Opportunities and Risks of Conversational AI for Credit Unions: Empathy and Intimacy in Automated Financial Customer Service

by Scott Mainwaring, UCI and Melissa Wrapp, UCI, Filene's Center for Emerging Technology

As the use of digital channels continues to grow for credit unions, conversational artificial intelligence (AI) technologies provide an opportunity for improved service delivery and the potential for new service offerings such as financial advice.

EXECUTIVE SUMMARY

Conversational AI technologies create new ways for credit unions to serve their members, from providing alternatives to interacting with human agents to creating new channels for more tailored financial services. They provide opportunities to build upon the trust and appreciation members place in credit unions as more human-centered, nonpredatory, and community based. But conversational AI technologies risk invading members’ privacy and being frustrating and opaque.

WHAT IS THE RESEARCH ABOUT?

This exploratory study looks at existing consumer relationships with conversational AI and digital assistants, on one hand; and with credit unions, banks, and other businesses, on the other, to begin to sketch the dimensions of, and provide examples of, points within a “design space” of possible financial digital assistants. While operational hurdles remain high for credit unions to deploy these new technologies, the opportunity will continue to grow in coming years. 

Through ethnographic research with consumers, this report anticipates how credit union members might come to value, or reject, digital assistants. For this exploratory study, we focused on one main question: What are the implications of digital assistant technologies for how members and credit unions could relate to one another in the next five years?

Interviews covered three broad topics: experiences using banks and credit unions; experiences using digital assistant technologies; and reflections on the idea of a financial digital assistant and issues of privacy, trust, and potential bias. This report summarizes findings on these themes and provides insight into how credit unions could take advantage of digital assistants to improve service delivery and differentiate offerings by incorporating elements from their mission and value proposition into their digital assistants. The way forward is to develop particular product proposals and related data transparency policies that can provide members with a new understanding of what they could achieve by relating with their credit unions through “talking computers.”

WHAT ARE THE CREDIT UNION IMPLICATIONS? 

Credit unions have an opportunity to deploy digital assistants in ways that improve service delivery and member experience and provide new types of service offerings. In thinking about what types of digital assistants would provide the best fit for your credit union and member needs, keep the following research findings in mind: 

• People like the promise of bots as part of a modern, organized, and simplified life.
• The realities of existing bots fall short of expectations and can limit imagination.
• People are resigned to the constant advance of technology without transparency or the ability to meaningfully opt out.
• Relations with credit unions are valued for their human element and trustworthiness, even if this means older, clunkier tech.
• The design space is complex, including diverse combinations of technologies, member needs, and business opportunities worth considering.
• The idea of talking with/through bots is becoming mundane, but credit unions could pleasantly surprise members with unique service features.
• Credit unions could tailor these technologies to show their strengths and to educate members not just about finances but also about data. 

In order to create a competitive advantage, credit union digital assistants would have to not only be useful and usable but also embody and express the core values of the credit union system. By building upon these core values of empathy and respect, credit unions could focus their development of digital assistant technologies in a way that creates differentiation, even with fewer resources than are available to larger financial services providers. 

We use findings from our research to generate design ideas that are meant to illustrate pathways worth exploring, developing, and evaluating: 

• Build a helpful, always-accessible agent. This kind of digital assistant could serve as the voice of the specific credit union and provide basic support but also demonstrate the “members not customers” ethos of the credit union value proposition.
• Provide an assistant to help members maintain, augment, and monitor their personal financial support systems.
• Provide robot counsel. This financial digital assistant could serve as a “second pair of eyes” as members conduct transactions with any financial services provider, intervening if necessary but always being available for reassurance or advice.
• Connect members to each other. This assistant would embody the credit union as a member cooperative, helping connect members to each other.

Access complete report, summary slides, and design principles here.

Reimagining the ATM: From Cash-out to Curbside Banking

by Bill Maurer, UC Irvine and Kate Larson, Kate Larson Writes, LLC with Filene's Center of Emerging Technology

With so many options for ATM service delivery, how can credit union leaders make wise decisions to meet their members’ needs? Set against the backdrop of rapidly changing consumer behavior and expectations during COVID-19, this report explores the past, present, and future of the unpretentious automatic teller machine—and how its evolution impacts credit union strategy today.

Image Credit: Filene

EXECUTIVE SUMMARY

As our financial lives increasingly take up residence online, the ATM may be one of the last physical touchpoints between credit unions and their members. This creates a key opportunity for credit unions to delight members, provide convenience, and create a consistent brand experience across channels. But ATMs can also be an institutional pain point. As physical machines in dispersed locations, they require ongoing maintenance, upgrades, and replacement. Because ATMs touch nearly every part of a credit union’s operations, it can be difficult to view the full impact of an aging fleet, a new strategy, or a potential partnership. Faced with this mix of obstacle and opportunity, how can credit union leaders make the best decisions for their organizations?

