Next Generation Solutions for Personal Finance Management

Representing nearly a quarter of the world’s population, Millennials are the largest generation today and are poised to inherit more wealth than any other in history. They are also the first generation of digital natives, which has impacted their expectations of banking and financial services.

In a survey, 50% of American millennials, along with more than 40% of Gen Z respondents, found saving money to be very difficult. Although they need help managing their personal finances, research shows that millennials are not inclined to seek advice from their bank or, for that matter, even walk into a branch. The independence of digital banking is clearly preferred as they seek transparency and control over their financial affairs.

In the past, it would have been impossible to meet such contradictory demands. But now, digital technology — and artificial intelligence, in particular — can empower millennials and Gen Z to make informed decisions so they can better save, borrow, and invest.

The last thing consumers need in today’s environment are high overdraft fees. So it’s no surprise that some customers are moving from their traditional banks to next-gen digital providers that have zero overdraft fees. While some banks may not be able to waive overdraft fees, they can recoup lost ground by leveraging AI-powered analytics solutions to improve their understanding of customer cash flows and predict when an account is vulnerable. to be exposed. Based on insight into a customer’s spending habits and planned spending, banks can offer quick help to better manage the account balance to avoid overdraft fees.

AI can also automate savings with better results. An AI solution can budget, monitor income and expenses closely to ensure the client is sticking to the plan. And millennial and Gen Z consumers can fund a variety of low-cost or no-cost purchases through AI-powered options like buy now, pay later. AI processes real-time consumer data to calculate credit risk, allowing the merchant to decide on the terms of offering instant financing at the point of sale.

Being independent-minded, millennials want to take charge of their financial future – right now. But they are not interested in tediously researching various investment options because they want quick answers.

Depending on an individual investor’s goals, risk appetite, and investable resources, AI algorithms can evaluate various investment instruments to create a personalized portfolio. Additionally, AI can automatically expand or rebalance the portfolio in response to changing client contexts and market conditions. The customer has complete visibility and control, with the ability to intervene whenever necessary.

Conversational AI has improved far beyond old customer service chatbots and is finding wide application in personal financial management. For example, banks have launched virtual assistants that can answer complex queries and even offer personalized assistance, and follow up on fraud.

When it comes to the next generation, tech-savvy Gen Zs are just entering adulthood and careers, and they’re mostly into short-term financial planning. Many investment companies employ robo-advisors to guide these people on the right savings options and even automate their savings activity. There are AI-powered apps that analyze a customer’s income and expenses and, after considering all impending expenses, automatically put a certain amount into savings.

Going forward, it is understood that AI will play an increasingly influential role in personal financial management. Current trends indicate that algorithmic trading, portfolio management, and personalized recommendations will be among the most popular use cases over the next few years. With the ability to analyze massive amounts of data and spot even hidden correlations, AI trading platforms manage risk and place trades better than humans, especially in volatile conditions.

In addition to recommending “regular” investment opportunities to clients, the AI ​​algorithms will further enable the creation of niche options – such as wine investments, which are already in play – to deliver better returns. than traditional assets.

Fintechs and neobanks are in the driving seat when it comes to innovative AI-powered personal money management solutions that are uniquely suited to the needs of millennial and Gen Z consumers. Many progressive incumbents have also adopted AI tools to help customers better manage their money. Banks must act quickly to introduce AI-powered financial management solutions or risk losing future customers.

Denis Gada is Head of Financial Services, North America, at Infosys.

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