Those who master bots will win payments' next battle
Bots and artificial intelligence (AI) are transforming every industry, but the heaviest impact may well be on the financial services industry with many payments use cases.
The financial services industry is naturally ripe for disruption, because it is too important and too inefficient for the status quo to survive.
The modern financial industry is built around human limitations that cause a massive information asymmetry between financial organizations and consumer. Financial organizations are armed with substantial computing capabilities while human users have limited memory, compute and time.
Humans are busy or distracted, they miss payment deadlines, pay extra fees, don’t optimize their investments, etc. Humans are sometimes lazy, they don’t open new accounts just to save or earn a percentage point of extra interest. Financial organizations benefit from sub-optimal human choices and are often geared up to take advantage of human limitations.
Bots will level the playing field. Bots, powered by unlimited compute, memory and time, will deploy the same kind of computing firepower on behalf of the consumer. In the financial arms race between banks and consumers, the consumer is about to get a massive upgrade. Bots will arm the consumer with superpower capabilities and each consumer will be a power-user making optimal financial decisions that earn them more money and save them on payment and service fees, and taxes.
Bots will be proactive, never reactive. This is crucial because today’s financial world revolves around a dizzying array of choices and due dates. Banks and brokers penalize customers that forget to pay bills on time or renew a policy. Bots won’t forget things, they will never miss a deadline. If the user can’t make a payment on time, bots will proactively make alternative arrangements. Either way, bots will take away a huge burden off the consumer’s shoulders.
Still, bots will make it easier to keep track of finances and financial products. The more financial instruments get created, the harder it is for consumers to keep track. Bots will make it easy for consumers to find the right product that is best for them, such as bots that help consumers find the best credit card, bank, mortgage or insurance policy for them. Bots can also help consumers stay on top of their financial history and status. Bots can provide daily or weekly summaries and respond to on-demand queries. Bots will automatically create summaries at tax time.
Bots will also optimize earnings and savings. There are bots that observe financial patterns and automatically moves money from checking to savings account earning the consumer “free” money.
Bots can indeed earn and spend money. Continuously maximizing financial outcomes requires keeping tracking of millions of constantly-changing financial data points to, say, rebalance your portfolio, increase or decrease credit exposure.
Bots will in fact change the face of financial firms. The financial industry’s consumer touch-point is a retail outlet, call center, paper bill and email alert. Tomorrow, the touch-point will be a bot that can text or talk with a human--with extensive personalization.
Over time, the consumer will care more about the “software” layer than the “hardware”; they will care more about the personalized bot than about where the money actually lies. So if your bot decides to move money from one broker to the other, the customer may well be indifferent to it.
Consumers are about to become more rational and smart; and the market is about to become much more efficient. Financial service firms will need to provide more innovation, better pricing, better services and more information. Banks, brokers and insurance providers will need to understand the new dynamics of bots and AI and start reinventing their roles.
It’s obvious that a bot-powered meteor will shortly strike the financial services industry. Some firms will adapt, others will simply perish. It will be survival of the fittest. It’s time for financial firms to start adapting quickly.