Podcast

Innovation podcast: Personal financial coaches, the new battle ground for retail banking customers

Published: March 15, 2020
Innovation Podcast: Personal Financial Coaches, the New Battle Ground for Retail Banking Customers

Sparking Innovation takes a look at how Personal Financial Coaches have become the killer apps for companies trying to win customers in the retail banking space.

Who do you trust to provide you with the best advice about managing your finances? The traditional banks clearly feel that they own this space, but the rise of Open Banking and the increasing sophistication of AI has open the door to new entrants.

In the battle for retail banking customers, Personal Financial Coaches (PFC's) are becoming ground zero. Players understand that winning this battle will define who thrives and who may not survive in the new banking world.

In this episode, we talk to Mandana Dilmaghani, Virtusa xLabs Service Design Lead, and Anil Awasthi, Virtusa's head of Retail Banking about the evolving PFM space and how players like Toucan, Plum and Yolt are designing and delivering engaging solutions using emerging tech.

Episode Transcript

Conducted by  Stephen Wood, Head of Design for Innovation | Virtusa xLabs

We see many banks that struggle a little with open Banking and offering their own PFC or PFMs services because people don’t necessarily trust them with their information from other bank accounts or with savings that they may have at home because they don’t know what the banks are going to do with that data – are they going to use it to sell me other products or what else? Fintechs have an advantage there because they come in as new players and they have a blank slate.

Fintechs have the “blank-slate” advantage on banks when it comes to leveraging new technologies to deliver customer-focused experiences. Listen to Sparking Innovation podcast to learn why the Personal Financial Coach can be a game-changer for banks and what it takes to build one.

In today’s podcast we are going to talk about PFMs (Personal Financial Management) and PFCs (Personal Financial Coaches) where we see the traditional banking world being shaken up by the tech-enabled start-ups which help people manage their finances more effectively and drive towards, hopefully, universal prosperity.

Mandana Dilmaghani (Virtusa xLabs Service Design Lead), and Anil Awasthi (Virtusa’s head of Retail Banking) We start with getting an understanding of what is a personal financial coach (PFC) and how do we describe these tools.

Anil Awasthi: You have seen people in the past using calculators or pen and paper to plan their budgets and other financial decisions. Now we can see an evolution from those days in terms of how technology is leveraged to give consumers more predictability in terms of finance management, especially in terms of debt and savings management.

Stephen Wood: PFMs are tools to help us understand how to manage our finances more effectively. We have seen this in business for many years but now they are entering the retail financial space.

Anil Awasthi: Absolutely. We see this in the retail financial space as well as in the SMEs (small and medium enterprises) segment, which need help to run the business smoothly.

Stephen Wood: Are the PFMs provided by banks or by other players?

Anil Awasthi: Banks have been trying to differentiate in this space and have struggled to provide better customer experience to begin with, without giving any other value-added services. However, over last 10 years, we can see that banks have started to come out with new value-added propositions for the customers, and the Personal Financial Management, rather than Personal Financial Coaching has become their focus.

Stephen Wood: So you use the term of personal financial coach rather than personal financial manager – are they different things?

Anil Awasthi: Yes – the personal finance management helps you aggregate, categorize and visualize all your accounts, but it doesn’t provide you with any personalized suggestions on what is right for you and what you should do next with your finances.

The PFC, as the word stands, supports you to take the right decisions about your finances going forward and it is unique for each person. Lately I was looking at how Credit Karma is doing. Interestingly, they have developed tons of data insights and they are able to generate around 8 billion data points about your customer’s finances. So how can that data be used to generate the right advice, depending on everyone’s needs and circumstances? Each individual is at a different life stage and the coach is about suggesting how one should act accordingly.

The management gets things together and the coach delivers it and advises you depending on your individual circumstances.

Stephen Wood: How have we seen the ownership of personal financial coaches divided between traditional retail banking players and the fintechs?