WHAT IS THE RESEARCH ABOUT

In the wake of the social and economic changes wrought by COVID-19, ATMs have become an essential way for credit unions to provide members access to cash, deposits, and assistance. Tracing the history of the ATM from early twentieth-century agricultural shows to our pandemic-constrained present reveals a technology that is both deep-rooted and innovative. 

While ATMs may not seem particularly groundbreaking, they have extended the reach of most financial institutions far beyond their branches—and they may provide a blueprint for how credit unions can rethink those branches entirely. We spoke to leaders from credit unions and supporting organizations about their ATM experiences, challenges, successes, and strategies and drew from those insights to offer recommendations and a roadmap for success.

WHAT ARE THE CREDIT UNION IMPLICATIONS?

ATMs are one piece of a member’s full experience with the credit union and should be viewed in that context. Serving as a billboard, a marketing opportunity, and (hopefully) a positive interaction between member and institution, an ATM transaction can leave the member feeling satisfied, or frustrated by a machine that is laggy, limited, or out of service. Credit unions have a variety of options for offering ATM services to members, from owning and servicing their own machines, to partnering with a third- party provider, to joining a shared network, and some organizations may choose several of these. Because any approach will have benefits and drawbacks, each organization must define what success will look like before pursuing a new ATM strategy.

Finally, credit unions should beware of chasing after shiny technology and instead seek to understand their members’ unique needs and preferences in order to design a compatible and accessible ATM experience. But there is plenty of emerging technology to get excited about: contactless payments may render the plastic ATM card extraneous, and open-source software could simplify future upgrades. 

Making decisions about ATMs may never be easy, but given the variety of available choices, credit union leaders can and should find opportunities to generate value for their members.

Link to download report and summary slides.

Link to Infographic: Strategic Contexts for ATMS by Melissa K. Wrapp, PhD Candidate, Department of Anthropology, UC Irvine

The CARES Act and Credit Reporting: What Credit Unions Need to Know

by Bill Maurer and Melissa Wrapp, Center of Excellence for Emerging Technology, Filene Research Institute - creating research, innovation and connections for credit unions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020, to provide emergency relief to consumers and businesses suffering from the economic fallout of the COVID-19 pandemic. The CARES Act contains a section (Sec. 4021) specifically addressing the credit reporting consequences of the pandemic. Even with direct stimulus payments, increased unemployment benefits, and the Paycheck Protection Program, consumers are facing dire financial circumstances. The expiration of relief payments and enhanced unemployment protection on July 31 has only made their situation more precarious.

Section 4021 does not go nearly far enough. It places the entire burden on consumers. It does not include all forms of debt, including debt collection accounts (which includes 99% of medical debt on credit reports). It does not standardize credit reporting practices. And more.

Still, there are ways your credit union can help your members.

PROBLEM: Protections are not automatic.

Consumers are required to contact creditors to ask for an accommodation. They are also required to do so for all their accounts. Most don’t even know where to begin.

What your credit union can do:

• Proactively contact your members to let them know how to ask for an accommodation from their creditors.
• Remind them of the top five most likely creditors they should contact. You can either look for trends in your area or go for the most likely creditors that any member would have. Provide them a checklist: Mortgage; car loan; student loan; credit cards.
• Provide phone numbers or websites to the national credit reporting agencies (NCRAs) so they can obtain their free credit reports.
• Preserve the dignity of your members and don’t overrun your call centers! Instead, consider automatic loan deferments or online/mobile solutions for loan deferment requests.

PROBLEM: Only deals with active accounts.

The CARES Act only deals with active credit accounts, not debt collection accounts like medical debt or debt owed to collection agencies employed by former landlords.

What your credit union can do:

• Target small-dollar lending products to utility delinquencies, medical debt, or other debt collection accounts.
• Help members identify court records of evictions and petition the court to have them expunged or sealed. The easiest way is to look at the Public Records section of their credit reports. They can also look up records on line via the National Center on State Courts website or partner with a third-party provider like MyRentalHistoryReport.Com (which charges a $29.95 fee). Or, identify and partner with a local nonprofit legal aid foundation.
• Provide a dated letter of reference to members with eviction records indicating they are a member in good standing of your credit union that they can share with potential landlords when filling out a rental application.

PROBLEM: Consistency using the AW code.

Furnishers are not consistently using the AW code (“natural disaster”) in providing data about COVID-related delinquencies.

What your credit union can do:

• Demand from NCRAs that furnishers of credit data use the AW code or CP (“short term forbearance”) in any data they provide to NCRAs.
• Lobby Congress for consistent application of Metro 2 ® codes related to natural disasters, including pandemics. Make this an immediate and high priority for our trade groups.

