Podcast: Banks explore AI with consumer concerns in mind

Whitney McDonald 08:10:35
Wendy, hello and welcome to The Buzz a bank automation news podcast. My name is Wendy McDonald and I’m the editor of bank automation News. Today is June 17, 2024 Joining me is Rob Krugman, Chief Digital Officer of Broadridge. He is here to discuss what banks are doing right with AI. He will also share what consumers are asking for from their financial institutions and how technology can help meet those customer demands. Thanks for being on The Buzz, Rob,

Rob Krugman 08:10:58
absolutely well first, thanks for having me. So my name is Rob Krugman. I am the Chief Digital Officer of Broadridge. A little bit about my background. I’m a bit of a unicorn in that. I started as a technologist, so I graduated college with a CS degree, kind of in the 90s. You know, worked at a number of digital agencies, including one that I was kind of part of the founding team. And so quickly, kind of became interested in the creative side of the of and the design side of the process of thinking about new solutions and capabilities, and moved to a strategy role, a product role. And now I would say I’m kind of more in a futurist role where, you know, my job is really to kind of look forward and kind of understand where things are headed. How do we leverage new technologies and services to digitize experiences, create new platforms and disrupt businesses? So again, I’m a little bit, I kind of you like the term unicorn, because it’s kind of this forward looking term as we think about things. So the other part of your question was about Broadridge. And so, you know, Broadridge is a, you know, depending on the day, 23 $24 billion public company. And there really are, you know, two aspects to our business on, you know, on one side of our business, we provide services to the financial services industry to help them run their businesses. And so, to give you an idea, on any given day, we clear about ten trillion in fixed income and equity securities through our platforms globally, we’re obviously not a broker dealer, but our clients are broker dealers and asset managers. And you know, all different participants in the financial ecosystem. The other side of our business, which represents about 70% of our business, is our communications business. And you know, within our communications business, we help organizations communicate with their customers, with their shareholders, with their clients through a variety of different type of mechanisms. There’s marketing communications, there’s communications about your account, there’s regulatory communications. And you know, we’re not just someone that simply distributes content, but really what we are is we, we’ve become a big data company where information flows into our systems, and we work to take that information and deliver personalized, relevant experiences to individuals, which facilitate actions and facilitate engagement on behalf of our clients.

Whitney McDonald 08:13:05
Thank you. And again, thank you so much for joining us now. You talked us through a little bit of your background. You have the technology side, and now you’re serving as the Chief Digital Officer. Maybe you can tell us a little bit more about that role, what your day to day looks like, some of your responsibilities as the Chief Digital Officer?

Speaker 1 08:13:23
Sure. Yeah. So Chief Digital Officer is kind of this weird title, because it concludes a lot of different things and mean different things, depending upon what organization you work for. So you know, in my role, it really is two pieces. The first part is, if you think about the word digital, it’s digital transformation. And in here’s my view of what the word digital means, right? Digital and digital transformation is, how do we take technology and information, wrap that around a newly reimagined experience from the perspective of the user, we’re trying to solve need for and deliver something new, right? So it’s that technology, content, data, experience, to create something better than what was there before. So that’s part. And I work with the different business units, and I speak to our clients about how do we actually think about digital transformation? How do we leverage these new technologies to reimagine the way we deliver services and the way that that we deliver the services that we have today. The second part is around innovation. And you know, I am responsible for kind of our innovation capabilities. We have an innovation lab. And when I use the word innovation again, I think about it in two ways. There’s what I refer to as sustainable innovation, which is the work that product teams do, where it’s around, creating roadmaps and thinking directionally, where do we want to take these products, and maybe, how do we integrate AI into a particular solution? And then there’s disruptive innovation, right? And so my innovation lab specifically focuses on the disruptive innovation side. How do we think about these emerging technologies, AI, Blockchain? All different types of transformational things for our industry. And how do they create new opportunities? How do they potentially create new businesses? And how do we think they potentially could disrupt our clients, as well as Broadridge? And how do we actually solve for that? And a big part of innovation is not just doing what we think is right, but it’s also working very closely with our clients and creating solutions together. So we can, you know, reimagine financial services together.