Anil Awasthi: This differs geographically. If you take an example of Europe and UK, which are heavily driven by PSD2 and Open Banking which has accelerated innovation, companies like Yolt have the capacity to aggregate customer data which most of the financial institutions cannot do yet. Banks have a peculiar problem because while they have the individual customer data for the accounts held in that bank, and technology allows them to aggregate all the data from different set of financial institutions, they have still a long way to go to get customers adopt their solutions. Conversely, fintechs come with no baggage and they only deliver the best-in-class customer experience. So, there is a fair bit of competition between banks and fintechs to delivery PFC.

Stephen Wood: If we think about me going to my bank and asking them to help me manage my money , a lot of is around helping me choose their products more effectively. So, they are helping but the subset of products is pretty much within the bank’s portfolio. Does this mean that people will have a higher propensity to look at fintechs because they are more objective or it doesn’t work like that?

Anil Awasthi: Yes and no. The traditional way of getting advice involved you walking in the branch, have a manager assigned, him sitting and blocking a time with you because they know how much money lies in your account and what products you can take. But the customers demographics have been shifting drastically and the customers now want to have the advice delivered digitally, they expect the bank to be able to look across their financial situation and not just the account they hold with them and provide the best suggestion.

In that aspect- changing customer behavior and demographics- the finance management approaches have evolved significantly and the benefits of the new approaches can be seen. Now starting with the deposit of the pay-check, the PFC is able to predict your expenses, manage them better , helps moving debts from one provider to another without you worrying about it, optimizing your liabilities and giving you overdrafts when you need them. It is able to predict your most difficult situations ahead of time based on the data they collect – it is a complete evolution – rather than a pull, it is a push for engaging with the PFC.

Stephen Wood: It sounds like we’ve got a shift not only in customer expectations from the person providing you with coaching or advice, but also democratization because there are very few people who get a wealth manager when they walk into a bank.

Anil Awasthi: This is a very interesting point because there’s a big discussion across the world about financial inclusion. Now financial inclusion is not only about opening an account but it is also about the ability to deliver similar financial advice to customers. If you talk about assigning a wealth manager as in the traditional scenario, it is not going to be possible. Digitizing or democratizing is very important hence there is a huge business opportunity for fintechs and the banks on the back of data they are gathering to bring more customers and help them change their lives.

Stephen Wood: If you think about the technologies underpinning the rise of personal financial coaches, what are the key bits of tech that are making this viable now?

Anil Awasthi: Before you get into to what kind of technologies are there, we need to consider the four essential steps in delivering the Next Generation PFC.  The number one goal is your data collection. Whatever advice you want to deliver to your customer and the predictions you are making must be backed by data. Data comes for from various sources, some data is held by the bank and the data which is not held by banks must be provided. How are you going to consume and ingest that data and how do you make sense out of it is also important. At the same time, there are regulatory aspects to be taken care of, like GDPR and PSD2. These decisions need to be made early on through the data governance strategy within the organization. Once you’ve got the data you’ve got to think about what insights and predictive analytics are going to be delivered. The third step is the financial coaching- how do you engage with a customer, and how do you identify the critical points in their lifestyle and deliver the advice.  And last is of course leveraging all of it together to make it autonomous.  While I talked about the approaches, the key technologies enabling it are Open Banking as a framework, but artificial intelligence, machine learning and big data are all playing a big role.

Stephen Wood: So we are thinking about the stages of aggregation, ingestion and analytics and coaching. We’ve got the key technologies: open banking through APIs and microservices, we’ve got AI and ML, Big Data and the Cloud all coming together at this point to make the personal financial coaches that much more viable. But it’s not only about bringing the technology there; we must think about three things: viability, feasibility and desirability. And this moves on into the idea of needing to design an experience with the coach. At the heart of it, if we are trying to decide of what we choose – a fintech or an aggregator or we go to a normal bank, one of the key things that we need to consider is Trust. Can we design for trust?

Mandana Dilmagani: Absolutely. I think that we see many fintechs in that space specifically designed for Trust because trust is really the central part to engaging with the PFM.