PROBLEM: Student loans.

75% of forbearances are for student loans.

What your credit union can do:

• Reach out to student borrowers and others with student loans to discuss their options. Identify them through your student loan providers/servicers; or, look for student loan payments in ACH files.
• Ask your student loan providers/services to advertise the benefits provided in the CARES Act for student borrowers.

PROBLEM: Poor understanding of credit reports.

Consumers poorly understand their credit reports. The 3 NCRAs are currently providing weekly free reports during the pandemic.

What your credit union can do:

• Make your members aware of the NCRAs free reports.
• Provide educational materials for members on their credit reports, how to read them, the importance of their credit score, and how to improve their credit score. Direct them to the websites of the NCRAs or the CFPB, which has a handy primer on credit scores.

For full original post, additional resources, and detailed specifications from the CARES Act, go to:

https://filene.org/blog/the-cares-act-and-credit-reporting-what-credit-unions-need-to-know

Important Note

At the time the guide was prepared (August 2020), the second major stimulus and relief act has passed the House of Representatives, but negotiations are stalled between the House, Senate, and Trump administration. The House bill, called the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES) Act, replaces section 4021 of the CARES Act and provides a couple of important additional protections. Most significantly, it bans reporting medical debt related to COVID-19 treatment. This is a step in the right direction, but many individuals will suffer medical debts unrelated to COVID-19 treatment that they will still struggle to repay given the economic fallout from the crisis. It also forbids the use of alternative credit scoring models that “would identify a significant percentage of consumers as being less creditworthy when compared to the previous credit scoring models.”

Digital Transformation in the Age of COVID-19: What Should Credit Unions Deliver?

by Bill Maurer and Scott Mainwaring, Center of Excellence for Emerging Technology at UC Irvine

The old era of neighborhood branch gathering places no longer looks tenable as a new era dawns of self- and curbside-service, constant online connectivity, and conversation in virtual spaces.

Digital transformation is here with a vengeance, whether we like it or not. The global COVID-19 pandemic has people paying with mobile apps instead of cash, applying for and receiving assistance online, and coping with anxieties around housing, employment, debt, and even bankruptcy. The cascading consequences of the pandemic means that credit unions must urgently engage with business reinvention in order to continue their mission of service to their members’ financial well-being. How can this mission be sustained even as online becomes the dominant way they deliver products, offer support, and work with members to solve problems?

We have been researching the implications for credit unions of emerging technologies that use so-called artificial intelligence techniques to support “natural” conversations, though text, voice, and/or graphics, between people and artificial agents that more or less pose as people in enacting a service. Amazon’s Alexa and Apple’s Siri are well-known examples, through financial service-specific versions like Bank of America’s Erica have also launched.

As social scientists, we start from a broad set of questions about how people experience and expect these systems to behave, both positively and negatively. And for these “conversational agent” technologies, we start in particular with questions of intimacy and empathy.

Intimacy of AI
In 2018 the popular parenting website BabyCenter released results of a survey it conducted on new parents and their use of AI assistants like Alexa and Siri. The results were striking—seven in ten parents own a smart device; and a third of those said that having one made them a better parent. 22% percent said their virtual assistants are “like another part of the family,” and 42% of device owners say that they speak to their virtual assistants like an actual person. The “intimacy of AI,” as AdWeek calls it, seems inevitable.

Voice and AI aside, intimacy is already central to smartphones themselves. These personal and personalized devices are our constant, daily, bodily companions. Add an always-available virtual assistant to chat with, and our relationship with our phones—especially in a time of social distancing—becomes even closer.

“Intimacy” from virtual assistants being rolled out by the big banks is threatening to credit unions precisely because credit unions have historically prided themselves on the quality of their customer service and their knowledge of their members. Take Bank of America’s Erica. Via your smartphone, she can help you plan a spending path, manage your expenses, alert you to when bills or other recurrent payments are coming due, give your FICO score, and even provide rudimentary credit counseling.

If interactions with financial digital assistants are to replace person-to-person conversations with customer service agents, is the credit union system back in a familiar position of trying to play catch-up with the big banks and their big pockets? Not entirely – to employ new technologies that put people first, credit unions have advantageous positions as member cooperatives that place well-being over profits.


