Future financial services will be built around human behaviour

While speaking at AMP’s Amplify Festival in Sydney this week, the CEO of fintech startup Moven, Brett King, said that financial services of the future — whether they be in the form of mobile applications or integrations with virtual reality/augmented reality devices and voice-activated assistants — will be designed around human behaviour.

According to the CEO, financial technologies around the world are progressively “removing the friction of [physical] interactions”. They are being designed around “low latency contextual experiences” and are personalised to the user based on behavioural patterns and individual needs.

“If you look at financial health or wellbeing… the tools you see emerging here are changing people’s behaviour when it comes to savings rather than promoting a savings account,” the Moven CEO said.

“This is an important shift because we’re working on where a value store fits in your life and we’re changing your behaviour rather than using the product as an artefact to encourage savings.”

Using Moven as an example, the CEO said that the application uses real-time contextual insights to encourage savings, discourage impulsive purchases and provide emergency credit when the user is low in funds.

“You can get a pop-up message on your watch or your smartphone [saying]: ‘Hey, you’re $200 below your typical spend this month; that’s great. Why don’t you save some of that money? How much would you like to save today? $50, $100 or $200?’,” Mr King said.

“I can tell you what time of the day and what day of the week is the best time to message a customer to get them to save money. That’s the beauty of design on a contextual basis.”

The futurist envisions a future where the customer can walk into any store and their mobile or wearable device will alert them if their bank account is low in funds and proactively ask if they’d like to borrow credit.

“As you walk in the store in the future, you will get a message saying: ‘We know you normally spend $300 when you go shopping at Safeway. You’ve only got $300 in your account today. Can we give you the extra $100 to complete your grocery shopping? The fee for this is $3.50’. You don’t need a credit card. You don’t need an application form,” Mr King said.

To manage risk, he noted that if the customer has a high-risk profile, then they would not get this message.

“That’s how we’ll manage risk. But from a behavioural and experiential [perspective], this is far better for a customer than applying for a piece of plastic,” Mr King said.

According to the Moven CEO, micro-investing apps such as Raiz (previously Acorns) allow users to invest incremental amounts (such as the change from daily purchases) into diversified portfolios.

“These [products] are [significantly] more effective than using an interest rate to convert customers to a new product — and they’re obviously more mass market-relatable,” Mr King said.

He further argued that customers are less curious about a bank’s credit card offer or the annual percentage rate on a savings account than they are about simple things like how much they can spend at a restaurant. Presenting key pieces of information in a simple format is more likely to resonate with customers as they get accustomed to digital financial services, according to Mr King.

“We think the most valuable piece of advice that you can give your customer is answering the question: ‘Can I afford to go out for dinner tonight?’ or ‘Can I afford to go to the movies on the weekend?’ or ‘Can I afford to go to the pub with the guys on Friday night?’. That is the core advice that we’re going to want from our bank account value store in the future.”

The CEO also spoke about the Industrial and Commercial Bank of China’s robo-adviser product, called AI Investment, which analyses stock and bond markets using an “intelligent investment model”, taking into account the user’s chosen investment period and risk level, and recommends fund portfolios to purchase or how they should adjust their portfolio without a human in the loop.

“They have actually removed the requirement to do risk profile questionnaires for portfolio management entirely. This [product] learns over time your investment portfolio and coaches you based on your behaviour to stay within your risk profile,” Mr King noted.

“How long before this really drives the way we think about risk for our customers? It turns out that there’s a lot of manipulation that goes on with risk because what a customer will do in the meeting with their adviser is say: ‘I really want to invest in this’, and the adviser will say: ‘But your risk profile says you’re a moderate conservative investor, not an aggressive investor, [so] maybe you should change this answer on this question?’

“When you can do it on a behavioural basis, you get much more accurate portfolio management that fits the customer’s behaviour.”

[Related: Universal banking will be ‘broken apart’ by fintechs, says CEO]