Digital bank TymeBank and conversational banking technology provider Finn AI have teamed up to bring a low-cost, AI-powered experience to underserved consumers as well as small and micro businesses in emerging markets.

TymeBank, which was awarded the first full banking license in South Africa in about two decades, signed up over 100,000 customers within the first few days of its formal launch in February. The bank has been adding 3,000-4,000 customers a day since, according to Coenraad Jonker, co-founder and CEO of Tyme, and chairman of TymeBank in South Africa.

Jonker told Bank Innovation that keeping operational costs down as the bank scales up is critical to its long-term viability.

That’s where AI comes in.

“We put a lot of effort into collecting more data on our customers so that we can truly understand our customers and, by understanding our customers, do proper expense pricing and, thereby, drive the cost of lending down,” he said.

AI can also help the bank provide jargon-free financial literacy services to customers, who are often unfamiliar with basic banking concepts and terms, Jonker said. The trick is to teach customers these principles without being heavy-handed about it.

“The key for us is to find that perfect, teachable moment where the customer needs to know that thing and is interested in learning that thing,” he said. “A lot of the effort goes into trying to figure out, and anticipate, where that little bite-size piece of learning is relevant to your life.”

Financial literacy coach Max, which resides within the bank’s TymeCoach app, is meant to serve as that conduit for customers, without great expense to the bank.

 

Financial literacy coach, Max in TymeCoach

 

Jonker said Tyme currently has 120 employees, including its bank in South Africa.

“When we get to a scale of 5 million customers, we don’t want to have more than 200 employees,” he said. “If that’s the ambition, then our chatbot is not a nice-to-have, it’s an absolutely necessary element of our proposition to reduce costs by making sure that we don’t need to throw people at the problems.”

He said the bank, therefore, doesn’t think of Max as an interesting add-on to its offerings but “key to our long-term success and to remaining resilient against the next generation of competitors.”

Jake Tyler, co-founder and CEO of Finn AI, told Bank Innovation the bot is all text and no voice, for the time being, as text messaging is by far the preferred method of communication in South Africa and elsewhere.

“We think messaging is the at-scale, ready-for-market channel and interface at the moment because it combines gooey elements plus conversations,” he said. “Voice has a much more limited set of use cases it can be deployed against, like single, transactional things… I’m sure that will evolve as voice gets better.”

He said a big part of the financial literacy effort entails meeting the customers where they are, namely on messaging channels like Facebook Messenger and WhatsApp.

“It’s about making sure we’re bringing banking to people where they spend time and adapting it to a way they’re already familiar with, where they’re interacting with their friends,” he said. “We’re sort of learning how to adapt to them, and that’s the power of conversational AI.”

Tyler said the ultimate objective is to have a personal banker in everyone’s pocket and to make it a product where the bank and its partners, rather than the customer, are doing the legwork.

“There’s this new paradigm now where the bank has to learn how to interact with you,” Tyler said. “It’s actually really hard for us and Tyme, and our other partners, to deliver this in a way that works for consumers. But, for consumers, they don’t really have to learn anything new. They can do complicated things very easily.”

Jonker said low-cost banks can’t afford to spend hundreds of millions of dollars building their own AI. But, because banking is so specific, and has such specific requirements, he also said these banks can’t just take a general chatbot from off the shelf, use those algorithms and expect them to work properly. He said working with Finn AI offers a “best-of-both-worlds” solution because of the firm’s focus on AI for banking and its work with other partners in the industry.

“We’re essentially in a club of banks that are all contributing to a difficult job of bringing up this ‘genius alien’ of ours, and we don’t carry all that cost ourselves,” Jonker said. “At the same time, we also get the benefit of having a specially-made conversational AI capability.”

Jonker said Tyme’s ambition is to take its low-cost digital banking model to other emerging markets across Africa and Southeast Asia. In addition to South Africa, it already has technology deployed in New Zealand and Indonesia.

In South Africa, the bank uses a network of automated kiosks located in stores where customers can open new accounts and walk away with a personalized debit card within minutes, or replace an existing card. It also uses partnerships with local retailers to allow customers to deposit and withdraw cash through cashiers at the stores they’re already doing business with.

Jonker said other markets may call for different levels of physical presence, as the bank aims to be agnostic to consumer behavior when it comes to preferred methods of payment and other quirks.

As originally published on Bank Innovation.