Whitney McDonald 08:15:21
So speaking of that approach to innovation, of course, you have the internal team that determines what to focus on, but also what you were just mentioning the client, the client experience, or the client feedback. Also helps with that innovation. So you guys do this annual Broadridge customer experience and communications consumer insight survey. I’d love if you could tell me a little bit about the survey itself, and we can talk through some of the findings of the most recent survey, and what you think the highlights are. Sure,

Speaker 1 08:15:51
sure I listen. I think the the most important perspective of this communication survey and user experience. Customer Experience is the word customer. It’s the word user. It’s how do we actually capture information from the users that we serve, and potentially, even more importantly, from the customers that they serve? To use that as the driving factor of how we develop solutions, right? If you think about experience, experience is not something that the two of us sit in a room and say we’ve got a great idea. It should work exactly like this. We may have an idea, but to validate and ensure that that’s the right idea, we have to go speak to people who are going to use it and how they’re going to leverage it, and we have to understand what they’re about. So from my perspective, experience is kind of synonymous with design thinking. How do we create solutions from the perspective of those that are actually going to be using those solutions and work backwards? Because when we do it the other way, we could be lucky and be right, but when we do it from the perspective of the end user, the likelihood of success is much greater because we’re actually solving problems for the people that we’re trying to solve problems for. And a funny thing happens when you do that, when you solve those problems, you end up solving your own problems. So what the survey provides is, it provides us insights into the way people are thinking about new technologies, thinking about experience, thinking about directionally, that the way that they should be doing things. And we’re able to package that to begin to say, Okay, what other questions are necessary? How does this impact the solutions we deliver, and how do we work with our clients to more effectively deliver what they’re trying to do?

Whitney McDonald 08:17:23
So some of the highlights that I kind of picked out from the survey were AI, implementation, personalization, so we’ll talk through some of those. But first, based on the survey, maybe we can talk about AI. Of course, we can’t ignore AI, right? But what? What banks are doing? What are banks doing? Well, when it comes to implementing AI, what are you guys seeing on that front?

Speaker 1 08:17:46
So I think you know, the first thing that they’re doing is they’re experimenting, and that’s actually the most important thing, right? So what one of the things we notice is that when it comes to AI, a lot of the efforts are internally focused. How do we provide efficiencies making it easier to use our platforms enable financial advisors to do their job better, right? And maybe some customer service capabilities where we can make it easier for clients to actually service and get self service, and then eventually go to the right folks. That’s a great place to start, because the risk level with that type of experimentation is controlled. And you know, so one of the challenges, and one of the things that came out of the survey is that, you know, consumers feel that AI lacks a sense of empathy, right? Right? That’s really good feedback, right? One of the things we also know is that if we look at the technology every single day, AI gets better. I was at a conference recently and someone spoke about that AI is as bad as it’s ever going to be today, right? And you can basically repeat that every single day. And so as we think about the future, how do we leverage AI to more effectively communicate with our customers and to facilitate empathy and understand who they are? Becomes increasingly important. So the other side of this is personalization, right? You hit on personalization as a component of this. You know personalization is really important, right? Specifically, when it comes to communication, we actually have a stat that says 45% of consumers have stopped doing business with companies who did a bad job of customizing experiences to their specific needs. That’s it. That’s a staggering number, 45% so if you take that number, and then you think about AI and think where we could be headed, right? I was in a another session just the other day, and someone was talking about real time experiences, right? This kind of hurt my head a little bit as I was starting to think through the ramifications of it. Because if we think about the way we personalize content, and even the way that we use AI today is to give us signals related to personas, well, what if we’d have to do that anymore? What if we could actually use data and information feed that into a real time experience engine that creates an experience specifically for you. That’s where things are headed. Now, are we there yet? No, right? There’s challenges that need to be overcome. There’s challenges around hallucinations that exist within AI and how do we actually tune the llms properly? That stuff is all coming. I think. The other aspect of this, and this was another finding, is around data, security and privacy, right? How do you you know, one of the really interesting things about AI is all the stuff that we can do. One of the questions we have to ask ourselves is, how much stuff we actually should do, right? So security and privacy become really important because we’re able to gain insights at a level that we haven’t been able to. To before, because the technology can actually identify those and then it becomes a question is, when do we get to that ickiness, right? Like we have to be really careful, in particular in communications, that we don’t scare people away, and that’s where empathy starts to come in. So I think the combination of these things start to work together, and the end result is much better experiences. And if you ask me where I think it’s going to head, I think we’re going to eventually get to a place where we’re able to communicate with individuals as individuals. Yeah,

Whitney McDonald 08:20:59
and you’re starting to see, I it really resonates what you said about AI is as bad as it’s going to be today, it’s so true that it’s constantly changing and and adapting and getting better at what it’s supposed to be doing. I kind of wanted to go back to one of the points that you made about personalization, and it is one of those components of leveraging AI that gets you to a place where you are having these customized experiences. You mentioned a statistic that you’re you’re you’re seeing consumers leave companies or stopping being a client or patron of certain businesses that don’t have that customized experience. Maybe we can break down a little bit what role data really plays in that, and maybe a step further, not just how important it is, but how do you make sure that you are tapping your data as a financial institution? How do you have meaningful data that you can really use to your benefit,

