How AI and Fintech Are Changing Your Money

Your phone buzzes at 2 a.m. It’s your bank, flagging a charge you never made, and the fraud system caught it while you slept. That alert is artificial intelligence, quietly at work inside your money. You never signed up for it and you can’t see it, yet it’s already sorting your spending, watching your card, and answering your questions at midnight. Give it ten minutes and you’ll know what it does for you, where it earns its keep, and where to keep your guard up.

Where you’re already using it

None of this is coming someday. If you have a debit card and a smartphone, all four are likely working for you right now, and mostly for the good. The fraud models alone stop billions in theft every year.

Robo-advisors, in plain terms

The one people ask about most is the robo-advisor. You answer questions about your age, goals, and nerves, and software builds you a diversified portfolio out of low-cost index funds, then keeps it balanced automatically. The fee usually runs about a quarter of a percent a year, well under what a traditional advisor charges. For straightforward investing, that’s a fine deal. What the software can’t do is sit with the rest of your life: the aging mother, the divorce, the business idea, the estate questions. Software manages portfolios. It doesn’t manage lives.

The part that should worry you

Those three habits sound almost too simple, and that’s the point. Scams, machine-made or not, work by rushing you past your own judgment. Any rule that slows the money down defeats most of them.

Keep the human in the loop

Here’s a sensible way to handle this part of the road: put AI in charge of the numbers and leave the judgment to us. Have the app break down your expenses, the model on the lookout for any shenanigans, or the robo-advisor make its adjustments. But when it comes to something of consequence, a sizeable transfer, an unfamiliar investment, or a product being pushed with some vigor, have a word with someone you can rely on. A fee-only fiduciary is best, since they’re bound by law to have your back. In the end, technology makes for a fine sidekick but not a very good one to be in command.

The bottom line

There’s no call to be an expert on the inner workings of a system to make use of it; one doesn’t have to be a mechanic to put the car in gear. Rely on the smart tools at your bank and in your apps, but stay on your toes when it comes to the kind of fraud that can be automated. Leave the weighty matters to people. It’s a formula that will stand up to time.

How the fraud watch actually works

Here’s the way to see it. When a bank puts a hold on a transaction, it’s because its software has an intimate knowledge of your habits. It knows where you tend to make a purchase, the typical amount, the hour of the day and even the town you’re in. So if there’s a departure from the norm, say, a charge in a different state right after one at the local market, the model will put a stop to it. This can mean a perfectly fine purchase while you’re away gets turned down. There’s no malice to it; the system is just being thorough. A simple reply to a text message is all it takes to have it sorted out.

There’s no burden here, and that’s as it should be. The system operates with each swipe of the card without you having to put in any work or even be aware of it; in the process, it puts a stop to billions in theft on an annual basis. All you have to do is verify with the bank that a working cell phone number is on record. That’s what matters, since the whole setup is predicated on getting in touch in a hurry if anything looks amiss.

Why your budgeting app sees everything

When an app is put to the task of categorizing your outlays for food, fuel or a night out, it’s open banking at work. A simple data link to your bank is all it takes. With one go-around of permissions, the app is free to scan and tag your activity. There’s no denying the convenience of it, but it’s something to be mindful of: you’re in effect giving a third party a view of your finances. So before making that connection, do some due diligence. Make sure it’s a name you recognize, see for yourself how they handle your information, and know for a fact you can sever the tie if you want to.

It’s worth making a practice of going over your app permissions or so every six months and parting with the ones you have outgrown. Think of each active link as an open door to your finances; the less you have, the less of a mark you’re. You’ll see the value in this when it comes to other security measures, like having a solid, unique password for the bank and two-factor authentication in place. That way, even if someone has your credentials, they aren’t getting past the gate.

The new face of scams

Here’s the hard part to swallow: the very tools at your bank’s disposal are in the hands of those looking to make off with your money. These days, a con artist has no trouble making a voice sound like your own by using a bit of audio from social media; the call from a relative in some kind of trouble will be indistinguishable from the real thing. And as for that email from the bank, it’s put together so well there isn’t a typo in sight. You can’t rely on spotty grammar to put you on alert any more, the software does a better job of writing than the fraudster could on his own.

There’s no new strategy on the part of the defense; in fact, it’s a welcome return to the old ways. Let the call end, then put in a number you have on file before any funds are transferred. Make sure there’s a code word in the family for when things are truly dire. Then let the sense of urgency be your guide. A legitimate institution won’t mind if you put an hour in to mull it over; a con artist, on the other hand, wants you to make a move while the pressure is on.

When to trust the chatbot, and when not to

There’s no denying the ease of a bank’s chatbot for the day-to-day. What was once a twenty-minute hold to see your balance, put a block on a missing card, or get an answer on a pending payment can be done in a few keystrokes at any hour. When it comes to the kind of work with a straight yes or no, the bot will outpace a person and is there 24/7. It’s the way to go for anything that has a definite answer.

Consider it a rule of thumb: if there’s any room for error in the way money or judgment is being handled, don’t let an algorithm be the one to make the call. Whether it’s a matter of a contested bill, a loan you’re weighing in on, or where to put your retirement funds, a chatbot has no place in the conversation. Put in for a human. When there’s actual money on the line, have a word with someone who has a legal obligation to look out for your interests before making a move.

Photo by CardMapr.nl on Unsplash