Financial matters are such a delicate topic for people that they really need to trust you to open up around these topics and to also to disclose other information around their finances. We see many banks struggling a bit with open banking and with offering their own PFC or PFM services because people don’t necessarily trust them with the information from other bank accounts or with savings they might have at home. Customers don’t know what the bank is going to do with that data and may think that the bank will start using it to sell them other products they may have. Fintechs have an advantage there because they come in as new players and they have a blank slate.

Stephen Wood: –  Yes, they have a slightly better track record because they have no track record whereas banks are renowned for mail bombing you with direct mail to try to sell something that may not be tailored to you. So how are the fintechs and the better banks at being open and honest with their holistic finances?

Anil Awasthi: Before we say that customers have lack of trust in the banks I think it would be unfair to the banks completely. The banks have earned their trust over decades – their own customers have more trust than trying out new options, as Mandana pointed out, it is very delicate to let go of one’s financial information.

Mandana Dilmagani: If I can add to that, the important thing about trust is “trust to do what?”  because trust is always a specific interaction. People really trust their banks to be there for the long run, to keep their saving safe but there is also the idea of “can an old dog learn a new trick?”

Anil Awasthi: I think that is a fair comment and also I want  to add that there are news of a patent being filed by Moven and it is about driving  adoption through the behavioral changes with a PFC.  And while we are talking about trust, there must be a holistic approach in addressing trust by addressing customer needs and understanding customers’ behavioral insights and what works for each individual. We see a big move, including filing a patent in addressing how do you drive adoption – and trust is one factor of it.

Stephen Wood: So what is being patented there?

Anil Awasthi: Moven, at the beginning had colorful ways which showed financial and spending analytics and that has been adopted by many fintechs.  This is not about filing a lawsuit, it is more about asking if it’s the right thing to do and take it to the next level and develop it.

Stephen Wood: So is it a patent around an algorithm, is it analytical or is it  around visualisation?

Anil Awasthi: A very good question; it’s about visualization to begin with, algorithms to predict what to be adopted and then analytics so it’s everything together – a holistic approach.

Stephen Wood: Coming back to the idea of Trust, I think those of us who are slightly older remember things like BBCI, and everyone is watching the wind up of Lehman Brothers; so the idea of banks being bastions for keeping money is not one that holds true in all cases and I think maybe there’s a difference between the way in which different generations look at banks. If we look at the adoption of the newer banks like Starling and Revolut by the boomers and the more mature people compared to people like Mandana’s generation, a young millennial,  do you think there is a difference in levels of trust and levels of acceptance  between  older and younger generations?

Mandana Dilmagani: I would say generally a digital native generation has been more willing to adopt solutions that are digitally native as well. But now we see more products also focusing on older generations who are now digitally comfortable and willing to try new things. We have Toucan as a PFM, which is focusing directly on people who are a bit older and financially vulnerable.

Stephen Wood:  The things that struck us as interesting when we were doing some demographics research around the retail banking  sector, was looking at the financial attitudes of millennials- the digital natives, and actually they are a lot more conservative than people in older generations. When thinking of designing the personal financial coaching experience for millennials vs one for boomers, how does that differ?

Mandana Dilmagani: There is a difference but it’s not so much about starting with which generation you belong to; it is more about the customer needs because every type of customer needs a PFM in some sense but it depends on their financial background and their lifestyle. People who struggle living from pay check to pay check have a need for a PFM and it doesn’t matter if there are millennials or boomers. Also, people who are high income professionals who do are doing really well might need help figuring it out how they can make their money work harder.

Stephen Wood: So it’s more around levels of financial awareness, competence and live stage context then it is about demographics.

Mandana Dilmagani: It is really about understanding how their financial situation looks like and how can we help them improve because there is a lot of awareness now that for many people the finance-related topic is very stressful and linked to depression. That really changes the role of the PFM in people’s lives; it becomes a facilitator to lead a better and happier life in a way.

