Could 2016 go down as a tipping point year for chat technologies in the financial industry? Facebook users can already make person-to-person payments via the social network’s Messenger and soon will be able to pay for for services like Uber and Get Taxi directly from the chat function. In Asia, Chinese giant WeChat offers personal loans in minutes, using only a chat function.
The trend towards expanded use of text messengers is apparent even with automated savings apps like Digit, which uses an algorithm to automatically move spare change out of a user’s account and deposit it in a Digit virtual savings account. The app “communicates” with users via an interface that mimics text messages, informing them of weekly or monthly activity and to ask for authorization on some transactions. In the other direction, users have the ability to withdraw money from their accounts with a simple SMS.
The digitization of financial services
In some ways, the move towards chat functionality represents a reversal for the finance industry. For more than a generation, banking, investing, payments and other facets of the money economy has been moving steadily towards DIY service. Prior to the 1970s, banking, investing and other financial services were typically conducted via close interpersonal interactions – deposits and withdrawals were made by standing in line at your local branch,where your account was overseen by an account manager who knew you well. Stock trades were made with a phone call to your broker, who was typically a middle-aged man you’d developed a relationship with over your adult years and who knew your investment patterns and preferences.
Later came drive-through banking, followed in the 1980s by ATM machines. By the turn of the century, the internet gave individuals the ability to shop online as well to administer their financial lives, essentially rendering human contact in this area irrelevant. Online, bank clients could decide when and how they’d like to interact with their financial provider.
This gave way more recently to more fully set-and-forget type services. These rule-driven technologies give users the ability to automate their banking. But banks found their users had a hard time setting global rules to their banking relationships (like deposit $50 on the 2nd Thursday of every month). Yesterday’s self-service banking website is now being slowly replaced by automation and algorithm-driven banking services employing SMS and internet chat technologies to simulate person-to-person interactions for users. Though they’re prompted by an automated bot, services like Digit require users to lightly participate in decision making.
The move away from 100 percent automation serves two functions: first, to improve mobile financial security by requiring user input. Second, it caters to banking and savings app users’ need for communication. They use text-based communication tools like Slack at work to communicate with their colleagues and Whatsapp to talk with their friends and families. Today’s banking clients want that same level of interactivity from their banking apps, too.
In addition, the effort required to confirm orders and payments by SMS reduces the chance of mistakes by an inadvertent thumb-click to a “yes” pop-up button.
There are also social/sociological benefits to using chat technology for internet transactions, in addition to tangible reasons for apps to “interact” with users via text messages.
How do your students relate to all of these issues?
We asked James Berman, founder of JBGlobal and a faculty member in the Finance Department of the NYU School of Professional Studies, how his students relate to technology interactivity.
“I teach traditional in-person classes at NYU, as well as on-line courses,” explained the finance professor. “Many of my 20-something students choose to take my classes in person, even thought they cost more. They say the reason is simple: ‘I can’t learn that way,’ is a common refrain. ‘I need the face-to-face interaction with other people to really learn well.’
“So I’d say something similar here. Of course, the millennial generation wants banking and financial services online to be quick, efficient and easy, and that trend isn’t going anywhere. But they aren’t willing to completely forego the elements of human communication.”