The economy is facing massive disruptions: inflation, great resignation, and possible recession, among others. This has driven customers to switch financial institutions at a click of a button, looking for the ones that provide them the most benefits and help with their financial health.
However, what are they truly needing? What can these financial institutions do in order to meet their customers’ expectations?
BOND.AI, a “human-centered” artificial intelligence (AI) firm, recently announced the creation of The BOND Network, a network of financial institutions and employers for truly interconnected finance. However, what does this mean and what’s its purpose?
Uday Akkaraju, CEO of BOND.AI, claims that this network is the next revolution in embedded finance. This will provide the API-driven collective of financial institutions and employers with an embedded-banking platform to access tools, products, and services not necessarily available in the current technological and core-centric environment.
Our discussion with Uday Akkaraju is shared below.
Crowdfund Insider: The economy is facing massive disruptions: Inflation, great resignation, and possible recession driving customers to switch financial institutions, but what are customers genuinely needing?
Uday Akkaraju: The last part of your question—what our customers genuinely need—is the biggest mystery right now. The data speaks for itself. Take Walmart and Target, for example. In the last quarter, they missed customer expectations—by a lot.
Their inventory increased by 43% because the goods they expected consumers to need did not match their reality. When you think about these US retailer giants, you think, okay, these guys have been doing this forever—they know the market trends. Brands, not even the biggest brands, know what customers need today. They still struggle to forecast and meet consumer demand.
It’s a bizarre situation we are in right now. We cannot call the current circumstances a recession because we cannot compare it to a previous era—the pandemic has changed everything.
When a recession happens, consumer spending typically weakens, but today, consumer spending has risen. And when you’re talking about the great resignation and consequent salary loss versus pre-pandemic levels, the credit card debt is less. Inflation is high, and employees are resigning, yet consumer spending is promising.
Crowdfund Insider: What can these retailers and financial institutions do to meet customers’ expectations?
Uday Akkaraju: It goes back to that fundamental thing: Data. But not how you think.
We always say we can use the data to predict what the consumers need… That has failed.
All these financial institutions with years of data have tried to predict consumer needs, but it doesn’t happen. They are missing a vital touch point with their user.
Imagine my kid is 18, around the age many will go to college. Perhaps, the bank knows this and sends me a student loan offer. However, my son has something else in mind. He might be a professional athlete, right? With this knowledge, banks can supply alternative, relevant options—but there is no way of communicating it. Would you respond to a student loan offer by telling your bank that your son wants to be a sports champion?
Data analysis requires a validation loop with customers. And to get that justified sequence, you need to have a channel to speak with them, which many financial institutions lack. They have an excellent, one-sided digital platform rather than two-way communication. This validation process leads to the success of machine learning models and algorithms—the last pieces of the puzzle.
Gaining validation is a two-pronged process: First, you need a channel. Second, customers need to understand their value in sharing additional information—their financial health.
Crowdfund Insider: How can individuals achieve and maintain financial health?
Uday Akkaraju: The popular answer to this is: You need to budget to plan.
In this generation, nobody has the time to make a plan because everything is happening in real-time. We expect instant responses, deliveries, and results from the Amazons, retailers, and banks—we’re living at the speed of light.
At BOND.AI, we’re theorizing this living pace to understand what individuals need to maintain financial health. Our solution? We call it cognitive speed bumps. Habits need some kind of a check. If you’re going 100 mph on a 50 mph road, you have the speed bumps that keep your speed relative.
Banking customers need speed bumps. That ‘cognitive bump’ can be as simple as talking once a month to a financial advisor, your banker, or even having a bot that you use to validate: Okay, can I do this? Can I not do this? Having a regular open conversation is the future. Banks understand their consumers’ issues to create and customize products, while customers learn the available options.
I spoke to one of my friend’s brothers, who is around 25 years old. He does not know how to use Excel. Many generations coming after us, the younger ones, have not used these tools. Instead, they use technology platforms and dashboards to express data points. The banking environment has seen massive disruption in the past few years—and cognitive speed bumps are essential in this fast-growing industry. Technology provides innovative solutions for customers, and it’s not difficult to inform them with the same means: Digital chatbot financial advisors, apps, and notifications.
Crowdfund Insider: How does the synergy between financial institutions and employers impact consumers’ lives and financial health?
Uday Akkaraju: This synergy is where embedded finance comes in. Mainly because half of our lives we spend sleeping, and the other half—on average 20.78% of our time—most likely, is with our employer. So if that is the importance of our time, our employers must take care of us and our financial necessities.
Banks are becoming like utility companies, such as power companies or telephone companies. Always in the background. In contrast, employers need to come to the forefront, adopt embedded financial banking tools, and implement them in their ecosystem to take care of their employees.
I was at a meeting last week at a local bank. All their employees receive 1% interest on any loan product, from a mortgage to an auto loan. It’s a great benefit, especially in the face of inflation.
Another company, Carti, provides a financial advisor once a month. It’s like when you were in college. You have a monthly session scheduled with your advisor. And if you don’t go, you don’t get credits. They implemented a system like that at that facility. When the financial advisor comes in, you must book your slot to meet them and redeem the credit.
And because of that commitment, all their employees are financially healthy.
Employers have to think beyond a paycheck; a 401(k) plan alone won’t help. They should implement these kinds of embedded finance incentives.
Crowdfund Insider: What is most important for banks to focus on in 2022?
Uday Akkaraju: We spoke about how data predictions must go alongside data validation and that two-way communication with the consumer has to be there. By creating that loop, banks can eliminate many costs, even in the call centers. Because right now, customers cannot reach their banks, airlines, hotels, or general call centers. As a result, 70.4% of customers shifted to alternative brands due to poor customer care services.
A preference for live chat is now comparable to phones. At the bank I use, I cannot talk to a customer service executive for at least three hours. They need to have an alternative two-way communication loop. You cannot do anything without that banking service, including embedded finance or crypto.
So once the data predictions are validated, banks must focus on the application programming interface (APIs). Financial institutions are entering into partnerships with fintechs or other non-financial institution brands to provide innovative financial assistance to the partner’s client base via user-friendly applications.
To better utilize customer data for a more human-centric consumer experience, banks must now expand on this B2B2C paradigm and enable banking as a service (BaaS). Banks should utilize digital resources, including AI-powered chatbots, to gather and produce data analytics and understand customer needs and behavior better. When it enables businesses to customize and improve their financial service offerings, this is when BaaS is at its best.
And the third one is, of course, crypto. Whether banks are ready or not, customers invest their salaries in crypto exchange platforms, find higher interest rates, and make passive income through lending, overnight. The market is hot, and banks can benefit too with smart parameters.
Customer data validation loop, robust APIs, and crypto offerings enlightened with banks’ expertise—these are the three critical focuses for financial institutions looking forward.