By Ray Birch
SCOTTSDALE, Ariz.—If credit unions wonder about the future of branches, it isn’t digital banking that’s that presents the greatest threat or promise—instead, it’s chatbots, says one person.
As 2023 arrives the debate around the future of physical locations remains as vibrant as ever, with some CUs going all in on branches and others getting out of the business altogether. What the new year and future hold for credit unions is being featured in a series in CUToday.info.
But what really deserves attention for numerous reasons, according to Chris Miller, director at Cornerstone Advisors, who told CUToday.info the consulting firm fully expects chatbots will only continue to learn and improve in their service delivery at a faster pace than CU call centers and member service reps, which could spell trouble for branches not too far down the road, at least in their current iteration.
Miller’s observations come at the same time as the debut of ChatGPT, the AI-powered chatbot that lets users type questions using natural language to get incredibly realistic responses.
“Digital delivery, such as mobile banking, will improve, but it has not been good enough today to kill off branches, as a number of people predicted years ago,” said Miller. “Branches won’t die unless digital improves.”
Not Meeting Expectations
Data collected by Cornerstone Advisors indicate digital delivery is not living up to the expectations of many. A recent study from the company reveals 40% of consumers between the ages of 21 and 55 who contacted a person when opening a checking account said they tried to get the information they needed online but couldn’t find it, while 28% said the FI’s website or mobile app didn’t support what they needed to do.
The delivery of services via the digital channel has been a bigger challenge for credit unions than banks, especially given the former’s more limited resources. As CUToday.info has extensively reported, it has been perceived shortcomings in the digital channel that has been the biggest issue separating banks from credit unions in recent years, as cooperatives have fallen behind banks for four consecutive years in the American Consumer Satisfaction Index (ACSI) study.
A spokeperson for the ACSI has told CUToday.info that a big reason for the slide is consumers’ definition of service has changed from a friendly face to a desire for a fast, efficient digital transaction, and banks have been simply managed that shift better than CUs.
In addition, other experts have repeatedly stated that credit unions have too many “friction points” in their digital service delivery, which is a major reason Cornerstone’s Miller believes digital has yet to displace branch delivery.
Chris Miller
“Credit unions aren't leveraging technology properly, or they have processes in place that stunt the growth of digital,” he said.
Miller said credit unions continue to build manual processes into their digital delivery that reduce the performance of those channels in the minds of members.
The ‘Roadblocks’
“Let's take something simple as mobile deposit. Credit unions are going to insert a few different processes they already have in place, such as additional reviews to manage risk, so that transaction is not going to be truly auto approved. There are roadblocks. The process is not instantaneous and therefore consumers don’t get the feeling they can truly trust digital.”
All of that brings the market in early 2023 to the state of chatbots, which are being increasingly relied upon, especially by the bggest banks, but the technology has not reached a level of sophistication that it can truly help consumers in the same way human agents currently do, said Miller.
He added, however, he believes that inflection point will tip soon enough, and that at some point in the the technology will reach the point of being fully functional intelligent digital assistants.
The ‘Wake-up Call’
“I would say chatbots today are a wake-up call for the branch staff. There is such a high rate of staff turnover within branches that the knowledge transfer isn't there,” said Miller, adding that credit union staff tend not to rely on a database to provide members with answers to their questions and instead are more likely to ask a coworker. “Now, you have a chatbot that's able to learn every single thing and interact with clients and learn off those interactions. It essentially becomes a tool that is able to be used over and over and over without any issues.”
As Miller noted, the AI technology behind chatbots learns exponentially, which means the speed of adoption will only accelerate.
For now, Miller pointed out most consumers’ experiences with chatbots to date have been through retail sites and have not generally been satisfying. He noted two of the biggest retailers investing in the technology have been Best Buy and Rakuten.
“Take, for instance, Rakuten, which over Thanksgiving was having issues with their service and giving cash back,” he said. “Anytime anyone used Rakuten’s chat it would ask you the same questions. It would give you some answers, but then when it would ask it for a specific answer it would completely go back to the beginning of the process and everything you answered was thrown out and you had to start over. The maturity of chatbots is not there yet.”
Getting ‘Humanized’
But that won’t be the situation for long, according to Miller, who believes the technology will improve and meet consumer expectations and be largely integrated within the next two to three years.
And what will make chatbots really effective is when they become “humanized.”
“The key differentiator is the member experience,” said Miller. “At the end of the day if there are pain points in the process when it comes to digital, members won’t trust it.”