The rise of the invisible bank

These spending views rely on accurate categorization, which is not always a given.

“I always joke, we can put a satellite in space … but we can’t get our transactions categorized correctly,” Berman said. “Transfers are still being categorized as spending in apps, which makes people not trust these types of apps to give you insights, which makes this useless. No kidding people aren’t taking action. We don’t trust the insights that we’re being given.”

Berman sees this going in two possible directions. Either the technology gets better and people start to trust it or consumers are given the tools to make better decisions using heuristics and a lot of the work is done for them.

She would prefer the latter: Instead of presenting people with categorizations and hoping they form better habits because of it, the customer is helped to make changes.

For instance, a customer could sign up for a goal, such as taking a vacation at the end of the year, and the bank would make automatic deductions from their checking account to a vacation account, based on their income and expenses. A few fintechs and banks offer such automated savings tools already, including Digit, Chime, Qapital, Acorns, Fifth Third and Bank of America.

“I would love a behavioral economics method that would help people to do this,” Berman said.

McIntyre of Accenture said that in five years, banks will be giving consumers more in-the-moment advice on things like which payment mechanism to use, who to pay when, how to split payments. Such small decisions can add up to financial wellness.

U.S. Bank and Huntington Bank are already experimenting with this, using technology from Personetics. Bank of America’s Erica virtual assistant also is beginning to provide this type of advice.

The overall idea is to stop customers from making bad decisions that are not in their financial self-interest. Fintechs like Chime and MoneyLion already tout the idea that they protect consumers from bank fees.

Ultimately, banks’ improvement in this area will hurt their ability to make fee income, but if they do not improve, they risk losing further business to fintech upstarts.

“The U.S. banking industry still has tens of billions of dollars of insufficient-funds fees and we’re getting to a point where technology should save customers from that,” McIntyre said. “The challenge is going to be self-cannibalization for the bank. The banks have benefited from customers making suboptimal decisions.”

Some banks have already attempted charging monthly maintenance fees. Monzo, the popular U.K. challenger bank with 4 million customers, recently tried that. But customers balked.

Another way banks could make up for lost fee income is they attempt to disintermediate other industries like telecommunications by using the visibility they have into customers’ spending patterns to help them get better deals. For instance, a bank could see that a customer is leasing an 18-month-old Toyota Sienna when they could lease or buy a new car with lower monthly payments elsewhere, and thus disrupt auto dealers.

U.S. banks are gingerly starting down this path. Wells Fargo’s Control Tower, for instance, gives customers the ability to see all their recurring monthly payments.

The next generation of this idea is to actually help people switch to cheaper providers, whether they’re auto dealerships, mobile service companies, or other firms.

For example, ING has a personal financial management app called Yolt that’s used by a million customers in the U.K., France, and Italy. ING crunches the customer data it gathers in Yolt to help users make better decisions about the products and services they buy. It will tell them which utility providers could give them a less expensive service, and help them switch.

“We have always a challenger’s mindset,” said Legrand. “For us, this is an enormous opportunity to expand, to give new services, innovate, and better service customers.”