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WHITE PAPER

PFM 2.0 Personal Financial Management with Empathy

Ganesh Ramakrishnan VP Enterprise Solutions Architecture FIS Global Banking Solutions

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Welcome to PFM 2.0 ? Personal Finance with Empathy

Digital Banking is no longer a trend. It is the established way. In a 2019 survey of 1,749 customers in four countries, the message is crystal clear ? "Stop Talking Digital, Start Talking Experience". We live in an era of hyper-personalization, and therefore it is the customer experience rather than the channel that will differentiate your financial institution. Banking consumers are increasingly receptive of human-like conversations, provided they can fulfill requests, resolve issues, provide meaningful financial advice, and help the consumer attain their financial goals. In other words, consumers value a contextual engagement that empathizes with them, reflects their current situation, and provides personalized responses and solutions that take their personal context into account.

A current reality is that the majority of Americans struggle with their finances. As with any problem, there is also opportunity (which is where "PFM 2.0" comes into play). Research conducted by the Center for Financial Services Innovation found that 72% of the U.S. population lacks financial health. Figure 1 indicates the extent and ways in which Americans struggle with financial stressors.

1 FISTM Performance Against Customer Expectations (PACE) survey (pace)

2 Center for Financial Services Innovation, From Buzzword to Business Model: How Industry Executives View Financial Health, April 2019.

3 G. Ramakrishnan, U. Akkaraju, 151 ? Conversational Banking, FIS Connect 2018

4 Georgio Andreoli, Guiseppe Bill?, Nicola Meleagri, Accenture Digital, Ready to Talk!, 2017 and Jim Marous, How Chatbots and Voice are Shaping The Future of Banking, The Financial Brand, February 2018

85% of Americans Struggle with Financial Stress

70%

Impacting Happiness

69%

Impacting Aspirations

67%

Impacting Health

61%

Impacting Home Life

51%

Impacting Social Life

Figure 1. How Americans Stuggle with Financial Stress

This situation demands attention. PFM 2.0 will help.

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Characteristics of PFM 2.0

Financial institutions have offered Personal Financial Management (PFM) tools for years. We'll refer to these first generation tools as "PFM 1.0". While the banks and the PFM vendors have made incremental improvements with the PFM tools over time, the adoption rate was relatively low and continues to hover in the low double-digits. This is because PFM 1.0 tools suffer from a fatal flaw ? they require customers to understand complex graphs and charts and do all the legwork themselves. Customers typically lack the time, willingness, and/or the deep financial knowledge needed to make much sense of these tools. What is needed is a solution that understands the customer context, derives meaningful insights, and provides prescriptive and actionable next steps to the customer in a simplified and intuitive manner ? in other words what consumers need is a next generation "PFM 2.0" solution.

Following are some key characteristics and attributes of PFM 2.0:

1. PFM 2.0 solutions are conversational ? To ensure a sustained level of customer engagement and adoption, PFM 2.0 tools integrate Conversational Artificial Intelligence (AI) to PFM.

Conversational AI refers to lightweight AI-powered chatbots that communicate with customers using a familiar text and voicebased interface to enable intelligent two-way conversations. Conversational AI can be very effective for the following reasons:

? Customers Crave Privacy ? Many people want financial advice but are not comfortable letting other people know the true state of their finances (including their account balances, mortgage payments, car loans, indebtedness, and salary). Americans in particular consider money matters to be private, so Conversational AI checks all the boxes for providing privacy within the context of a meaningful human-like interaction.

? Financial Concierge ? Chatbots can also learn, which means they pick up the customer's words and expressions and are not restricted to a pre-programmed script. By mirroring the customer's speech and expression patterns, the bot becomes an effective personal financial concierge that empathizes and advises the customer effectively.

? Ubiquity of Messaging Apps and Voice Assistants ? Messaging with brands and using voice assistants is now commonplace and is embraced by all generations. According to a study by Accenture and The Financial Brand, 63% of customers use messaging apps to talk with brands.

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2. PFM 2.0 solutions are capable of having proactive and intelligent two-way conversations ? Chatbots allow for deep engagement with the customer. In today's environment of an on-the-go and multi-tasking lifestyle, consumers want applications that provide contextual answers to their questions and can carry on an intelligent conversation. It is no longer sufficient to provide a prescriptive set of menu-driven capabilities, where users who have questions outside of the menu selections must talk to a banker who may or may not be able to help.

Here is an example of how a PFM 2.0 conversational chatbot converses with a customer named Ken: Ken is a married man and a father. He is very worried about his upcoming credit card bill and other payments. He gets a proactive alert on his mobile phone, and as he taps it to get the details, an intelligent bot on his mobile app proactively begins a conversation with him:

Bot (to Ken): Hello Ken. Your airline credit card bill is due on the 10th and your car insurance payment is due on the 12th.

Ken (to Bot): What is the amount due on my airline credit card?

Bot: The amount due is $1,340. The minimum payment due is $25.

Ken: OK, pay $25 for the airline credit card bill.

Bot: Guess what! You can pay up to $1,000 this month without affecting any of your regular spending. Do you want to do that?

Ken: Hmm sure!

Bot: Please confirm I can pay $1,000?

Ken: Yes please.

Bot: Done! You have reduced your outstanding credit card balance by 5%. Way to go Ken!

This example shows how the Conversational AI chatbot reached out to customer Ken proactively. When Ken assumed that he would only have enough money in his account to pay the minimum due amount, the bot was able to quickly guide him to the amount he could actually pay without disrupting other financial activities. This required a comprehensive understanding of Ken's financial habits (including his income, spending, and investment patterns), and then providing contextual and valuable financial advice. This deeper engagement promotes Ken's loyalty to the bank and helps to make him a fervent advocate for the bank to his friends and family.

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The 2019 PACE survey revealed that a staggering 75% of young millennials chose their bank due to a referral (primarily from a family member). A "key takeaway" from the 2019 PACE findings shows the importance of having customers become advocates for your bank:5

5 PACE Findings 2019 ? US Insights (pace)

KEY TAKEAWAY ? Tap Your Existing, Older Customers

Leverage existing customers similar-aged peers and older parents and family members to serve as influencers to win over this emerging generation of customers via recommendations, which may be relationship- or offer-driven. As more young millennials open accounts, encourage and incentivize them to share their banking experience within their social network. Key to this, however, is offering digital convenience and intuitive design (i.e., an uncomplicated user experience) worthy of earning such a coveted recommendation.

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