simply put: AI is the wave of the future.
For the skeptics, consider The Motley Fool – an independent investment news service based in Alexandria, Va. Everyone it seems, from Bill Gates to Warren Buffet to Jeff Bezos believes that AI will transform every economic sector. Forbes has reported as much.
Rex Moore, senior technology analyst at The Motley Fool, has covered tech trends for nearly two decades. Moore says the AI trend is “unlike anything I’ve ever seen.” Moore reports the technology is already at work, in helping discover potential treatments for Ebola, Multiple Sclerosis and certain types of cancer.
And as in my experience, banks and credit card companies are using AI to monitor spending habits and red flag potentially-fraudulent transactions.
The Motley Fool reported that one insider at Google called AI “the new electricity.”
“Just as 100 years ago electricity transformed industry after industry, AI will now do the same.”
Some say this burgeoning tech could be worth “35 Amazons.”
So, what does this mean from a community banking perspective?
First, let’s be clear, AI will not replace the human element in banking anytime soon. It will simply enable human bankers to work more effectively and efficiently. AI will enable banks to speed data analytics –good news for customers and shareholders.
In practical terms, it can mean greater security. With the growing sophistication of cybercrime, banks need to move their AI capabilities forward to meet the threat. If American Express knows I’m out of the country, they can prevent my card from being used in LaFayette, Alabama or New York City.
And from a marketing perspective, as in my case with the plane ticket, AI will enable community banks to individualize services to customers. Instead of bombarding depositors with information on services they don’t want or need, data can be used to streamline the process and better target customer interest. The result is the ability for a bank to create contextual and personalized messages and communication and offer advice based on insights from a variety of places and data points.
RBC, the Royal Bank of Canada –North America’s sixth-largest bank –recently announced that it was opening an Al lab.
Last year witnessed an explosion in AI and banking seminars and training. These are splendid opportunities to learn how AI figures into the present and future of banking. As we noted in an earlier post about how vital it is to learn from non-traditional players in fintech, failure to respond to the AI revolution is perilous for community banks and credit unions.
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