Speaker 1 08:21:56
sure, and I actually think what’s interesting about this, the question you just asked is, let’s also tie AI into that, because I think there’s a role it can play. So you know, if we think about the types of communications organizations send to their customers, I tend to think about it in several different buckets. There’s Marketing Communications, which tend to be the mess the best communications that people send. They’re very, very experience driven. They’re really focused on facilitating conversions, right? It’s about generating new business. So not surprisingly, there’s a huge amount of time spent on them. The Other Side, though, is when someone becomes a customer, all right? So let’s think about financial services. I become a customer of a brokerage firm or an insurance firm or a bank, right? There’s communications that need to be sent to me. Some of them are regulatory communications. Some of them are account communications, like monthly statement, could be trade con firms or other different types of letters and notices that I get from the institution I have a relationship with, by and large, those communications have no empathy. They’re not personalized whatsoever. They’re the same thing that everybody gets. And there’s such a lost opportunity here, right? So one of the interesting things we’ll go back to the survey for a second Gen Z and millennials. 45% of people we said, will stop a relationship because of the lack of personalization. As you get some younger generations, it goes up to 55% so why is that important? What can we do about it? You mentioned data. Data is the number one driver here. If we think about it, we know a lot about the people we’re trying to communicate it with, but what’s happened? And I don’t want to use the word lazy, because that’s not what it is. It’s that we view a lot of communications as checkboxes. We need to send out this content, we need to send out a bill, we need to send out a statement, we usually need to send out a regulatory disclosure document, but we don’t think about the impact on the relationship when we send those things. What if instead we thought of personalization and the opportunities to say every time that we communicate, it’s a touch point with our client, a true touch point. This is a meeting. This is an opportunity sit in a room reinforce the value proposition that we bring and explain information in a contextually relevant way that the customer understand what it means. Right? That would be a huge step in the right direction. So kind of, what are some of the areas we can look at when we want to do that. So one of the more interesting things is, over the last two or three months, a great place to look is LinkedIn, right? So LinkedIn updated their entire platform to integrate AI, so every single post has prompts integrated, where you can get information about what was just said in that particular post. That’s a really powerful thing. So if you think about that in financial services, let’s go to brokerage, for example, instead of simply sending a statement that said, Whitney, you’re up 3% for the month. Here are your holdings, and here’s the return. The reality is that means nothing to you. What would be much more effective if it had said, Whitney, you’re up 3% for the month. Here’s how you compare to other people that look like you. Here are some of the drivers of that performance. Here is, let’s have a conversation, because I think we could change a few things to actually drive better performance. That became an engaging communication and there’s so many opportunities to do that across this content, regulatory materials. I you know, people are not jumping up and down when a regulatory document comes to them, but the reality is, those regulatory documents potentially have really important information, but it gets lost because there’s so much of it. So how do we pull out information and say, hey, the RE. And you’re getting this is because you actually own this stock, right? This is what it means to you. This is what you’re being asked to do, and this is why it’s important. We need to provide that context, that empathy in all types of communications. That’s kind of like bucket number one, pocket number two around personalization is recognizing that, in particular in financial services, people have multiple relationships. I may have a wealth account, I may have a bank account, I may have an insurance account, and they may all be with the same organization. When we get different pieces of information from all of those parts, we’re inundated, right? It actually becomes noise. And so one of the fascinating things that we have found is that in many cases, people prefer the physical experience versus the digital experience, because in the physical experience I know what’s important and what’s not in a few seconds, but in the digital experience, I receive cryptic emails that don’t include empathy, don’t include information, and so I don’t know what’s important, so I ignore them. And that’s a problem for everyone, right? It doesn’t mean we shouldn’t be sending these things. We should, but we should make it part of the story, and that story should really be focused on the needs of that particular person. And here’s the funny thing, people are scared to do this because of regulations. If you actually look at regulations, you understand them, you’ll start to realize that all this stuff can work together, right? We can be regulatory compliant while facilitating empathy and providing a story. And actually, we can do it a lot better digitally than we can physically. And so it gives the opportunity to drive that digital transformation and that digital adoption.