Stephen Wood: So if it becomes the key point in deciding whether you have a happier life,  suddenly we move back to this idea of how can we make sure that the PFC it is a beneficent actor and that it’s working for the good of the customer rather than for the good of the other players?  We’ve seen a certain financial market movement and manipulation happening in many forms over the years. When we think about designing for Trust, we talk about the idea of consent being central to making sure that the PFC acts on behalf of the customer rather than the bank. How do we engineer it so that the consent is explicit?

Anil Awasthi: Going back to Open Banking, we can look at the example of Europe and UK. Keeping in mind that the PFCs’ innovation or value proposition is propelled by Open Banking which enables data collection and insights delivery to the customer, the fundamental idea is that the customer is asked to give an explicit consent for what purpose the bank or fintech is collecting the data and how long they are going to retain it. Once this is set, the customer is clear and knows that he is in control of the data and he can withdraw the consent whenever he wants. This is one of the measures towards building trust with the customers.

Stephen Wood: But who is policing that?

Anil Awasthi: Open Banking is regulated in Europe but in other geographies where there is no Open Banking regulation and the data is not opened, the PFM or PFC solutions can only exist on paper. The Open Banking is a fundamental enabler and consent is a core part of it.

Stephen Wood: So it needs to be backed up by the regulators but whenever you look at some of the terms and conditions to provide access to the data, there are over 20 pages and people just scroll down to the bottom and just click the consent box.  Is there anything that is moving the regulators to try and make this clearer and simpler? Are the T&Cs really useful?

Anil Awasthi: I was reading a couple of reports in which customers are overwhelmed by reading all the terms and conditions, so many customers just tick the box, believing that the regulators will taking care of it and that they are safe. However, there’s a lot of drive happening in simplifying T&Cs or covenance. Looking at banks like Monzo or Revolut, when you are signing up, they also bring up a simplified version of T&C’s. Yes, there is a lot of work to be done but I think that the banks or any fintechs are obligated to keep those details.

Stephen Wood: So it looks like human centered design needs to be applied to that part of the equation. This brings us back to the need to design a better and cleaner experience, which typically the retail banks have not been very good at and the fintechs have been fantastic at.   Mandana, are there any great examples of PFCs that you have seen that really take a clear and transparent view to the Financial Management?

Mandana Dilmagani: Absolutely. Just to add to the terms and conditions of Monzo for example- it’s really in the interest of the PFC to make these things clear because it communicates to the customer that they don’t have ulterior motives and they are clearly saying that they have nothing to hide and are willing to communicate this in a way that is relevant and really understandable to the customer. In terms of designing a good PFM, I’d say the ones that are really doing well are the ones that differentiate not by only getting the basics right but by adding extra services and making the experience even more holistic. One of the things that we see coming up now is that many PFMs are starting to add more of human touch to the experience – it’s not enough to just have the app and see your finances broken down and maybe have the ability to filter by expense type. Companies like Albert for example now see that people actually want to talk to a real human being, consult an expert with some more delicate questions and they have this function of their geniuses, they called them, which are human experts that can give extended advice to people.

Stephen Wood: That kind of goes against the behavioral psychology principle stating that people open up to these machines; there are some experiments in which people are a lot more frank with their discussions of very personal matters, especially in the health market, once they knew it was an automated experience. But here we are seeing a shift away from “I trust the machine because it has access to all the data in the world and it has the best algorithms in the world”. This takes me back to this idea that when it comes to a financial decision point I still want to talk to a human.

Mandana Dilmagani: Yes I think we all have experience whit chatbots and they do have limitations; they are kind of fun to play around with and they can give you quick and simple answers but financial questions are often quite  complex and you want to evaluate different  options have somebody to lay it out to you in simple terms; humans have that ability to bring emotion into it and to pick up on the emotional language and respond accordingly.

Stephen Wood: So is it that the technology isn’t there yet or is it that there is a fundamental human need to want that human to human touch at the point of commitment?

