Jeff Falk
DES MOINES, Iowa—Keeping the credit union’s plastic top of wallet just got a little harder.
Machine learning solutions—applied to payment apps and financial management tools—are now telling consumers which is the best card for them to use.
Machine learning, also known as artificial intelligence (AI), allows apps such as Clarity Money to review a consumers’ card payment and purchasing history to recommend a card that’s best suited for an individual and for certain purchasing needs. Clarity Money will also scout a person’s commonly used retailers for coupons and discounts and factor those into the decision making.
What those machine learning tools—plus the inclusion into solutions such as Amazon’s Alexa--mean for credit unions, said CO-OP Financial Services, is that close attention must be paid to how their card offerings are structured, particularly credit cards. As CUToday.info has reported, a rewards battle has heated up in the credit card space, with major issuers investing significantly in attractive programs.
“Yes, Clarity Money uses an artificial intelligence engine to recommend the best credit card based on consumers’ spending habits,” said Jeff Falk, CO-OP director of payments product management. “This is all done before the person shops.”
Not Real Time
Falk said the tool is not something cardholders use right before they make each individual purchase.
“It’s not a real-time app,” said Falk about Clarity Money. “Again, it looks at your payment history and provides a guideline for which card is best for you.”
That makes it more important for the credit union to understand its members’ credit card needs and habits, broken down by demographics.
“So maybe you are a rewards person versus a cash-back cardholder, or maybe rate is most important to you if you keep balances,” said Courtney McKibbin, CO-OP product manager and research analyst. “Watch for behaviors to get the right type of card in front of the right person.”
McKibbin said that CO-OP credit union clients generally do a very good job of assessing their members’ needs to develop the right card offerings.
“Our clients are making sure they are offering what their cardholders respond to,” said McKibbin, who emphasized the new AI apps are comparing CU plastic to many competitors.
“Yes, it makes it more imperative that you stay on top of the rewards offerings of all competitors,” she said. “And the fintech industry is putting all sorts of apps in front of people that are offering them all sorts of innovative financial products. So credit unions have to keep up with equally sophisticated products.”
Table Stakes
Falk said that for credit cards that cash back is now table stakes. As CUToday.info has reported, analysts have stated that 2% cash back is what it takes to effectively compete today.
“Cash back is where the needle is at now. Before, it used to be points,” said Falk. “Points are still relevant, and we hear that from our clients. But to build a foundation for a loyalty program you need to start with cash back, as opposed to points.”
McKibben feels the new AI apps place pressure on rewards programs to offer greater variety.
“You will need to meet the changing demands of demographics—so a lot more needs,” she said.