How predictive AI is becoming a weapon to fight financial hardship
By Rami Cassis (pictured), CEO of Fintilect
Financial hardship is a topic that is never far from the headlines in both the US and UK.
This is perhaps not surprising when you examine some of the reasons driving this. A fluctuating global economy, an ever-spiralling cost of living crisis and ongoing employment issues are just three examples of many, which are bad enough when taken individually – but, when combined, present a perfect storm to cause immense financial hardship for huge swathes of the population.
As the gatekeepers to the population’s financial health across both sides of the Atlantic, banks, building societies and credit unions are feeling the pressure to do all they can to ensure people do not reach financial rock bottom. They are increasingly being guided by legislation designed to protect consumers and are furthermore being placed under intense moral pressures by society at large to ensure they take their responsibilities seriously.
An increasing number of financial providers are looking to the merits of predictive Artificial Intelligence (AI) as a way of offering proactive, supportive solutions that go beyond traditional risk management.
Let us examine how predictive AI can help providers offer consumers a solid wall of financial support – and prevent financial issues from snowballing into major financial hardship.
Financial hardship statistics
An examination of how financial hardship is affecting people’s daily lives across both the UK and US presents sobering reading.
The UK’s Financial Conduct Authority shows that the cost of living continues to have an impact on the financial lives of many adults in the UK. Its research shows that in January 2024:
- 4m (14%) felt heavily burdened by their domestic bills and credit commitments
- 5m (11%) had missed any of these bills in the previous 6 months
- 6m (28%) were not coping financially or finding it difficult to cope
- 9m (11%) had no disposable income
The FCA’s research goes on to outline how many “vulnerable” groups tend to struggle more than others, including adults from low-income households, unemployed adults, others not in work such as the long-term sick and full-time carers, renters and single adults with financially dependent children.
In the US, figures present a similarly concerning picture. The Financial Health Pulse 2024 U.S. Trends Report, released by the Financial Health Network, the leading voice on financial health, found that 70% of American households remain financially unhealthy with day-to-day financial realities worsening for many. Credit card debt was particularly singled out as a major issue for many households.
How financial providers can harness predictive AI.
Predictive AI can be an invaluable tool for people facing financial hardship.
By analyzing data and identifying trends, it allows financial providers including banks, credit unions, and building societies the ability to improve the financial situations of multiple groups of people across both the UK and US.
Leading predictive AI platforms are designed to work seamlessly with existing digital banking platforms or can be implemented via related cloud-based engagement platforms to deliver end-to-end, hyper-personalized customer experiences.
By providing personalized financial predictions, recommendations, and insights, predictive AI empowers individuals to take control of their financial well-being and make smarter decisions, ultimately helping them navigate through periods of financial difficulty.
- Budgeting and Expense Tracking
Predictive AI can help people create and stick to budgets by analyzing past spending patterns and forecasting future expenses. It can alert users when they are approaching their budget limits, suggest areas to cut back on, or provide reminders about upcoming bills or payments. This proactive approach can prevent overspending and help people better manage their cash flow.
- Debt Management
AI tools can analyze an individual’s debt portfolio and suggest the best course of action for repayment. By predicting how long it will take to pay off debt based on current income and expenses, AI can suggest debt consolidation options, refinancing opportunities, or the optimal method of tackling multiple debts.
- Income Forecasting and Planning
For individuals with irregular incomes, such as freelancers, predictive AI can analyze historical income patterns and predict future earnings. This allows users to anticipate lean months, plan for savings, and avoid spending more than they can afford. Additionally, AI can recommend ways to increase income or find side gigs based on skills and market demand.
- Financial Assistance and Aid Discovery
AI can predict eligibility for financial aid programs, grants, or government benefits by analyzing income, employment status, and household situation. For those facing financial hardship, predictive AI can help identify opportunities for support, such as food assistance, utility subsidies, or unemployment benefits, based on data inputs.
- Optimizing Savings
Predictive AI can recommend strategies to save more effectively, even during financial difficulty. By predicting future financial needs, such as emergency fund or medical expenses, it can suggest how much to save each month and offer tips on reaching savings goals faster. AI can also suggest high-interest savings accounts or investment opportunities that fit an individual’s financial situation.
- Improved Credit Management
AI can analyze a person’s credit score, financial behavior, and spending patterns to provide personalized advice on how to improve credit scores. By predicting when payments are due and highlighting areas that are negatively impacting credit, AI can help users take specific actions, such as paying down high-interest debt or disputing inaccuracies on their credit report.
- Predicting Financial Emergencies
AI can analyze patterns and external factors, such as medical history or weather, to predict potential financial emergencies and suggest ways to prepare financially. Early detection of possible hardships can allow individuals to build savings or adjust budgets accordingly.
- Access to Financial Education
AI-driven platforms can recommend tailored financial literacy resources, such as articles, videos, or courses, based on an individual’s financial needs. This could be helpful for people who are struggling financially but need to understand better ways to manage money, credit, or investments.
- Investments and Asset Management
While investing might seem out of reach for those in financial hardship, AI can suggest low-risk investment strategies or teach individuals how to invest in a way that aligns with their goals, risk tolerance, and financial situation. It can predict the best times to make small investments and build long-term wealth.
- Personalized Financial Advice
Many financial institutions now offer AI-driven financial advice based on data inputs. These tools provide personalized recommendations that account for a person’s unique financial situation. AI can help people make more informed decisions about spending, saving, and investing, reducing the likelihood of financial missteps that could exacerbate hardship.
Conclusion.
Financial services providers are increasingly expected to provide an individual, tailored approach to people to ensure they understand their specific financial needs and requirements.
A core way to do this on a mass-scale is to implement the power of predictive AI. Its ability to provide financial institutions with the intelligence to speak with their customers as individuals is proving to be a big draw for an increasing number of providers across both sides of the Atlantic.
After all, against the never-ending storm of financial pressures and economic hardship, predictive AI is rapidly carving out a reputation as one of the must-have, reliable weapons for financial institutions wishing to show they have the financial interests of their customers at heart.
