Managing personal finances
For millennial and Gen Z customers, artificial intelligence can create a budget and closely monitor income and spending to ensure they keep to their plan.
The millennial generation, which makes up about a quarter of the global population, is now the largest generation in history and is expected to inherit the most wealth. Their expectations for banking and financial services have changed as a result of being the first generation to be born into the digital age.
In a survey, more than 40% of Gen Z respondents and 50% of American millennials said conserving money was very difficult. Despite the fact that they require assistance managing their personal money, research reveals that millennials are reluctant to seek counsel from their banks or even visit a branch. They definitely prefer the independence of digital banking because they want to be in control of and transparent about their finances.
Previously, it would not have been able to satisfy such conflicting expectations. However, modern digital technologies, particularly artificial intelligence, can help Gen Z and millennials make better financial decisions so they can borrow, save, and invest.
High overdraft fees are the last thing today's consumers need. Therefore, it should come as no surprise that some clients are switching from traditional banks to next-generation, digital service providers that have no overdraft fees.
Even while some banks might not be able to waive overdraft fees, they can make up ground by using AI-powered analytical solutions to better understand consumer cash flows and anticipate when an account is likely to go overdrawn. Banks can provide timely assistance in managing the account balance more effectively to prevent overdraft fees based on knowledge of a customer's spending habits and planned expenses.
AI can automate budgeting more effectively. To ensure that the client is adhering to the plan, an AI solution may create a budget and closely track income and outlays. Additionally, Gen Z and millennial shoppers can finance a range of items for little to nothing thanks to AI-powered features like buy now, pay later. AI analyses customer information in real-time to determine credit risk, allowing the retailer to choose the conditions of providing rapid financing at the point of sale.
Because they are self-sufficient, millennials want to take control of their financial prospects now. However, they expect rapid answers and are not interested in spending hours exploring different investing choices.
AI algorithms can assess different investment instruments to develop a customised portfolio based on an investor's goals, risk tolerance, and investable resources. As consumer situations and market conditions change, AI can also automatically increase or rebalance the portfolio. The customer gets complete visibility and control throughout and the freedom to take action as needed.
AI in personal financial management
The use of conversational AI in personal financial management has significantly advanced past the capabilities of previous customer care chatbots. For instance, banks have introduced virtual assistants that can handle complex questions, even provide individualised support, and monitor fraud.
The cutting-edge Gen Zers, who make up the next generation, are just beginning to enter adulthood and the workforce, and they are primarily interested in short-term financial planning. To advise these people on the best saving options and even automate their savings activities, many investment businesses are using robo-advisers. There are apps with AI that examine a user's income and spending habits and, after taking into account any upcoming expenses, automatically transfer some money to savings.
It is anticipated that AI will become more significant in personal financial management in the future. Personalized recommendations, portfolio management, and algorithmic trading are predicted to be some of the most common use cases over the coming years based on current trends. AI trading systems are managing risk and placing trades better than humans, especially in volatile conditions, thanks to their capacity to analyse enormous amounts of data and detect even hidden correlations.
In addition to offering "normal" investment alternatives to clients, AI algorithms will make it possible to develop specialty options that will yield higher returns than conventional assets, such as wine investments, which are already in use.
When it comes to developing AI-based personal financial management products that are especially adapted to the demands of millennial and Gen Z consumers, fintechs and neobanks are in the driver's seat. For the purpose of assisting clients in improved money management, many forward-thinking incumbents have also implemented AI solutions. A delay in implementing AI-powered financial management systems could cost banks future business.
At Infosys, Dennis Gada oversees financial services for North America.
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