According to a recent study, 33 percent of customers who abandoned a business relationship did so due to a lack of personalization. But artificial intelligence in banking is changing that.
Deployed by major banks including HSBC and Bank of America, AI, and predictive analytics make it easier for banks and loyalty program issuers to determine what rewards consumers will want at any given time and offer those rewards, along with incentives to use their card for future, similar rewards.
What is AI?
If you have not heard the term used before, artificial intelligence is when computer systems or machines are able to perform tasks that normally require human intelligence. These skills include speech recognition, as in the case of the Amazon, Alexa virtual assistant or Apples Siri, decisionmaking, and visual perception, such as facial recognition.
These tasks primarily involve pattern recognition and comparisons of data. Sophisticated marketing software uses AI algorithms for ad retargeting on social media platforms. The software can recognize, from the thousands of users who saw an ad or visited a website, those who are most likely to click an offer.
So where do these skills AI offers come into play in banking and designing better credit card rewards programs?
How AI banking could change what is in your wallet?
Just as social media marketers use ad retargeting to deliver more relevant ads to users, banks and credit card companies can design rewards programs based not just on basic demographic information, but on your past redemption activity and buying behavior.
The banks are already collecting this information- is available within your online accounts and on your statements. But it would take countless hours for human beings to sift through the data, find patterns, and derive logical conclusions from those patterns.
AI makes that kind of hyper-personalization possible, so you get more relevant rewards that you're more likely to use, delivered proactively- before you even realize you want to redeem the rewards you've accrued.
You could have two choices when redeeming rewards in the future:
- Sift through pages of offers to analyze how you can get the most bang for your buck with rewards you'll use or
- Receive relevant rewards suggestions with the best return, delivered directly to your computer screen or mobile device.
Which would you choose?
Hyperpersonalization: the future (and present)
AI needs lots of data to work effectively. Fortunately, the majority of consumers are willing to share personal information if it means improved services or products, according to a digital banking report sponsored by Personetics, a digital banking solutions provider.
HSBC has already rolled out a pilot program that uses AI to deliver more relevant rewards and seeing redemption rates of 70 percent based on the AI generated recommendations. To determine the best rewards, the software analyzes the users purchasing and redemption history.
But the potential of an AI card goes far beyond the typical or expected predictions. While a human being might assume that someone who redeemed their rewards for a flight to Orlando in the past might do so again, AI can aggregate all their past spending habits and recommend other offers that could be an even better fit.
Best credit cards and banks for AI banking
Several of the major banks are already using AI banking for hyper-personalization and improved customer service.
HSBC makes great strides with the AI program
HSBC is on the cutting edge, putting together a Client Intelligence Utility with 10 petabytes of corporate and institutional data from 1.6 million clients.
HSBC's program, so far, is experimental, but it is safe to assume that the company's top tier rewards cards, like the HSBC Cash Rewards Mastercard┬« credit card, will soon employ AI to make the best rewards recommendations if they are not already.
In fact, more targeted rewards choices and hyper-personalization could help make up for the cards relatively modest 1.5% unlimited rewards. If HSBC impresses users with proactive, useful rewards suggestions that make redemption easy and provide more value, it could keep customers using the card long after the first-year introductory rewards have been exhausted.
American Express┬« embraces AI
American Express is known for its high-end rewards and its travel concierge service. The charge card and credit card provider is now incorporating AI into its travel services with the purchase of Mezi, an AI-powered virtual assistant, and Chabot that provides services normally offered by personal shoppers and travel agents.
Right now, Mezis services are offered as a perk to American Express cardholders through a downloadable Smartphone app, AskAmex. Many Amex offers, such as rewards redemption and 2X rewards offered through Amex travel, are not available through AskAmex, yet. But it's not a stretch to think that integration between the programs could be the next step.
For now, cardmembers can AskAmex for the convenience of travel suggestions based on voice queries, and then book through Amex travel using their American Express Gold Card to maximize their points.
Voice and AI will learn and improve
While voice recognition is not necessary for a successful AI card, it helps. Bank of America reports that more people are using Erica through tap and gesture functions, with voice and text being used equally after that.
Voice recognition is still not perfect, and there will be learning on both sides, by people and the machines, before we can have seamless spoken conversations. But the more voice is used by today's AI-powered virtual assistants, the better Erica, Mezi, Siri, Alexa, and all the rest will get at understanding us.
Artificial intelligence banking in the future
In general, the more data AI-powered software can gather, the more effective it will be. Credit card issuers, with a world of consumer data at their fingertips, stand in a strong position to provide their customers with the best options for their lifestyles.
Banks are already using AI to make banking easier and help consumers make the best choices to get out of debt.
Hyperpersonalization, more relevant rewards, and even better choices for bonus points are the future, and the present, of AI-powered credit cards.