Autonomous finance, or as some say, “self-driving” finance, can be designed and trained to perform many financial tasks from automating savings to running a personal stock portfolio to providing spending alerts and budgeting advice. It’s being used by both fintech startups and traditional banking institutions.
But there’s one thing this evolving financial technology can’t do: Sell itself. The reaction of the average American to the question, “Are you interested in autonomous finance?” would likely be a blank stare.
Forrester defines autonomous finance as “algorithm-driven services that make financial decisions and/or take action on a customer’s behalf.” Peter Wannemacher, Principal Analyst, says the concept is simple, but marketing the service remains challenging.
“The technology that underpins autonomous finance has matured over the past five years,” says Wannemacher in an interview with The Financial Brand, “but the ability to convey the value of autonomous finance really hasn’t improved much at all in that time.”
Forrester predicts that even though consumers may not know precisely what is going on inside autonomous financial services, a growing number of people will use these products. They are a specialty of startups, such as Digit, which automates savings and more, but also something that larger banks such as Wells Fargo and Huntington Bank have been adopting. Smaller financial institutions can also take part in this trend by working with vendors, according to Wannemacher.
Marketers, Add This to Your Do-List:
Catching up on the marketing curve will be a matter of when, not if. Autonomous finance has become a real thing.
“Any firm aiming to provide these services will need to articulate what the value proposition is and position the company or products as the go-to brand for this type of service. That takes marketing talent,” states a Forrester report, “What You Need to Thrive in Autonomous Finance.” To drive growth through autonomous finance, firms need to either have marketing resources of their own or find a strong partner, the report states.
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What People Are Really Buying When They Choose Autonomous Finance
In one sense, Wannemacher continues, the appeal for autonomous finance lies not in the mechanism, but in the results. An old adage about selling maintains that no one buys drill bits because they want drill bits, but because they want holes.
“No financial institution that I know of is dealing with overwhelming demand for ‘autonomous finance’,” the analyst says.
“It’s difficult articulating the value proposition of the service itself and articulating the ‘how’ to some degree,” Wannemacher says. “Customers don’t need to have an MIT-level understanding of what counts as an algorithm and what doesn’t. But someone has to explain to them the difference between what your institution is doing and what you customers could be getting from other providers.”
Wannemacher says the value proposition for autonomous finance, in plain English, comes down to “Don’t make me work too hard and do make my financial outcomes better.”
“That’s a great double appeal,” says Wannemacher. “No one needs to get out there in the market to get consumers to think, ‘Hmm. I could really use better financial outcomes.’ But you’ve got to show them how autonomous service can make their finances easier to handle, get them better returns on their investments, and help them save more money.”
While Functions May Be Identical, Marketing Challenges Differs
“Traditional banks must realize that they have a harder job when it comes to marketing autonomous finance than a little startup does,” says Wannemacher.
A startup is selling one thing, which gives it a built-in focus. Not so for traditional banks and credit unions.. They must manage a balance.
“No bank is abandoning all of their other products in favor of autonomous finance. So they have to convey the benefits of autonomous finance in the context of a wider product portfolio. They come into this with some big advantages like scale and brand awareness. But that brand awareness concerns them as classic financial institutions, not as providers of autonomous financial services.”
— Peter Wannemacher, Forrester
For community banking institutions, marketing autonomous finance is an even more delicate balance, given that it’s likely they will offer a vendor-supplied e option. “Their role is front and center with the consumer and especially with local businesses,” says Wannemacher.
“That local connection will continue to be important,” the analyst explains. “So they’re not going to just send their customers off to deal with some app. They will want their institution to continue to play a role.”
Wannemacher says the types of autonomous finance that institutions of different sizes will engage in vary by their size as well. Larger banks will be able to invest in proprietary algorithms that will issue recommendations and advice in a broad range of needs. He suggests that community banks may opt for narrower white-label solutions, such as a robo advisor to help consumers manage student loan debt.
“So their paths will not only be different in scale,” says Wannemacher, “but also in form.”
How Much Appetite Do Americans Have for Autonomous Finance?
As noted earlier the average American is unlikely to have a clue what “autonomous finance” is, but that belies the interest that Wannemacher believes is growing.
“American consumers tend to lag in adoption of some financial services technologies, for various reasons,” says Wannemacher. “Take ‘chip and PIN.’ Americans were swiping magnetic strips long after the rest of the world had abandoned them.”
He suggests that some U.S. financial institutions are in no hurry to implement autonomous finance, because they are enjoying strong results right now. But he indicates that this may be short-sighted.
Wannemacher believes the latent demand for autonomous finance is strong, especially so when it is broadened to include embedded finance, which typically operates in the background but in end-to-end service, and financial involvement with the Internet of Things. One example of embedded finance is online point of sale availability of buy now, pay later lending insider the ordering process.
Here’s Some Homework for You:
Forrester’s Wannemacher recommends that marketers and others involved in product design look at some of the autonomous services already available, and open their own accounts for a hands-on experience. Specifically, he suggests trying out Digit, Wealthfront and Betterment.
This would be a good way to prepare “for a world where algorithm-driven systems make decisions on people’s behalf and take action on those decision on their behalf.”
One important understanding that Wannemacher says will be reached by first-hand experience is the difference between autonomous finance recommendations versus executions on them. He says today’s autonomous services typically seek permission before executing on recommendations, though that permission may be granted up front, rather than transaction by transaction. Understanding nuances like that will be critical to intelligently marketing such accounts.
How Nonbanks Describe the Autonomous Finance Experience
For Wannemacher the jury is still out on how best to describe autonomous finance in consumer friendly terms. As a parallel, he notes that no one would have thought, years ago, that a term like “streaming,” which has its roots in technological speech, would become a term consumers freely use. What they come to call autonomous finance remains to be seen.
Looking at marketing language today:
- Wealthfront speaks in terms like “upgrade to effortless banking” and ” Automate your finances. Optimize your money across spending, savings, and investments — effortlessly.”
- Betterment says “We put the robots to work for you, with automated tools and strategies that help unlock your money’s potential.”
- Digit says, “Take the worry out of your money: You don’t have to think about saving or investing money anymore. Digit does it all for you.” It also states, “We handle the hard stuff: Digit uses machine learning and financial best practices to calculate smart amounts to save and invest each day.”
- Douugh calls itself “Your money on autopilot.”
- Chip, a U.K. app, quotes a customer this way: “Amazing app changed my life! I love this app! I was very skeptical about letting a robot handle my finances, but it does a better job than I could ever do!”