Mandana Dilmagani: I guess that depends on who you ask – if you ask an AI expert who is very passionate about it they might tell you that AI is getting more and more sophisticated in that space. When we look at trends and emerging tech, we do see that AI is now able to read emotions and probably also deliver messages with emotional language but many people argue that there is still a difference when you talk to a human and it’s really a differentiating factor for a company that can show that they’re willing to give their customers that extra human touch.

Stephen Wood: So do you think that at some point when the technology is there and we’ve got better at language processing  and we have machine empathy, we’ll be able to say ”Hey Google tell me where should I invest my money to afford my dream holiday that I’m tracking on Instagram?”

Mandana Dilmagani: Yes because one of the trends that we’ve observed this year while researching for the Trend Almanac, is autonomous finance – people will give over their finances to AI because it will be able to make more informed and quicker decisions; people will let AI act on their behalf to make sure they can’t make wrong decisions themselves.

Anil Awasthi: The point is not about whether the technology is there or not; the additional point which I think it’s important  is accuracy because these are delicate things. What happens if it goes wrong? As nobody blames the technology, the accountability lies with the service providers and the solutions. But the technology is improving – looking at the example of Corso – a robo-advisor firm in South Korea which boasts around 83% accuracy. However, there is still 17% error to be accounted for. Yes, AI is advancing but the accuracy remains the fundamental point to keep it going.

Stephen Wood: So 83% accuracy isn’t bad if you are betting on a horse but if you  want to put your entire life savings on it suddenly it becomes a slightly different situation. But again, you tend to come back to comparing it with the monkeys doing the dance at the Wall Street Journal which has the same return as going to some of the larger brokers. Do you think that if the banks or the fintechs will start to underwrite the decisions so they limit your losses, will people start to trust them?

Anil Awasthi: It’s happening now and if you look at it without advancement in technology, your deposits are protected by government regulators up to £85,000. However, when you’re dealing in the risky instruments, all of us are used to read the advice that the investments are subject to risk. I think that in that aspect, if you compare, the situation needs to get better because now there is access to more data rather than being on your own or with the wealth advisor trying to do a lot of manual research. With the PFC we have an automated way to make more informed decisions and so the risk needs to be reduced.

Stephen Wood: I think there’s probably a tipping point where we can take a parallel, going back to the idea of financial inclusion, by looking at a Kiva a firm which enables people to make microloans to specific people, typically in developing economies, to do things like setting up shops, build wells and these loans get paid back and they are underwritten by Kiva. In reality, there’s always some level of default but it is relatively low and once you know that there is this underwriting method, you’ve got the chance of doing it and also getting a return, which means you’re more likely to invest. But I’m not aware of anyone in the retail PFC or autonomous finance space doing that yet.

Anil Awasthi: It is not  yet there  to be honest and I think we have to look at the various instruments which make up a leading PFC or autonomous finance. There are four leading providers in this space – Wealthfront, Sofi, Credit Karma and Betterment, each at various stages of maturity. The attributes on which they are compared include: savings accounts, checking accounts, retirement planning, personal loans offerings. Also, in terms of debt management we can look if they are helping with investments, insurance and what are the key PFM/ PFC features. Most of them have invested in AI, some of them are only able to predict the events, some are able to advise to take a certain action and some of them are able to execute that action once they advise.  So autonomous finance is yet to see more investment to make it a reality.

Stephen Wood: So we have three stages of maturity in this progress towards autonomous investment or autonomous PFMs: awareness, advice and action. Are there any firms that have really mastered the full spectrum and have a decent customer base that is happy and comfortable with them taking the reins?

Anil Awasthi: Not yet; there are four important attributes. Firstly, we have Automated Money Management and companies like Cleo, Olivia, Plum and Digit are experts in that space. The second attribute is Debt Management. Tully takes the lead in debt management functionality and Bright Plan Coach have streamlined the Retirement Planning. The last one is a robo-investing which executes some investing tasks. The different use cases have been taken by different fintech providers and the bank that can assemble all of it together will be the winner. But right now, there is a lot of fragmentation.

Stephen Wood: So we have seen people like Robinhood in US going into Wealth Management trying to shake things up; but can we can see a future where finance isn’t handled as it was done for generations and the banks become just the cash management function for sexier fintechs?

