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Bot-Advisor as your Banker - Are you ready?

Banks across the globe are investing big dollars into Intelligent Bots. HSBC has recently announced a low-cost online investment service that uses algorithms to match customers to an investment portfolio. American financial services provider Raymond James ­Financial said it would offer bot-advisers to clients by the year end. NatWest recently launched its Invest service to its existing customers and is planning to launch a full Bot Advice service by end of 2017. According to U.K. based Juniper Research, this technology could save businesses $8 billion annually worldwide by 2022, up from $20 million this year.

There are some clear cut benefits that Bots deliver: They are very precise - they do exactly what they have been taught to do. They don't have any vested interests (sales targets!) and they can turn around huge volumes compared to humans. All this comes at a much lower cost as well. A bank can afford to provide a bot-advisor to a mass market customer, whereas hiring a human advisor will be expensive.

But, are customers willing to take the bot advice?

According to consumer research conducted by Accenture across 18 countries, the majority of customers are open to receiving advice from a bot for certain banking and insurance products. Consumers are open to bot-advice to help them determine which bank account to open (71%), which insurance coverage to purchase (74 %), and how to plan for retirement (68 %). Nearly four out of five consumers (78 %) said they would welcome bot-advice for traditional investing.

This all looks very compelling. So what are the challenges?

Whilst the research indicates that customers are open to bot-advice for less complex and traditional products, they still rely on human advice for more complex products like mortgages and mutual funds. Face to face meetings in brick and mortar branches still have a role to play for now. The fear of getting it wrong plays strongly on the mind of customers. Who will be held accountable if the bot-advice goes wrong? Will banks take responsibility if customers end up losing money? Consumers need to have faith in the organisation that developed any robotic financial advice tool that they use. But, today customers do not have this level of trust and banks don't provide this level of transparency. Also, bots are obviously not known for their interpersonal skills. While they are excellent at making complex calculations, they can't empathize or build a rapport with the client based on their circumstances and personal goals - yet. This makes them harder to embed into a seamless customer experience.

These points illustrate some of challenges for banks. Banks need to ensure that they can reassure customers that the quality of advice they will get from a bot-advisor is on par with what they can get from a human. Customers need to be given the confidence that their financial data is secure and advice is personalized. As algorithms become more sophisticated and banking industry travels this learning curve, I believe this is achievable. For now, we can say that the door for bot-advice is open and banks are pushing in the right place.

Do you agree? Would you invest your money based on advice from a bot-advisor? 


Comments: (1)

A Finextra member
A Finextra member 03 October, 2017, 09:081 like 1 like

Good post Vaibhav, agree with how you have articulated the limitations of embracing robo advisory  by customers

Vaibhav Grover

Vaibhav Grover

Assistant Vice President


Member since

26 Sep 2017



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This post is from a series of posts in the group:

Disruption in Retail Banking

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