Olivia Moore of Chicago was $20,000 in debt when she downloaded Tally, a personal finance app designed to help customers pay off their credit cards. With Tally’s help, in less than two years she was able to cut her debt in half. Similarly, Callie Person of Florida turned to an app called Charlie, and in less than a year, she was able to set aside $1,500 in savings.
In a nation challenged not just by debt and tight incomes but also by shortfalls in financial literacy, those are significant victories. And these apps have a distinctive feature: Tally and Charlie are early examples of deploying artificial intelligence, or AI, to assist with personal finance.
It’s a way for time-strapped consumers to get some nudges – based in part on data about their own past behavior – to align their small daily decisions with longer-term goals. But as with so many technologies, these uses of AI also come with caveats. This early phase of AI-empowered apps may be revealing cautionary lessons that coexist with their emerging promise. “Technology can do a lot of good things to help people with their finances – especially to assess, to measure and track, to offer curated learning resources, and to nudge and remind,” says Cynthia Meyer, resident financial planner at Financial Finesse, a financial education program. ”But it can’t be empathetic, be a compassionate witness to someone’s struggles or worries, brainstorm in the moment, or offer a nuanced perspective or find the ‘question behind the question’ like a human financial planner can.”
For many people, including 20-somethings like Ms. Moore and Ms. Person, it appears that the caveats don’t outweigh the convenience. “It doesn’t feel weird or out of the ordinary” to be letting an app like Tally access personal data, says Ms. Moore in Chicago. “I’m a young millennial and have grown up with all forms of technology, including AI. … I understand that to receive a certain level of service, you have to give a certain amount of information, and I’m OK with that.”
And for her, the benefits were visible. Tally issues users a line of credit, enabling the app to make credit card payments for them and then charge a lower interest rate. It also served as a caution flag on debt, in a way that credit card statements hadn’t done for Ms. Moore in the past. “Tally reminded me that those rates are very real and are very, very high.”
A big need for financial help
Although millions of consumers now use AI-based finance apps, the apps still lag behind more traditional online financial tools. But proponents see reasons for growth. These apps are empowering because they show consumers in user-friendly ways how to save money or pay off debt, says Carla Dearing, CEO of online financial wellness service SUM180. “It’s important to recognize that customers who use banking apps leveraging AI typically have a much higher level of engagement than standalone apps,” says Jody Bhagat, president of Americas at the company Personetics, a provider of AI tools. And they’re dawning at a time of need.
Most Americans struggle to manage their finances. According to a 2018 Bankrate survey, 20% of Americans aren’t saving any money. Four in 10 Americans couldn’t handle an unexpected expense of $400, according to a 2018 Federal Reserve study.
“The big picture is Americans don’t like to manage their finances,” says Thomas Smyth, CEO of Trim, an app that analyzes the consumer’s banking and credit accounts to find subscriptions and recurring payments, and then gives the option of canceling them.
“The thing about saving and projecting finances is it’s a hard and an embarrassing conversation to have,” says Brian Wolfe, assistant professor of finance in the University at Buffalo School of Management. It might be easier to interact with a robot than to look a financial planner in the eye and feel like you’re being judged, he says.