Next-gen solutions for personal finance management – BAI Banking Strategies

At nearly a quarter of the world’s population, millennials are the largest generation today and poised to inherit more wealth than any other in history. They are also the first generation of digital natives, and this has affected their expectations from banking and financial services.

In one survey, 50 percent of American millennials, as well as more than 40 percent of Gen Z respondents, found saving money very challenging. Despite needing help with managing their personal finances, research shows that millennials are not inclined to ask their banks for advice or, for that matter, even step into a branch. The independence of digital banking is clearly preferred as they seek transparency and control in their financial affairs.

In the past, it would have been impossible to meet such contradictory demands. But now, digital technology – and artificial intelligence, in particular – can empower millennials and Gen Z to make informed decisions so they can save, borrow, and invest better.

The last thing consumers need in today’s environment is high overdraft fees. So it is hardly surprising that some customers are leaving their traditional banks for next-gen, digital providers that have zero overdraft fees. While some banks may not be able to waive overdraft fees, they can recover lost ground by leveraging AI-powered analytical solutions to improve their understanding of customer cash flows and predict when an account is likely to be overdrawn. Based on insight into a customer’s spending pattern and scheduled expenses, banks can offer timely help in managing the account balance better to avoid overdraft charges.

AI can also automate savings with better results. An AI solution can draw up a budget, monitor income, and outgo closely to make sure the customer is sticking to the plan. And millennial and Gen Z consumers can fund a variety of purchases at low to no cost with AI-powered options such as buy now, pay later. AI processes consumer data in real-time to calculate credit risk, thus enabling the merchant to decide the terms of offering instant financing at the point of sale.

Being independent-minded, millennials want to take charge of their financial futures – starting now. But they are not interested in tediously researching various investment options, as they want quick answers.

Based on an individual investor’s goals, risk appetite and investible resources, AI algorithms can evaluate various investment instruments to create a personalized portfolio. Additionally, AI can automatically expand or rebalance the portfolio in response to changing customer contexts and market conditions. The customer has full visibility and control throughout, with the flexibility to intervene whenever required.

Conversational AI has improved far beyond past customer service chatbots and  is finding wide application in personal financial management. For example, banks have launched virtual …….

Source: https://www.bai.org/banking-strategies/article-detail/next-gen-solutions-for-personal-finance-management/

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