Anil Awasthi: It’s happening now and I’m going to give an example from China – Alibaba  and the concept called Super App. I wouldn’t say it’s cash management per se but the super function lets the customer be with the app and it will handle everything from content, gaming to banking, debt management, and any other lifestyle needs. If you draw the parallel to the banks, there is a discussion about the possibility of a bank to become a platform. Here a bank can be the pipe which can supply these services and consumed by anybody who wants to consume it. So yes, I think the banks are also going in that direction but there are yet success stories to be drawn from Alibaba.

Stephen Wood: So thinking about traditional retail banks dragging this enormous ball and chain of legacy architecture, process and regulation behind them – have you seen any traditional bank doing really well in the PFC space?

Mandana Dilmagani: I’d say most traditional banks are now trying to get in and they’re building their own solutions but none of them have really nailed it yet. Most of them are trying to bring in the human touch and the branches, mostly because they know that this is what they can offer compared to digital start-ups. They are trying to bring people in, have a conversation with them but what they are missing is the digital element where they can gather all the information from people to give them actionable advice.

Stephen Wood: This brings us back to the final mile and potentially having a human as the last step in the process. For traditional banks, if their only USP is having a branch, we come back to the conversation that we’ve been having for the last 10 years about the “branch of the future.” But many banks have found out that the “branch of the future” has now turned into a pub or a café and branches don’t exist, they are not relevant anymore. Have we seen anyone address that phygital (physical+digital) space – bringing together the physical and digital in a way that is actually successful or is like your dad is trying to wear trendy clothes and looking really out of place?

Anil Awasthi: That is not true across every country. If you look at India for example, the branches are still relevant because people relate to them even if the digital infrastructure is high. The cost of operation is possibly lower than the Western countries and the branches are still the way to go. Many countries are tapping into existing infrastructure like post offices and try to see how they can optimize and leverage them more to stay relevant and physically present. Now people are taking on remote banking. As for the phygital (physical+digital) space, many innovators are having the mobile branches which can be set up on certain days. The technology is also delivering that experience to the customer-  one can have a video call with a branch representative from anywhere and have that physical experience delivered to you. A lot of innovation is happening while the physical branches are being reduced so branches are not a limiting or enabling factor for the PFC.

Stephen Wood: So there is a continuum between the branch ceding to telephone banking ceding to internet banking ceding to app based banking,  and over the past 5 years everyone has talked about voice user interface VUI . Do we think that a personal financial coach is something that we will ever engage with using VUI?

Mandana Dilmagani: I guess it really depends on if you think you are in the safe space. If you’re sitting on the bus and you want to check your balance you’d probably just check your phone screen rather than having your phone saying out loud your balance for everyone to hear it. In the comfort of your own home it’s a different experience and maybe having a conversation with somebody could be more of a comforting experience if it’s a delicate topic. But again, it really depends on how sophisticated the technology is – if you feel like you are speaking with a robot with an electronic voice giving you advice that doesn’t really match your question, it doesn’t really work-  it has to be really sophisticated.

Stephen Wood: Again this becomes the cycle of competency/trust/ transparency and how willing you feel to engage with that. I would not feel very comfortable talking about my finances to my phone but I would still be relatively comfortable to talk to an independent financial advisor. However, I would still loath to go to my bank to talk about that because the partisan attitude is still there.

Mandana Dilmagani: Yes, the key is really the word “independent”- people want to feel like they’re talking to somebody who has their best interests in mind and doesn’t come in with a motive to sell them something.

Stephen Wood: Who do you think are the people who are doing PFC right at the moment?

Anil Awasthi: In the UK we see banks which have picked up some aspects (the early stages) and I believe Lloyds  Bank started  to do some pieces of it.  Monzo does it better and they’re able to help customers create different goals and allows money movement. Revolut is the other example. In US, the PFC world is picking up with companies like Mint.com. But to answer to your question about a leading bank: the banks could not build the technology and engagement on their own; they have adopted a Central aggregator where the customers love to go. The fintechs are coming to the front and not the banks.

