By Ray Birch
ST. PETERSBURG, Fla.—It’s time credit unions consider how artificial intelligence (AI) can help them prescribe the right financial services for members, asserts one analyst.
“Imagine that every time a member walks into the branch you know what savings or loan product they really need,” said Brian Scott, SVP of sales and solutions consulting at PSCU. “You can then have an intelligent conversation with them about why they should invest or take out a loan, because AI quickly analyzes member data and tells you what they need next.”
Scott said that type of service is much more effective at driving loyalty and deeper relationships than having a conversation about a member’s kids.
Targeting Needs
“Members will begin to say, ‘I love going to my credit union because they let me know what I need’,” said Scott.
Scott said that data analytics today can help CUs target members’ needs, but at some point in the process a person has to decipher the data and make the final decision.
“You use AI to predict needs and prescribe a solution—imagine having a computer that does that for each of your members on the spot every day,” said Scott. “That is powerful.”
Scott added that kind of service works well with mobile applications to help members on the fly, when they are making purchases.
“Say you walk into Trader Joe’s and your phone is on and your geo-location is on and your phone is connected to the credit union’s mobile banking app,” said Scott. “The AI solution knows your spending history, knows you spend $300 every time you go to Trader Joe’s, and sees you only have $60 in your checking account.”
Scott said that the AI solution can then recommend transferring money to checking from savings, or taking out an emergency small-dollar loan.
“AI is prescribing a solution even before you go to check out,” said Scott.
A Step Ahead
Today, credit unions can do something similar on their own, said Scott, by seeing a member was declined at the grocery store and then reaching out with a solution afterward, like a money transfer.
“With prescriptive AI you are a step ahead of that, and it will make members feel like, ‘Hey, my credit union really knows me,’” said Scott.
Scott suggested that prescriptive AI can not only help credit unions assist members and spot cross-sale opportunities, it can also help members stay out of financial trouble.
He gave the example of two members who at a glance look the same—same age, same credit score, same card balance.
“But when you begin to layer on more pieces of information, you can see they are not the same,” said Scott. “Both members pay their credit card bill on time, but Member A pays more than the minimum each time, while Member B pays only what he has to.”
Add on their card usage histories and the picture changes even more, said Scott.
Member A uses his card for restaurants, electronics and auto parts, while Member B uses his card to pay rent, buy groceries and gas.
“So now looking at all of that data, we would treat what we first thought were two identical members very differently,” explained Scott. “For Member A we might extend his credit line, and for Member B we might offer financial counseling.”
Scott emphasized again that AI is a very powerful tool when used this way, to make fast, accurate decisions about member needs based on layers of data.
He said it could even be used to make suggestions about retirement based on a member’s shopping habits.
“If someone spends $400 at the grocery store every month, AI could suggest being a little more thrifty, spending $20 less each time and putting that money into savings, and explain how the money could add up over the years and help the person retire three years earlier,” said Scott. “It’s about using prescriptive AI to help members be more successful financially.”
CU Advantage Threatened?
Scott is confident that all financial institutions will be using AI in this manner within five years.
“The largest banks are starting to dabble in it,” he said, pointing to online bank Moven as another leader in the space.
If banks begin providing more personalized service through prescriptive AI, does that threaten the service advantage CUs hold over banks?
Scott is not sure, but he advised credit unions to begin evaluating prescriptive AI.
“Again, this is not really happening yet. But can banks roll this out faster and sooner than credit unions? Sure. They have tons of money. So it is important for credit unions to begin thinking about this. There is incredible value when someone says, ‘My credit union not only knows me but really understands me.’ If you really understand someone and their financial journey in life, and understand the right things to prescribe for them at the right times, that’s huge.”