Market Spotlight on Financial Services: Customers Talk Up Voice Banking’s Benefits

Voice-activated banking was first made available to consumers in 2014 when ING introduced a voice interface named Inge for its mobile banking app. Two years later, Capital One launched a voice skill for Amazon Alexa, becoming the first American firm on Amazon’s virtual assistant platform. And in 2017, Barclays rolled out a voice banking app for Apple’s Siri.

Since then, consumers have been forcing a technology revolution that financial institutions have not been able to hold back—or only do so at their own peril. Just about every major bank today has taken advantage of voice technology. Consumers can use voice payments to send money to friends or business associates via platforms like Venmo, Square Cash, or PayPal; to conduct bank transactions, such as balance inquiries, paying off credit cards, or making transfers; or to make purchases from online retailers.

Bank of America’s artificial intelligence-driven financial assistant, Erica, is a classic example of just how popular these applications have become. The financial giant rolled out Erica in May 2019 to provide proactive and personalized guidance to help clients with their financial lives. Erica reportedly gained more than 6 million users in the first six months and completed more than 50 million requests in its first year. Then, at the height of the coronavirus outbreak, Erica added 1 million users a month from March through May, increasing its user base to more than 14 million, according to Aditya Bhasin, chief information officer and head of consumer technology, wealth management technology, and operations at Bank of America.

This is just the beginning. Business Insider Intelligence reported that just 3 percent of U.S. adults had made voice payments in 2017. The firm projects that number to reach 19 percent this year and expects it to reach 31 percent by 2022.

But other research suggests that voice banking hasn’t really caught on just yet.

Microsoft, in its “Voice Report 2019,” noted that 11 percent of consumers have used voice technology to access banking or personal financial information and 10 percent have used it to retrieve credit card records.

Recent research from the Harris Poll found that a mere 9 percent of voice-activated device users performed banking functions in the prior 30 days.

But the numbers are not as bleak as they might seem. The same Harris Poll research found that people who are using voice banking are using it a fair amount—about five times per month on average.

On top of that, more people report seeing the benefits of voice banking. In the Harris Poll 2019 survey, 51 percent of consumers said they saw benefits to voice-activated banking, up from 41 percent in a similar 2017 survey.

While there is some disagreement regarding current usage patterns, there is little disagreement that voice banking is gaining market traction. Factors driving this growth include “an explosion of voice-enabled devices, generational gains in artificial intelligence, and a strong consumer value proposition for voice payments,” Business Insider Intelligence noted in its report.

Another strong factor influencing the market is technological advancement, particularly in the area of natural language processing, which is making it possible for voice payments to evolve from clunky, poorly scripted interactions to ones as natural as consumers might get during face-to-face interactions with personal shoppers or bank employees.

Natural language capabilities are a huge benefit for consumers, but they present a huge challenge for financial institutions and their technology partners. In designing its voice assistant technology, U.S. Bank found that there are so many different ways—it counted 573—that consumers could use to ask about their bank balances. U.S. Bank had to build each variance for that simple request into the programming when developing the skill for each device.

The Security Hurdle

Aside from ensuring the technology is sound and capable of recognizing and acting on just about every possible utterance, a bigger challenge for financial institutions and technology vendors alike might be convincing wary consumers that voice banking is trustworthy and secure.

Microsoft found that building trust is key for 41 percent of voice assistant users. Among them, 52 percent cited data security concerns; 41 percent feared that their devices are actively listening to and/or recording them; and 14 percent do not trust the companies behind the voice assistants.

Banks and technology vendors have been quick to point out that most voice-assistants and the devices that house them do not store consumer data after interactions end. On those devices that do store transcripts of everything users have spoken into them, account-related numbers are usually blacked out so no one else can read the information.

A similar concern, shared among 36 percent of respondents to the Harris Poll survey, was that strangers might overhear them during voice-based financial transactions, while 20 percent say the same of friends or family members. That is not something that technology can readily correct.

Another challenge is new regulatory compliance mandates for global banks. The European Union’s revised Payment Services Directive (PSD2), for example, requires strong multifactor customer authentication for voice-activated payments. A key element in that struggle is voice biometrics, which most experts hail as the most secure method of personal identification. A number of research studies have concluded that consumers have fewer security concerns using voice payment technology if it’s connected to some form of biometric authentication using factors like voice, face, or fingerprint recognition.

In general, many banks had been slowly making their way down the path toward digital capabilities like these. Then the COVID-19 pandemic hit, and they had to quickly readjust their future banking strategies.

According to findings by Marqeta, a card issuing platform provider, COVID-19 has had a significant impact on 96 percent of all European banks, with more than three-quarters (78 percent) planning to change their future banking strategy to adapt to changes in consumer behavior, such as the accelerated adoption of digital banking and cashless payments.

Additionally, 89 percent of banks in the study said that COVID drastically increased the speed of change in banking from years to months. Digitally transforming to improve the online and mobile banking experience (76 percent), offering new, differentiated payments services (70 percent), investing in security and anti-fraud solutions (70 percent), and modernizing core banking and payment platforms (66 percent) have all increased in priority.

“The future of banking has come around quicker than most expected. The onset of COVID-19 accelerated many trends in consumer behavior, with more people moving away from cash and adopting digital services, such as online and mobile banking,” says Ian Johnson, managing director for Europe at Marqeta. “These are all trends that were set to slowly change over time, and banks would gradually transform to adapt. But COVID-19 has drastically moved up the timescales, with 36 percent of banks saying COVID-19 has ‘opened up the floodgates’ to modernizing core banking and payment systems.

“To adapt and thrive, traditional banks need to be supported with modern core banking and payment platforms that can support the requirement to digitally transform and provide the flexibility needed for their future banking strategies,” Johnson concludes.