Stephen Wood: In your perspective Mandana, who is pushing the envelope?

Mandana Dilmagani: Monzo is definitely one of the leaders in UK; then we have Plum which is doing a great job and also aiming to change people’s financial behaviors rather than just engaging them superficially.

Stephen Wood: This is one topic that we have not touched enough: coaching, which is around not just providing insights but also help in motivating people to change their behaviors. Personally, using Plum has been great for me and it gives really actionable insights in a very simple way that I didn’t get from my traditional bank. What are the types of behaviors that you’ve seen PFCs encourage?

Mandana Dilmagani: Changing financial behavior it’s really about ongoing engagement and making sure that firstly people are comfortable with their finances and start to get into a habit of engaging regularly and then also rewarding good behavior. If we want a person to perform a certain action, we will usually need to make sure they have the motivation and the ability to do so and then serve up a trigger. In the beginning, the PFMs started sending out regular triggers to get people to engage and over time, those triggers become internal- there was no longer a need for that push notification to get the customer engage with their finances, it becomes an internal need.

Stephen Wood: So coming back to behavioral psychology, I can imagine everyone in the PFC shop reading their copy of “Hooked” and going back to Skinner to see if they can try and encourage people how to do the shift. Thinking back diet apps which did this way before PFCs, we found that they’re fine at the beginning but suddenly the interest is lost and then the trousers aren’t as loose as they once were. Do you think this is something that we will see with PFC?  Will they be something that we swap regularly rather than sticking with the same one?  And if so, what does it mean for where we have our money?

Mandana Dilmagani: To make sure that people actually stick with it and not get tired of it like with a calorie tracker is to ensure that it really responds to people’s needs and in the language they comfortable with. Some people really need to get pushed to change their behavior and for some people a hands-off approach works better.

Stephen Wood: Going back to the diet apps, if we compare PFCs to diet apps, many people saw the social reinforcement as a great tool to encourage them to continue on their progress towards  weight loss,  but I think it’s a very different thing sharing your weight loss and sharing your savings or investment success. Do you think that social reinforcement strategy works for PFCs?

Mandana Dilmagani: In a certain way, yes – gamification in the sector can be a very strong force to motivate people. We see different types of gamification work. At Tide for example, it is about self-growth and feeling like you’ve reached the next level and getting this positive reinforcement from the app itself. Toucan has a system which connects you to a trusted person nominated by you; and that person gets notifications about how well you are doing so that they can pick up the conversation with you.

Stephen Wood: So it’s almost like a AA sponsor then?

Mandana Dilmagani: Pretty much yes. In other cultures, things work differently. Interestingly in China when Ant Financial launched their Sesame credit score systems, they were quite surprised to see that people were really happy to share that on WeChat and then have people see how they improve over time.

Stephen Wood: So they even shared bad scores because it was seen as progress that rather than baseline.

Anil Awasthi: In banking, gamification can happen in a trusted network and it could be anonymized in that social scoring. For example, a Rank 3 in credit management (pulled from all the information available) gives a different feeling and reinforces good behavior in a different way than just publishing individual names. You can still gamify and generate that behavior reinforcement in different ways.

Stephen Wood: So you are not giving the details, you are just giving abstract forms of awards.  What are your predictions for what we will see in the PFC market over the next year?

Mandana Dilmagani: We will definitely see  this shift to having  AI  become the over-friendly assistant for your finances and take off the burden of filtering through  loads of information to make sure that you make the right decision.

Anil Awasthi: From a business standpoint, I would expect  a lot of  acquisitions happening with the best of the fintechs being acquired by the leading banks to deliver the value propositions and I see a major push towards autonomous finance investment.

Stephen Wood: Also we can predict the usual cycle “something sexy being acquired by something  less sexy and losing it sexiness” and something new sexy appearing in the market.

Anil Awasthi: Consolidation – Yes! So it is a good time to start a PFC.

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