Will Chatbots and Robo-Advisors Eliminate Financial Literacy?
The modern banking industry has more demands than ever. Because of the ongoing advancements, many experts believe that traditional financial education methods are already a waste of time and simply won’t be heard by a generation accustomed to being more “spoon fed.” The “old school” techniques will not help Millennials prepare for their futures in the financial world. They believe that credit unions should share useful financial advice to help Millennials go through their routines. To them, credit unions could also help relay information through real-time alerts and mobile app platforms.
These experts believe:
• Traditional financial education methods are a waste of time for all generations
• The oldest Millennials (38 years old) may have already moved out of their family homes
• Real-time alerts don’t really help anyone because they don’t pinpoint the main cause of anyone’s financial problems
Turning Millennials into Baby Boomers
Another problem is that delivering financial advice through smartphones might not work. TIAA Institute’s study on financial literacy state the following:
• The millennials who trach their spending or pay through mobile apps are highly likely to overuse their accounts than others
• Improving various levels of financial literacy will probably lessen the negative effects of online spending tracking and mobile payments
There are issues with these pronouncements:
• Financial literacy scores increase with income and age.
• Using mobile spending trackers and mobile payment apps are not the causes of account overuse
Based on a study at the University of Colorado, financially illiterate households tend to manifest more intelligent financial behaviors than financially intelligent households.
Will AI Place Financial Literacy in Storage?
Some huge banks are already using AI Advice:
• Citizen Bank’s goal for its SpeciFI AI-driven program is for their clients to know that they are looking out for their financial condition.
• Bank of America’s virtual assistant, Erika, helps clients provide individualized guidance and deal with more complicated financial tasks so that they could be on top of their financial issues.
Even so, they do not help improve financial decisions.
Financial Literacy is Not the Issue and AI-Advice Doesn’t Correct Behavior
Bad financial behavior is not the main issue—it’s the main symptom of a much greater issue. The root cause of bad financial behavior, such as overusing accounts, is personal problems. Addressing these issues will be able to help people regain good financial behavior.
Robo-advisors and chatbots are useless in improving financial health. They are just good for stock picking and customer service. Behavioral change should be inspired and drive so that clients can perform better financially.