Big Brother or big help? Banks defend collecting customers' personal data

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When banks and fintechs talk about using data analytics and artificial intelligence to personalize offerings to customers, they really mean it.

One bank is developing the ability to scan accounts and inform customers about their “financial hygiene.” Another lender is exploring how to use customers' social media metrics to flesh out their creditworthiness. There is even an effort to learn users' individual typing styles on smartphone banking apps.

“We work with 17 million customers to get them the right offers and the right experiences that are relevant in the moment — it’s conversational banking,” Avid Modjtabai, Wells Fargo’s technology leader, said at The Economist's Finance Disrupted conference in New York on Tuesday.

It all sounds a bit Big Brother, but Modjtabai and other tech-savvy bankers predict customers will ultimately be better off from expanded AI and data use.

She offered up Wells Fargo’s Greenhouse mobile-only banking app as an example. It ties two accounts together: one for routine spending on a debit card and another account for longer-term savings. The app also ties in Zelle, the peer-to-peer payments network.

“It gives [customers] real-time insights about real transactions in the moment,” she says. “We are bringing applications to our new banking customers — either students or customers that are challenged to manage their accounts from month to month — and leveraging AI to help them understand spending patterns and calculate their funds.”

Alice Milligan, chief digital client experience officer for Citigroup’s U.S. consumer bank, said it is using AI in marketing to add security measures such as facial recognition in its banking app, and also to prod customers to invest and expand their nest eggs.

“We are launching features and capabilities, and ultimately a platform, to understand where customers stand, tools like budgeting and being able to plan for the future," Milligan said. The financial planning software will help meet near-term goals, like saving for a vacation, or longer-term goals for retirement, she said.

The apps aggregate customer accounts in one place and could be especially useful to clients who do not have sufficient assets to meet account requirements for traditional advisers, she said.

“AI is also helping their service experience, understanding where their money is, how to move that money and what are the best investments,” Milligan said. “We can proactively serve up to clients through our devices, and push notifications, and geolocation to find relevant information.”

Wells Fargo is also diving into customer mobile usage, Modjtabai said, noting the bank employs third-party fintech providers to examine types of alternative data gathered during a customer call, such as background noise, and even the speed and force of typing in apps — which can be associated with a specific user.

“You are always carrying your mobile phone,” she said. “It is registered with us. Connecting all that data gives us more confidence you are who you are.”

The small-business lender Kabbage analyzes social media use and factors it into its loan approval process. The company not only looks over applicants' balance sheets but also their social media metrics to see how active they are with customers, said Kathryn Petralia, Kabbage co-founder and president.

“I think it’s important to verify they are a business,” Petralia said. “It’s important to track engagement with their customers."

It sounds invasive, but the goal of collecting such alternative data is to reduce needless interaction, Petralia said.

“Every time a customer has to contact us, it’s a defect,” Petralia said. “Calling because they don’t know how to use the mobile deposit app means that product just isn’t working.”

However, there are a group of customers who refuse to do anything digital and ultimately remain removed from such examination.

Last year, Citi conducted a study of 60,000 customers and found a core group who chose to stick to checkbooks and other traditional methods, Milligan said. Those customers are not going to get personalized service, but they are maintaining their privacy, she said.

“No one can Google me,” Milligan said, echoing these customers. “No one can find me.”

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Customer data Data privacy Big data Artificial intelligence Machine learning Digital banking Wells Fargo Citigroup Kabbage