GRAPEVINE, Texas–Been told over and over again that fintechs are coming to get you and your credit union? That’s false, according to one “meta-analyst” who looked to counter a lot of what he called the “bull” in the “hyper-bull-e” credit unions hear on a regular basis.
Lee Wetherington, director of Strategic Insight with Jack Henry & Associates, walked attendees at CU Direct’s Drive 18 Conference here through five emerging technologies and focused on where he believes credit unions should—and should not—be focused.
Here’s a look at each of the five emerging technologies addressed by Wetherington, where he sought to differentiate the realities from the “bull.”
Wetherington explained that inside of Artificial Intelligence is Machine Learning, and inside of Machine Learning is Deep Learning. While there are ongoing breakthroughs and developments in each, Wetherington cautioned credit unions to be cautious with chatbots right now, or the use of AI to have “conversations” with members. Often, people leave chatbot conversations frustrated, which leads to a micro-aggravation that feels like a macro-aggravation when it’s discovered the “person” on the other end is AI. It’s a scenario Wetherington summed up someone yelling “REP-RE-SENT-A-TIVE” into a phone.
“The closer we get to something that kind of feels and sounds like a human, but isn’t, it’s really problematic, because the more repulsed we are when we realize we’re not talking to a human,” said Wetherington, who calls the experience the “Uncanny Valley.” “You can end up doing more damage to a relationship by botching the release of an AI, including chatbots, if you really aren’t ready for prime time.”
So, how should credit unions deploy chatbots differently than big techs and big banks? asked Wetherington.
“Credit unions need to be right in the middle of the chatbot continuum,” he advised. “Big banks can’t scale personal service. Leverage what makes credit unions credit unions, and that is your people and your service. You don’t want to let go of that. When a member reaches his or her limits of self-service, that person should immediately talk to a real, live human being at the credit union in a secure chat channel. That doesn’t exist right now, but will before the end of this year. Don’t give up what differentiates you from these big techs and big banks.”
And what about video chat? It’s “absolutely not preferable,” according to Wetherington, citing research showing the place where people spend the most time on their mobile phones is the bathroom.
“Right now, as a credit union you are data rich but insight poor,” said Wetherington. “Just your payments data alone is the Holy Grail in the era of big data, and you’re just sitting on it. But we’re beginning to know what to make of it. The good news is you have the best data, but the bad news is you don’t have enough data. Individual CUs don’t have enough data to properly do machine learning.”
The other piece of good news for credit unions, suggested Wetherington, is that “big banks and big techs are violating trust. You have the opportunity unlike others.”
Wetherington told credit unions that for the past eight years all have been hearing the same message: “The fintechs are coming to get you. They are going to disrupt you. That’s false. It’s not happening, and it will not happen.”
The reason, said Wetherington, is platforms, which he defined as a “plug-and-play business model that allows multiple participants, producers and consumers, to connect to it, interact with each other and create and exchange value.”
He noted there are now emerging Platform Service Providers that are creating credit union-friendly platforms to allow CUs to connect to platforms of choice.
Wetherington acknowledged that where the threat lies is in a giant player like Amazon, which has the potential to control distribution as part of the user experience. He pointed out Amazon has already done $3 billion in lending and is partnering with Bank of America to extend lending to its ecosystem partners.
“A lot of us don’t understand why (Amazon is) in financial services. About six weeks ago they reported they want to partner with JPMorgan Chase on checking,” said Wetherington. “Amazon has no interest in being a bank, but it must integrate payments services into its platform to create in the world to compete with Alibaba and Tencent. They are amassing scale that makes Amazon look small.”
What credit unions should watch for, said Wetherington, is a big tech threat in the P2P space with stored value and deposit accounts (such as ApplePay Cash). Square also has new app that encourages people to leave any extra cash with Square.
“All of this adds up to some significant deposit displacement,” with $5 billion alone stored in Venmo, Square and ApplePay, observed Wetherington. Starbucks has another $2 billion in cash stored in its application.
Credit unions continue to struggle with cybersecurity and cyberrisk, as do consumers, as there is an authentication problem for all parties.
“Passwords are dead, dead, dead,” said Wetherington, quoting Randall Munroe’s observation that for 20 years consumers have been trained to create passwords that are hard for humans to remember, but easy for computers to guess.
The most common frauds at credit unions and banks are now account takeover and application fraud as the result of the reality that everyone’s personally identifiable information is available to scammers on the dark web.
“We are now using device fingerprinting associating specific devices with particular members,” said Wetherington. “We can codify all that together to create a digital persona.”
All the sensors in the world that are increasingly installed in various devices are becoming connected, with Wetherington noting that it is increasing the magnitude of data being captured. With the cost of sensors going down, it creates more data, which means more potential analysis leading to automation and the taking of action.
“Think about the impacts on payments,” said Wetherington. “We’re going to have a lot more micro-payments. There will be a shift from periodic or monthly payments to real time, on-demand payments that will challenge your payments capacity. Understand we are coming into a real time payments infrastructure in the U.S. and that means real-time everything. It means instant loans and real time funding–and questions of why does a loan have a beginning and end and shouldn’t it just be a floating line of credit?–instant onboarding, dynamic lending, real time fraud monitoring and control and real time analytics.
“Understand what that means strategically is so much more important than the speed of the payment,” continued Wetherington. “The advent of real time payments is the beginning of the reengineering of everything.”
The technology for measuring human emotion is now available via an API. User experience is all about emotions of the transaction, said Wetherington. And good UX over and over again leads to engagement, and engagement leads to trust, he said.
Negative emotions related to money include doubt, anxiety, guilt, inferiority, incompetence, and more. Positive emotions include trust, control, confidence, empowerment, competence, security, safety and peace.
“You want to get them to positive emotions of money,” he said. “This is engagement, over and over and over again.”
To measure human emotions Wetherington pointed to solutions such as Affectiva, which uses a phone’s camera to measure the user’s face.
“Collect insight into unfiltered consumer emotional responses,” he said. “Make apps and digital experiences emotionally aware.”