Whitney McDonald 08:27:04
No, it’s such a great way to connect those dots and to provide the example of LinkedIn, and it takes away like the futuristic what can ai do? You’re already seeing a lot of AI application, and this is LinkedIn. Isn’t necessarily financial services, but it is a positive experience that you can gain a little bit more knowledge about who’s interacting with the post. Okay? So can a financial institution gain a little bit more knowledge about how their clients are interacting, or, like you mentioned, you get different things in your inbox or a text, and you’re like, I don’t know. I already know that, or that doesn’t mean anything to me. So seeing AI implemented in that way and saying, Actually, we could apply this to financial services and have much more meaningful like you said, it’s a missed opportunity. You’re already making contact with a client, but you didn’t get anything out of it. They didn’t get anything out of it. So I love that example, and it kind of takes away the what ifs around AI, because you’re seeing it in action in different realms and different industries, and it is working. It

Speaker 1 08:28:11
also can start, you know, with just context, right? Like you don’t. We don’t need to go all the way to kind of creating this uber personalized experience, completely developed by AI. We can actually start with small pieces, and it could be as simple as this doesn’t even take into account AI, think about a trade confirm, right? If you have a financial advisor periodically throughout the year, they’re going to make trades on your behalf, and you may receive, you know, tomorrow in the mail or through email, five trade confirms, and it says, You bought this, you sold this, you sold this, you bought this, right? That’s all it says. And you’re kind of left asking the question, Why? Why did this happen like and there’s no context. Think about the power if it simply said, You know what your portfolio was out of balance against your goals. I wanted to make some changes, so we changed the position, and you now rebalanced against those positions. If you have any questions, give me a call, right? That’s not even AI. That’s just providing a description of actually what happens, and you think about that financial services cases. My favorite example is the explanation of benefits for healthcare, right? I know it’s not finance, but everyone gets this. You get these EOBs in the mail and it says, This is not a bill. You owe $200 and you’re like, What do I do with this? Like, is this? Do I actually owe someone money or not? It’s because context is missing, right? And that’s where personalization becomes so important. I think if it you know, we can personalize the experience and what it looks like. Personalizing the content by providing context is so important for people to understand what it means to me, because if not, it’s just a generic piece of information that really has no strong benefit to me. Yeah.

Whitney McDonald 08:29:53
Now we talked bigger picture. We talked a little bit about the survey. You gave some data there. We talked AI and personalization, but more specifically, I’d like to hear a little bit more about what Broadridge clients are really asking of your team, and kind of how that innovation fits in what you’re working on today to really fit some of those speeds. Yeah.

