Artificial intelligence has rapidly become an integral part of wealth management, so that computers and algorithms analyze massive amounts of financial data to spit out stock recommendations and other types of advice. Yet it’s taken a bit longer to figure out a way to apply this technology to consumers’ day-to-day spending and saving habits.
But over the past year there's been an explosion in the number of artificially intelligent personal finance chatbots, suggesting that we’re entering a new phase of digital assistance. Some of these digital assistants have human names like Olivia and Abe, while others go for succinct monosyllables like Plum and Trim. Financial institutions have started rolling out their own apps, too, like Bank of America’s Erica that’s purported to help customers make smarter financial decisions. This year MasterCard is releasing Kai that will respond to verbal or texted questions about credit card transactions.
These apps mostly use cloud-based artificial intelligence, predictive analytics and human-like messaging to track consumers' purchases, automatically dribble small amounts of money into savings accounts and update people in real time about their spending habits.
Make a debit or credit purchase and an AI assistant can text you about how that purchase affects your monthly budget and how your current monthly spending compares with your historical average. It can be a useful tool for real-time personal financial tracking, but since the application of chatbot technology to personal finance is fairly new, the quality and usefulness may vary.
So will any of these programs truly help you save money?
“While these applications can provide personalized advice, they’re not always effective at helping a consumer actually change their habits and behavior,” Nicola Morini, managing director of artificial intelligence at professional services company Accenture, told Salon.
Accenture is working on its own digital personal accountant that Morini said will have a more “human-centric” design approach and the capability to automate other money-saving activities as they become available. For example, digital advisers have the technical capability to automate small money-saving practices, like adjusting connected home thermostats or automatically changing bank accounts when artificial intelligence finds better interest rates. Some of these capabilities, like closing and opening accounts, would require financial institutions to allow this kind of automation.
“There is also a challenge around consumer acceptance of allowing an AI to control such a large aspect of one’s life,” Morini said. Depending on how financial institutions and consumers react to ceding more control of personal finance to virtual assistants, virtual assistants could communicate with one another to do many of the things that today require interactions between humans such as closing and opening accounts. But for now, the technology that consumers have access to is fairly limited compared with what is technologically feasible (or soon will be).
Critics argue that current personal finance chatbots have much further to go to become truly useful money-saving tools.
“We all know the technology is not there yet,” Josh Reich, the co-founder of online bank Simple, told The New York Times in October after several companies, including Bank of America and MasterCard, announced that they would be soon release digital financial assistants.
Another question is whether such chatbots can be trusted to offer unbiased financial advice. A bank’s app might, for example, nudge you toward its own credit card rewards program as a way of saving money rather than to a competing service that offers a better deal. And, as that scenario implies, digital assistants offered by companies that make money from your banking activity could wind up trying to sell you a product or service under the guise of looking out for your financial interests. This is one reason why it may be better to use chatbots offered by nonbanking startups that enable you to link their apps to bank accounts regardless of which financial institution manages them.
These artificial intelligence personal financial advisers may become commonplace in the future when they become more advanced. For now, there’s clearly no harm in trying them out to see if they can help you sock away more money than you would otherwise. Ultimately the best way to save money will always boil down to the same thing: adopting a disciplined approach to managing your income and your expenses. That’s something an algorithm can’t impose no matter how much data it parses and throws at you.