BRAVE NEW BANK This NerdWallet series delves into what's new in retail banking and what's in it for you. We explore some of the surprising things in store for products, tech and security and look at how they'll affect consumers.
Pretty soon, a robot could be giving you financial advice and reading your emotions.
So-called banking chatbots - artificially intelligent virtual assistants that understand and respond to questions via text or voice-activated technology - emerged in 2016 with the likes of Capital One's Amazon Alexa integration and artificial intelligence developer Kasisto's MyKai.
So far, this first generation of bots mainly reacts to a set of commands or questions , such as relaying account balances and telling you how much you spent on coffee this month.
The new generation of banking chatbots will go a step beyond that by making financial suggestions based on your spending habits and even reacting to your emotions.
"One of the interesting things we're seeing in the industry is the move from reactive to proactive," says Dror Oren, chief product officer of Kasisto, which has partnered with financial companies such as Mastercard and Wells Fargo to build chatbot technology.
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The bots of tomorrow, experts agree, will help users manage their money instead of just answering their questions.
New banking bots like Bank of America's Erica, slated to be deployed to customers this year, could notify you if your spending is higher than usual. Erica could then ask if you want to transfer money from a separate account to your checking account to avoid an overdraft .
USAA's Alexa-integrated AI assistant - currently available as a pilot to the bank's customers - can quickly analyze your typical spending patterns and help you make decisions. Ask if you can spend $200 on shoes, and it'll respond with your typical monthly expenditure on clothes and how much you have left to spend in that category for the month.
Reading your emotions
New chatbots may do more than churn out financial recommendations. They'll be able to "understand" your emotional state and react accordingly.
Type in capital letters or use profanity, and a bot can deduce you're angry and send you to a human service representative, for example.
Clinc, a developer of bot technology for financial institutions, says its technology allows for a "real-time and dynamic changing of personalities based on cues from the conversation," according to CEO Jason Mars. For example, Mars said, Clinc can detect the mood of the user and then "switch personalities to be softer and more suggestive if suitable."
Banking technology experts say this is a logical feature for bots, which may be uniquely capable of getting an accurate reading of consumers' moods.
"People tend to be more open to bots than they are to humans," Oren says, because people know a chatbot can't be offended or retaliate. "We can see if users are really happy with [their banks]."
Banks betting on bots
Bank of America and USAA aren't the only ones with AI assistants in the pipeline. Capital One is piloting a new text-based, gender-neutral bot named Eno slated for release later this year, separate from its Alexa assistant released last year. Wells Fargo is piloting a Kasisto-powered bot that will interact with customers through Facebook Messenger, with no specified release date.
Customers could eventually "speak" with their bank as well, with integration into voice-powered technology like Amazon's Alexa and Google Home. Financial technology company FIS Global announced in June that several undisclosed banking clients were piloting bots the company had built that could respond across both text and voice-driven platforms.
Clinc, the AI provider for USAA, has developed a conversational bot accessible across multiple platforms, according to Mars, the CEO. That means you could start a conversation with your banking bot at home on Alexa, then continue the conversation on your phone through text as you walk out the door.
"Consumers [will eventually be able to] leverage these services in any of these devices, whether it's your mobile device, whether you're sitting in your car, whether you're talking to your refrigerator," says Bipin Sahni, head of research and development at Wells Fargo Innovation Group.
Unlike automated phone messages customers get by calling their bank, the new breed of bots won't rely solely on preset voice commands to operate; ask them almost anything and they'll respond with answers.
Although banking leaders expect this influx of customer data to lead to more personalized and accurate assistance, some customers may be wary. A 2017 survey by Accenture found that 62% of people were comfortable with an AI-powered assistant answering their queries, suggesting there are still a good number of skeptics. Another 90% of people were concerned more generally about identity theft and the security of online financial transactions.
Privacy and security have always been top concerns for consumers around new banking technology, said Ron Shevlin, director for research at banking industry consulting firm Cornerstone Advisors. Consumers were concerned about using electronic bill pay and mobile banking when they first came out, he says. But worries faded as people adopted the technology and were able to use services safely.
"It never persists as a reason for not adopting," he said.
What's more, chatbots are probably going to be more secure than human assistance, says Shevlin, as a large number of security breaches are caused by human error.
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Banks see 'gold rush'
For their part, banks see chatbots as new opportunities to capture more data on customers and adjust their offerings accordingly.
Ken Dodelin, vice president of digital product management at Capital One, says chatbots will give banks unprecedented insight into what customers are thinking, what questions they have and their financial behavior.
Today, he says, "when someone goes to a webpage and they stop using it and call the call center, we don't know exactly what they were trying to do." With a chatbot, "the customer in natural language says exactly what they were trying to do. … That could help inform our roadmap [in] a way that we just haven't had in the past."
Clinc's Mars says delivering a product when customers are looking for it - say, a credit card when people are asking about credit card rates - could potentially bring in more money for banks.
Sahni of Wells Fargo emphasizes the significance of this data that can be captured through chatbots. "Without data, [the chatbot] means nothing," he says. "This is the next gold rush, so to say."
Shevlin, though, is skeptical about chatbots' immediate capabilities. "This stuff isn't going to get any good until there's a lot of data, and it might not ever get a lot of data if it isn't any good," Shevlin says. "We have a chicken-and-egg problem here."
For that reason, Shevlin thinks it will take five to seven years for chatbots to handle most simple interactions between banks and customers. Kasisto's Oren believes a majority of banks will have some sort of chatbot deployed by 2018.
Either way, the robots are coming.
"This is the future of how banks are going to be engaging with customers," Mars says. "It's starting to crack right now."
Amber Murakami-Fester is a staff writer at NerdWallet, a personal finance website. Email: email@example.com
The article Money-Managing Robots Will Know If You're Mad or Glad originally appeared on NerdWallet.