With chatbots, Mercantile aims to be virtual teller, financial coach

More than a year ago, Mercantile Bank of Michigan was searching for technology that could make it even simpler for digital banking customers to glean insights about their money. But when the community bank’s tech executive met with the conversational banking experience provider Abe AI about fulfilling that need, technology was hardly mentioned.

“We just bonded over financial health,” said John Schulte, chief information officer at the $3.2 billion-asset unit of Mercantile Bank Corp.

The Grand Rapids, Mich.-based bank revealed the result of its partnership with Abe AI last week: MercMoney, an artificial intelligence-enabled chatbot that customers can interact with on Facebook Messenger, Google Home and SMS to find out how much they have left in their grocery budget, what their income was last month or what their routing number is — without needing to search for answers.

While many industry observers see chatbots as the next frontier of digital banking, few banks have made the leap to offer conversational tech to consumers. That, of course, is expected to change as the technology matures and pilots scale up. Bank of America recently introduced Erica, its mobile banking chatbot, in Rhode Island, for instance. Citibank announced that noncustomers can use its mobile banking app to get insights on their financial data. Abe AI, which formed in 2016, already counts more than 15 financial institutions as customers and said it has several more currently in implementation.

Mercantile Bank of Michigan took the plunge early in an attempt to help customers think of the brand when they are trying to become more financially healthy, and ultimately, interact more often with the bank digitally. “That’s the position we want to be in,” said Schulte.

It’s a position that has been somewhat elusive. For years, banks across the country have learned pie charts will fail to inspire customers to budget, regardless of how good the personal financial management experience is.

Mercantile is no exception. “You always hit a wall with adoption,” said Schulte. “There is a certain segment who is intimidated by charts and graphs no matter how pretty they are.”

Schulte sees conversational banking as something that could spark customer interest in paying more attention to their day-to-day finances, or at the very least, answer typical questions.

But the bank was happy with its PFM provider, MX. So Mercantile decided to expand what it was already using from MX into MercMoney. In addition to finding out what their routing number is through voice-and-chat interactions, the bank’s bot users can aggregate their outside bank accounts and complete tasks like updating budgets and creating savings goals across their complete financial picture.

Without naming a specific number, Schulte said the cost of investing in a chatbot is “much less” than mobile banking and “pretty affordable” investment for any community bank or credit union. In fact, he hopes other like-minded banks pursue the model.

The model, however, is not an attempt to move customers away from the bank app to messaging and voice command banking. “We’re expanding the ways you can access information,” said Keith Armstrong, co-founder and chief operating officer of Abe AI.

In time, Armstrong envisions the chatbot sending proactive notifications to people, such as predicting someone’s account balance based on income and cash outflow based on data and other information the conversation may supply in a conversation.

It’s a vision analysts are championing.

Tiffani Montez, a retail banking senior analyst with Aite Group, is bullish on chatbots evolving into offering customers enough insight on how a transaction influences short- and long-term goals that they will be able to understand the trade-offs. “It’s another phase that will come soon,” said Montez.

It’s an important phase too. Right now, the return on investment is unclear for technology that won’t yet reduce call center calls or necessarily lead to direct sales. But the promise is that it can potentially engage more people with their money, and in turn, more clearly understand customer needs and wishes.

It's too soon to tell just how people will engage with bank chatbots. Already, the provider of the popular automated savings app Digit decided to ditch its chatbot as its primary interface — finding it too cumbersome.

And yet, analysts foresee a role for chatbots, predicting the vast majority of banks will let customers ask for information however they want and without the need to wait on toll-free phone lines or navigate the menu of a mobile banking app.

Emmett Higdon, director of digital banking at Javelin Strategy & Research, expects smaller banks to use chatbots to help people find things, like routing numbers, in the shorter term. But in time, he said, chatbots could help solve one of banks' more pressing issues: personalization.

A chatbot could, for instance, get people to think beyond a bank balance if it, say, cautioned someone they are over budget and highlighted some of the customer’s recent expensive transactions to show why. To put it another way: to supply advice that makes customers stop and think about their finances.

“Chatbots can get interesting,” said Higdon. “If nothing else, [they are] helping them to think more broadly about their behavior rather than focus on a single data point.”

Consumer interest appears to be there. According to Aite Report, 79% of 22-to-34-year-old consumers and 77% of 35-to-49-year-old consumers said they were moderately to extremely interested in using a virtual financial-wellness coach.

At Mercantile, Schulte has few preconceived notions about how MercMoney will be used and by whom. However, he said he expects mobile banking apps to endure in a land of bots because the context will matter. If he wants to know how much he spent on Amazon while cooking a steak, he may just verbally ask the Google Home bot. If someone wants to see the big financial picture, he may fire up his bank app. And he may want to use both.

“I see people using all of it,” said Schulte.