The advent of 'digital banking' promised much in terms of 'ease of use' and actually delivered more of the same, i.e., in transferring the bulk of the 'hard work' from paper to screen.
Although, in a somewhat primitive format, work was indeed transferred to the individual.
And it wasn't until later, i.e., with the advent of the 'app ', that the focus started to shift, albeit ever so marginally.
Today, that dynamic is shifting in a fundamental way.
While the core of financial technology is to help manage money better, Artificial Intelligence changes the basic interaction between consumer and technology dramatically.
No longer are consumers forced to navigate through long lists of accounts and transactions to find information that already exists in a database somewhere.
Instead, they are able to interact with their finances naturally.
The Shift From Dashboards to Conversations
Although information has always been available in finance apps, until recently the consumer finance apps worked on a self-service basis.
Therefore, in order to find out about spending, for example, customers had to log into their online accounts, go through several menus, export reports, and even then try to make sense of sometimes cumbersome graphs and charts.
The data was available, but interpretation of that data remained with the consumer.
This smarter technology helps consumers manage their money by communicating with them in a natural way about their finances.
Now your finance app understands language too and provides all the answers you need.
Ask it how much you spent on takeaways last month or whether you can afford that weekend break you've had your eye on, and it will immediately start to analyze your last few months of transactions and give you an answer within seconds.
Communicating with your money this way makes day-to-day financial management far easier.
What used to be a chore is now something you can handle on the move, 24/7.
Your personal AI financial advisor gives you real-time insight into your financial situation without requiring you to be a financial expert yourself.
This kind of personalized wealth management, once reserved for a select few, is now available to everyone.
A genuine democratization of financial services that lets millions of people manage money as if they had their own personal financial manager.
Hyper-Personalization Beyond Generic Advice
For years, consumers have relied on traditional personal finance tools that follow broad rules of thumb for managing their finances.
Many tools are based around the notion that everyone can save 20% of their income or cut out daily coffee purchases to save money, for example.
However, no two people have the same financial situation. Rent, unexpected medical bills, and income from freelance work all vary greatly from person to person.
For this reason alone, the way in which we receive financial advice must change.
A financial algorithm designed for individualized financial management looks at the complete financial situation of a person and, through thousands of data points, can learn about the spending habits of that person over time.
This allows it to recognize individual patterns of spending as well as a number of fixed expenses, and even seasonal spending peaks.
For example, as you prepare for the renewal of your auto insurance, your smart financial tool identifies this in your transaction history and, in forecasting your spending for the remainder of the month, automatically reduces any suggested amounts for discretionary spending. It gets you and acts accordingly.
Proactive Guidance in Real Time
One of the biggest changes that is happening within the sphere of the consumer finance market is the shift from analyzing historical data to delivering proactive guidance and advice.
Instead of having to log into online accounts at the end of the month in order to collate data and analyze spending, for example, consumers are now able to benefit from intelligent and automated financial management tools which continually analyze current accounts, debit cards, credit cards and other financial data.
This information is then used to provide users with real-time financial management and the potential to avoid problems such as unnecessary expenditure, overdrafts and high interest charges before they occur.
Intelligent automation shifts the focus forward.
However, new financial tools have become able to forecast upcoming money requirements. In particular, they are able to identify potential shortages of funds with reference to a customer's cash flow in advance of any such shortage actually occurring.
For example, where a customer has a recurring payment due to be made from their current account, and the account does not contain sufficient funds at the time the payment is due to be debited, the tool can flag the impending risk of an overdraft or point to the fact that the necessary funds could be transferred from the customer's savings account.
Automated financial planning reduces stress and creates confidence when people know that there is a safety net in place to manage finances on their behalf.
That means they can be aware of potential problems with their finances but without the worry and stress that usually accompanies such problems. In that respect, personal financial planning software takes the stress out of financial planning.
Lowering the Barrier to Wealth Building
While it is true that there are many personal finance tools available on the market for the average consumer to use, in reality they have always been the preserve of the higher-paid group.
High minimum account balances, management fees, and a plethora of obscure financial terms have meant that high-quality financial planning has always been reserved for those with significant capital to invest.
The use of automation and machine learning has enabled consumers to make investments and receive advice previously only available to high net worth individuals.
Automated portfolio rebalancing, micro-investing tools and savings apps enable people to begin investing and planning their finances using small sums of money.
Algorithms automatically transfer small amounts of money left over from daily purchases to invest in new shares, and also ensure that the optimal proportion of your assets is invested in line with your attitude to risk; finally, the intelligent system continuously rebalances your investments as required by the movements in the financial markets.
Before, managing your finances for the long-term required loads of cash and many, many meetings with a whole team of analysts. Yes, it was that bad.
But with hyper-personalization in financial technology, now millions of consumers from all demographics will have the ability to tap into expert financial strategies. Not perfect perhaps, but better than before.
The Human Element in an Automated Future
And no, when your money is managed by intelligent automation, this does not mean that human judgment is completely swept out of the arena of personal finance.
In truth, the opposite is true: the best financial technology today is that which enhances human judgment.
Consumer financial technology needs to enable individuals, allowing them to make decisions and to manage their finances effectively.
Money is personal and emotional; it relates to an individual's values, aspirations, and fears. All that technology can do is to help to analyze numbers, to identify trends, and to automate and to optimize processes.
It is not able to make decisions about a person's priorities. When it comes to money, those priorities are deeply personal.
This is the future of money.
Incredibly powerful technology that gets better all the time, enables us to manage our finances with a small amount of effort, and allows us to focus on what really matters to us.
