Artificial intelligence is changing credit cards and banking


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Unless you’ve been saving your credit card rewards for a specific purpose, such as paying down your existing debt or purchase airline tickets for a vacation, sifting through the credit card reward options can be overwhelming.

Some major credit card providers, however, are using artificial intelligence to make it easier to not just choose your rewards, but offer the rewards consumers want the most. In this drive for hyper-personalization of our rewards, artificial intelligence banking is benefiting all parties involved.

According to a recent study, 33 percent of customers who abandoned a business relationship did so due to lack of personalization.

But artificial intelligence in banking is changing that.

Deployed by major banks including HSBC and Bank of America, AI and predictive analytics make it easier for banks and loyalty program issuers to determine what rewards consumers will want at any given time and offer those rewards, along with incentives to use their card for future, similar rewards.

What is AI?

If you haven’t heard the term used before, artificial intelligence is when computer systems or machines are able to perform tasks that normally require human intelligence. These skills include speech recognition, as in the case of the Amazon Alexa virtual assistant or Apple’s Siri, decision-making, and visual perception, such as facial recognition.

Futurist Andrew Ng wrote in the Harvard Business Review, “If a typical person can do a mental task with less than one second of thought, we can probably automate it using AI either now or in the near future.”

These tasks primarily involve pattern recognition and comparisons of data. Sophisticated marketing software uses AI algorithms for ad retargeting on social media platforms. The software can recognize, from the thousands of users who saw an ad or visited a website, those who are mostly likely to click an offer.

So where do these skills AI offers come into play in banking and designing better credit card rewards programs?

How AI banking could change what’s in your wallet

Just as social media marketers use ad retargeting to deliver more relevant ads to users, banks and credit card companies can design rewards programs based not just on basic demographic information, but on your past redemption activity and buying behavior.

The banks are already collecting this information – it’s available within your online accounts and on your statements. But it would take countless hours for human beings to sift through the data, find patterns, and derive logical conclusions from those patterns.

AI makes that kind of hyper-personalization possible, so you get more relevant rewards that you’re more likely to use, delivered proactively – before you even realize you want to redeem the rewards you’ve accrued.

You could have two choices when redeeming rewards in the future:

  • Sift through pages of offers to analyze how you can get the most bang for your buck with rewards you’ll use or;
  • Receive relevant rewards suggestions with the best return, delivered directly to your computer screen or mobile device.

Which would you choose?

Hyper-personalization: the future (and present) 

AI needs lots of data to work effectively. Fortunately, the majority of consumers are willing to share personal information if it means improved services or products, according to a digital banking report sponsored by Personetics, a digital banking solutions provider.

HSBC has already rolled out a pilot program that uses AI to deliver more relevant rewards and seeing redemption rates of 70 percent based on the AI-generated recommendations. To determine the best rewards, the software analyzes the user’s purchasing and redemption history.

But the potential of an AI card goes far beyond the typical or expected predictions. While a human being might assume that someone who redeemed their rewards for a flight to Orlando in the past might do so again, AI can aggregate all their past spending habits and recommend other offers that could be an even better fit.

And that’s only a fraction of the data programs could use to make rewards recommendations.

Tapping into location tracking on your phone, your AI card could deliver promotions via text with location-specific offers, from tickets for tourist attractions in a city you are visiting to gift cards for stores within a shopping center.

Best credit cards and banks for AI banking

Several of the major banks are already using AI banking for hyper-personalization and improved customer service.

HSBC makes great strides with AI program

HSBC is on the cutting edge, putting together a Client Intelligence Utility with 10 petabytes of corporate and institutional data from 1.6 million clients.

For reference, there are 1 million gigabytes of data in one petabyte. A single petabyte of storage can hold 13.3 years of HD video, and the entire written works of all time would take up 50 petabytes, according to this Gizmodo infographic.

HSBC’s program, so far, is experimental, but it’s safe to assume that the company’s top tier rewards cards, like the HSBC Cash Rewards Mastercard® credit card, will soon employ AI to make the best rewards recommendations, if they aren’t already.

In fact, more targeted rewards choices and hyper-personalization could help make up for the card’s relatively modest 1.5% unlimited cash back. If HSBC impresses users with proactive, useful rewards suggestions that make redemption easy and provide more value, it could keep customers using the card long after the first-year introductory rewards have been exhausted.

American Express® embraces AI

American Express is known for its high-end rewards and its travel concierge service. The charge card and credit card provider is now incorporating AI into its travel services with the purchase of Mezi, an AI-powered virtual assistant and chatbot that provides services normally offered by personal shoppers and travel agents.

Right now, Mezi’s services are offered as a perk to American Express cardholders through an downloadable smartphone app, AskAmex. Many Amex offers, such as rewards redemption and 2X rewards offered through AmexTravel, are not available through AskAmex, yet. But it’s not a stretch to think that integration between the programs could be the next step.

For now, cardmembers can “AskAmex” for the convenience of travel suggestions based on voice queries, and then book through AmexTravel using their American Express® Gold Card to maximize their points.

Let Bank of America’s erica guide you

First, there was Siri. Then, Alexa. Bank of America’s counterpart to the American Express AI chatbot is named Erica, and “she” already has more than 1 million users.

Right now, the capabilities include searching for transactions, transferring money, or checking account balances. For instance, let’s say you make a purchase at Walmart using your Bank of America debit card and you want to return the item without a receipt. To expedite the return process, Erica can find the transaction for you.

This virtual banking assistant was introduced shortly before Bank of America revamped its top-tier Bank of America® Cash Rewards credit card. While Erica currently doesn’t integrate with Bank of America rewards programs, it would be a logical next step.

The newly revamped Bank of America® Cash Rewards credit card enables users to choose their own bonus categories to earn 3% cash back on gas or your choice of one of five other popular categories, 2% at grocery stores and wholesale clubs (up to $2,500 in combined choice category/grocery store/wholesale club quarterly purchases) and unlimited 1% on all other purchases.

While this benefits card users, giving them more flexibility to maximize their rewards, it also enables Bank of America to collect data on customer preferences and create more tailored redemption programs using AI software.

In the future, it’s possible that Bank of America’s cash rewards programs will also integrate with Erica, enabling the AI to suggest relevant rewards.

Voice and AI will learn and improve

While voice recognition isn’t necessary for a successful AI card, it helps. Bank of America reports that more people are using erica through tap and gesture functions, with voice and text being used equally after that.

Voice recognition is still not perfect, and there will be learning on both sides, by people and the machines, before we can have seamless spoken conversations. But the more voice is used by today’s AI-powered virtual assistants, the better Erica, Mezi, Siri, Alexa, and all the rest will get at understanding us.

Artificial intelligence banking in the future

In general, the more data AI-powered software can gather, the more effective it will be. Credit card issuers, with a world of consumer data at their fingertips, stand in a strong position to provide their customers with the best options for their lifestyles.

Banks are already using AI to make banking easier and help consumers make the best choices to get out of debt.

Hyper-personalization, more relevant rewards, and even better choices for bonus points are the future, and the present, of AI-powered credit cards.