Continue reading about intimacy, empathy, and opportunities for credit unions in the age of COVID-19, full post on the Filene Research Institute blog available here: https://filene.org/blog/digital-transformation-in-the-age-of-covid-19-what-should-credit-unions-deliver

Filene Fill-In Ep. 66: Managing Misinformation in the Midst of a Pandemic

Podcast with Filene Fellow Bill Maurer and Dr. Joan Donovan

In this episode of the Filene Fill-In, Filene Research Institute discusses what credit unions can do to combat the spread of disinformation and misinformation, and sustain the level of trust they’ve built with their communities and their members. Plus, we share resources below (COVID-19 Financial Scams: Look out for these scams!) and talk about some tangible ways credit unions can deal with the spread of misinformation if it is happening on their digital and social platforms.

LISTEN to podcast here: https://soundcloud.com/user-306424525/filene-fill-in-ep-66-managing-misinformation-in-the-midst-of-a-pandemic

"In a public health crisis, timely, reliable and trustworthy information is critical to safeguarding people’s health and well-being. Unfortunately, the widespread adoption of digital media and information technologies today has made it easier and faster to produce, disseminate, and be exposed to false or manipulated content, from simple misinformation to conspiracy theories to hate speech.

Our research fellow for the Center of Excellence for Emerging Technology, Social Sciences Dean, and IMTFI Director Bill Maurer of UC Irvine has professed through his work with us that credit unions have a great role to play in lessening consumer anxieties by reassuring their members, fighting to protect their communities, and making wise decisions about our future.

Bill returns to another episode of our podcast with Taylor and I, in which we are most fortunate to be joined by Dr. Joan Donovan -- Director of the Technology and Social Change Research Project at the Shorenstein Center on Media, Politics and Public Policy at Harvard Kennedy School.

In this episode, we discuss what credit unions can do to combat the spread of disinformation and misinformation, and sustain the level of trust they’ve built with their communities and their members. Plus, we discuss some common scams that we’re seeing and how to protect against them. We talk about some tangible ways credit unions can deal with the spread of misinformation if it is happening on their digital and social platforms.

Find out why Joan says local and redundant information is so valuable right now. And stick around for recommended trusted sources of information from our experts -- BONUS: stay till the very very end for a special coronavirus song from Bill. It’s no lie."

Resources:
Novel Coronavirus (2019-nCoV) Situation Reports, World Health Organization
Surge of Virus Misinformation Stumps Facebook and Twitter, The New York Times
How to fight an infodemic, The Lancet
The coronavirus is the first true social-media “infodemic", MIT Technology Review
Here’s how social media can combat the coronavirus ‘infodemic’, MIT Technology Review
How search engines disseminate information about COVID-19 and why they should do better, Harvard Kennedy School Misinformation Review
Coronavirus Misinformation Spreads on Facebook, Watchdog Says, Wall Street Journal
‘Surviving the Coronavirus Infodemic’, UW Center for an Informed Public
COVID-19 Financial Scams: Look out for these scams!, UC Irvine

See original post at Filene's Resource Hub

The Lessons of Fintech Apps: Design Matters for Personal Finance​

by Bill Maurer, UCI; Melissa Wrapp, UCI; Chandra L. Middleton, UCI; Vivian Dzokoto, Virginia Commonwealth University; and Jenny Fan, UCI

This research report from Filene's Center of Excellence, the Center of Emerging Technology at UC Irvine provides lessons to credit unions that may help ​improve how their services are​ perceived and that may help ​activate deeper engagement ​with younger members.

Executive Summary
Fintech-based personal financial management (PFM) apps are providing new ways for budgeting and investing. In an effort to attract or retain Gen Z and Millennial members, financial institutions have been quick to adopt products similar to Mint or Acorns. In the race to provide these services, few financial institutions have reviewed and explored the value that such products provide, and how people interact with and feel about budgeting and investing with these new apps.

What Is the Research About?
Filene piloted a study that tested three PFM apps for budgeting (Mint, Wally, and You Need A Budget) and two for investing (Stash and Acorns). Twenty-seven participants between the ages of 18 and 34 used an assigned app for one month. Each participant was interviewed before and after using the app. Focus groups were held to provide additional insights.

We set out to learn three things from this study:

• How do people use these apps? And how does the design of the apps shape the user experience?
• What are the apps really teaching users? Are there conflicting messages to “buy” in budgeting apps? And how do users’ behaviors change as a result of using the apps?
• How effective are the apps at getting people to improve their financial behaviors?

Surprisingly, we learned that traditional financial institutions are still preferred over PFM apps. Although the apps have their benefits, people still want access to actual people in their financial institutions. In terms of design shaping the user experience, good design begets credibility. Poorly functioning or shoddy-looking apps eroded trust in the financial institution.

The apps tended to raise awareness of participants’ budgeting or investing behaviors rather than change behaviors. For some, using the apps reinforced preexisting frustration or stress participants felt about their financial lives. With investment apps, some participants felt that the gamification of the apps promoted addictive behaviors.

Read additional takeaways, download the full report, and view summary slides here: https://filene.org/487