Speaker 1 08:30:14
So I would say the four primary areas that we’re thinking about when it comes to innovation, the first is experience, right? So, and it’s not just communications experience, it’s experience of everything that we do. How do we make sure that we’re focused on empathy in everything that we build so that. That our communications are more effective, that we distribute on behalf of our clients, that the interfaces that we provide take into account the people who are going to use them, so it makes their jobs easier, right? Just as an example, I was recently, and I’m not going to say which bank it was, but it was recently at my ATM machine, and they rolled out an entire new experience. And what used to take maybe four clicks on the screen on the ATM machine. Now, it takes about 15 and I was like, What in the world did they do? And I was, I was I was visibly frustrated at the machine. I was like, they didn’t do strong usability testing here. I’m not sure what they were thinking. It looks pretty, but doesn’t make my life easier. So that becomes really important. So experience is really important. Ai, I don’t think you can be an organization today if you’re not paying attention to what’s going on with AI, right? And so that comes really from from two perspectives, right? We have teams that are focused on, how do we think about integrating AI into the solutions that we already provide to make it easier for people to use those tools to identify efficiencies and enable those efficiencies to happen. What my team really is focused on, though, is, how do we leverage AI to facilitate more interactive communications, make it easier for people to get answers to their questions, to provide copilots that allow us to kind of dig deeper into information and where it’s going and where I really get excited about AI is the future. How can machine learning plus AI make it easier for people to make decisions, right? So if machine learning is being used to identify anomalies that exist in the data that automatically becomes exhausted as we’re running through and providing processes for clients, can AI actually be trained to actually make decisions, and then when the decision is a priority enough, it goes up to an individual to help them to do their jobs. That’s kind of, you know, one of the things that I look at the third bucket, and this really isn’t communications related, though, I think in the future it will be, is around tokenization, right? So we’re spending a lot of time thinking about not just tokenization in the world of crypto, and we’re doing a lot of work in that space, but also, what does tokenization of real world assets mean, and how is that going to affect and what type of new products and services are going to be made available? Right? We’re seeing a lot of this where banks are experimenting with token ace and asset managers are focusing tokenization. And I think where that eventually comes to is the effect that blockchain and DLT in particular, tokenization is going to have on traditional finance? Right? Are we going to see an eventual move where funds and equities are tokenized assets that trade in a real time manner, and simplify the back office processing and efficiencies to a level that we probably never thought was even remotely possible. So those are kind of like three of the big areas. The fourth, which is kind of more of a an area that I’ve been thinking about for a long time, and it speaks specifically to personalization and communications and everything that we try to do is identity. So you know, one of the the big things that our industry has had to solve for since it’s become a digital industry is identity. How do we do and what do we do with information about our customers? How do we protect it? How do we use it? How do we make sure that it’s not part of a cyber attack or vulnerable, right? And the risk associated with that, and the technology associated cost organizations billions of dollars a year, right? So recently, there’s been some major changes. The the CFPB in November issued a new set of rules, which is kind of GDPR plus for the financial services industry. The White House in February issued an executive order. We’re seeing the same thing in healthcare. And essentially, what it’s saying is that consumer information is owned by the consumer, right? Let’s not question where we might store information. It’s owned by the consumer. And so what we’ve been experimenting with is we experiment with AI and we experiment with tokenization and web three technologies are there opportunities to give consumers control over that information and make it easier for them to engage frictionless with the organizations they work with? Right? Can I have a digital wallet that’s my that’s me, it’s my name, it’s my address, it’s my social security number, it’s the other pieces of information about me, and can I use that to facilitate connections with various service providers? Because when you do that, it eliminates friction, it actually increases security and does other things as well. But the biggest value proposition to organizations is going to be the elimination of friction in the digital world, because friction right now, right we kind of hit on it before 45% of consumers decide to stop doing business with an organization when there’s not a personalized experience. What I can tell you, and it’s not captured in these numbers, but what I do know is that when friction happens, I get an email and I have to click on something and I have to remember username and password I don’t know, or I point my phone at a QR code and it asks me to do something, and I don’t know how to get in. I. That’s kills convergence, right? And so identity is such a central portion of that is, can we simplify that and we can break the barriers to make it easier to flow between the two?

Whitney McDonald 08:35:46
Well, even your ATM example, it’s a little bit different, but you’re like, why is this so challenging? I’ve done this when it was easier, so yeah, the in and the frustration that comes with that, or, like you said, you’re just like, forget it. I don’t want to do this. I don’t want to go through

Speaker 1 08:36:01
this just, just the other day, we had an issue where we’re trying to send money through Zelle, and it got locked up for some reason, and we had to get on the phone at 1130 at night to speak to, like, like, this is crazy to like, ask me questions. You’re like, Is this even the bank I’m talking to? I’m concerned I’m speaking to someone that’s trying to someone that’s trying to steal my information. And you’re like, This is crazy, right? So, like, there’s, I think it goes back to this idea of if we lead with experience and we focus on empathy, and what I mean by that is, how do we put ourselves in the shoes of the people we are trying to communicate with, service, facilitate actions with and make it easier for them to do that in a way that is secure, that they don’t. They don’t necessarily see the security, but it’s there. That’s that’s January law. That’s what we’re all trying to do. Yeah, yeah,

Whitney McDonald 08:36:45
absolutely. And all of those buckets that you mentioned are super important right now, the AI tokenization, and then, of course, the security as well, which kind of all goes into this whole idea of investing in digital and frictionless experiences that consumers it’s very clear that that’s that’s what they want, that’s what they need. And so meeting up with that customer demand through all of those buckets is really important.

Speaker 1 08:37:13
What’s really interesting though, just I didn’t know one point there that you just said. The good news is there’s plenty of places where we can steal ideas from it. I don’t mean that negatively, right? The retail industry, the non financial services industry, is really good at this stuff, like you want to see great customer experiences. Go, look at what Apple does. Go, look at what Amazon does. Go, look at what Google does, right? Go, look at what retail shopper sites do. It’s pretty amazing. And you could say, we’re not competing against the other bank, we’re not competing against the other broker. I’m competing against Amazon. I’m conceding against Apple. How do I actually deliver experiences that are at that level? Because if you do, that’s how you get people excited, and that’s they talk about it like. You want people to become net promoters. Make sure the way that you communicate and the way that you deliver experiences is not viewed against the old bank that they used to work with or the old wealth management firm they used to work with, have them view that against. Wow, this looks like something that Apple would deliver, right? That gives you bonus points.

Whitney McDonald 08:38:13
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