How BankMobile Uses Artificial Intelligence to Streamline the Experience

A young mobile-first bank finds that overcoming AI risk worries brings improvements in retail banking service, better consumer lending performance, and the potential for improvements and savings in operational costs. Leader Luvleen Sidhu says more financial institutions should follow her bank's example.

It’s ten years since Venmo was founded, and global adoption of digital payments continues to scale rapidly, with $62 billion processed in 2018. We are continuing to see changes in consumer behavior, particularly how consumers work with their financial institutions. We have witnessed incredible shifts to digital, massive mobile adoption, some enthusiasm for digital wallets, and also a growing move from traditional to digital lending.

We all know about the retail apocalypse, but this changing consumer behavior is also impacting the financial sector. Banks and credit unions are undergoing a massive reboot.

My institution, BankMobile, differs from most others. Completely digital, we offer a mobile-based low-fee checking account, aimed at helping the underbanked, Millennials and middle-income Americans have an affordable, effortless and financially empowering banking experience. Founded in 2015, we do not struggle with legacy technical systems, or outdated infrastructure. And this has allowed us to explore new technologies, notably investing heavily in artificial intelligence (AI).

Role of Artificial Intelligence in Bank of the Future

The shrill warnings about AI seem extreme, another backlash directed against a disruptive technology. When streaming video came on the scene, there was an equally vocal uproar. From our vantage point, we see benefits for banking and consumers in AI, not risks.

AI has the potential to transform banks and credit unions for the coming decade, and those that do not embrace this rapidly evolving technology will risk falling farther behind. The impact of AI will be far-ranging across customer experience, operations and credit underwriting.

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AI Will Transform the Customer Experience

At BankMobile, we are particularly excited about the rise of digital-first services, those that make suggestions for new services, platforms and offerings, and those that empower customers, like our own.

Previous generations wanted to pick up the phone and speak to a bank or credit union representative. But younger generations are less inclined to function this way. They live on their mobile devices, even sleeping with their phones.

Bank of America’s much publicized chatbot Erica is making waves. Conversational AI is the future. By some estimates, virtual agents can scale upwards to 1.5-2 million-plus customer queries daily, according to a report by Citi Global Perspectives and Solutions.

In our global society, natural language processing also has huge potential. We can process massive amounts of feedback at scale, and in various languages, to understand the voice of the customer and then take action in real-time. Every business now has a way to process consumer feedback through customer experience platforms, survey tools, or social media monitoring systems.

People are talking, and more financial institutions will be listening. At BankMobile, we use AI to create targeted campaigns for our consumers, proactively highlighting their future financial needs. Through AI, we also identify fraud, and created a process for informing consumers that enhances their experience and appreciation of our services.

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AI Will Create Operational Efficiencies

Operational efficiencies through AI will reduce costs and increase speed for a variety of business tasks.

On the front office side, we are seeing greater adoption of consumer-facing tools that minimize friction, but on the back office side, we are seeing massive efficiencies for compliance processes.

The reality is that AI-driven automation in the realm of regulation and compliance can increase speed, increase accuracy and provide better oversight for processing the large amounts of data necessary for the regulatory function.

For example, AI could detect employees opening fake accounts by finding multiple accounts from the same email address or IP address. In addition, AI could strengthen “Know Your Customer” compliance across both identity verification as well as any potential money laundering or other illegal activities. All of the data needed for compliance, and for retention, can be processed more quickly and analyzed in real-time for any anomalies.

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AI Will Revolutionize Credit Underwriting

Traditional methods of determining a borrower’s creditworthiness are outdated, in our view. The FICO credit score is three decades old, predating the creation of machine learning and AI. Some research indicates that the FICO credit score propagates bias and perpetuates the “wealth gap.”

It is time for a new approach. There are more accurate ways of measuring a borrower’s likelihood to repay a debt beyond credit score, which is inherently backwards-looking. A wave of innovation has occurred in this space, with massive potential to disrupt traditional lending models. By taking into account more complex variables, and a greater number of them, an AI model is better able to detect shifts in individual behavior and find borrowers who are best able to repay.

BankMobile chose to embrace AI for credit underwriting and has partnered with Upstart, an AI lending startup in Silicon Valley. BankMobile is an early adopter of a new approach that leverages traditional lending data alongside alternative lending data to make more accurate lending decisions.

These consumer loans, in an effort that launched in December 2017, are outperforming traditional models, with lower loss rates, increased access to credit and increased approval rates. As a result, we can pass the savings to borrowers in the form of lower interest rates.

AI Fulfills the Need for Speed

Uniting all of these various areas is speed. We know that consumers love the speed at which our bank operates, whether responding to a customer question or approving them for a loan in approximately 24 hours.

It boggles the mind that anyone could have ever waited 26 days for anything, let alone something as important as funding! All of the developments around AI only serve to remind us that many of our traditional banks and credit unions are woefully behind. It is time to let go of irrational fears, embrace AI and move into the future alongside our customers.

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