Issuers now can tailor cash back offers to match your spending habits
Personal finance writer
Covers fraud, families, and erasing debt.
Imagine credit card rewards tailored to your spending, travel options based on your past preferences, text prompts to shift some money over to savings and scans of your spending patterns to block fraudsters from using your card.
Card issuers are doing all of this now – with much more in the works – all powered by artificial intelligence.
The public faces of these AI-based systems are such as Alexa, Erica (Bank of America), Mezi (American Express) and Watson (IBM). Behind the public faces, these big data systems look at your past behavior, crunch the numbers and reply with personalized suggestions based on your spending and savings goals.
Here’s how AI is changing credit card rewards and even how you budget and save:
Personalized rewards offers
“Customize is the key word,” says Craig Snodgrass, chief data officer at Cardlytics, which partners with more than 2,000 financial institutions to run their online and mobile banking rewards programs.
“It’s not enough that we are able to provide cash back rewards. We want to make sure the offers are relevant to the consumer and are driving incremental return for our advertisers,” Snodgrass says.
Customization boosts redemption
In a 2017 HSBC Bank and Maritz Motivational Solutions pilot program, 70 percent of 75,000 targeted cardholders redeemed rewards for something within the category (travel rewards, gift cards, merchandise or cash back) recommended by artificial intelligence sifting through 300 data points.
“The AI program helped identify a category that was deemed relevant to each individual cardholder based on their purchasing and redemption history,” says HSBC’s Marcos Meneguzzi, executive vice president and head of cards and unsecured lending.
“If we do our jobs right, it should feel like your credit card is your personal shopper. It can pick out what you’d use your points on without you needing to shop yourself,” says Maritz’s Jesse Wolfersberger, chief data officer and senior director of division sciences.
Location, location, location
Where you are can determine which rewards you are offered.
“If a Boston local is traveling to Charlotte, North Carolina, and used their card to buy the ticket, they will start to get deals for Charlotte hotels restaurants, stores, etc.,” Cardlytics’ Snodgrass says.
And whether in Boston or Charlotte, your phone – and therefore your bank – know where you are.
For example, if you’re in a bookstore, AI may ask if you want to use points, get cash back or redeem rewards to make a purchase, says Karl Kaluza, vice president, marketing and communications, at processing and marketing company Member Access Pacific.
“Or you could say, ‘I’d like a 10 percent discount on this instead of gaining points,’” Kaluza says.
“If we do our jobs right, it should feel like your credit card is your personal shopper. It can pick out what you’d use your points on without you needing to shop yourself.”
An AI-equipped personal travel concierge
American Express, which recently acquired the Mezi personal travel assistant app, is using AI and human expertise to help cardholders book vacations and business trips based on their preferences.
“Travelers simply message their requests for flights, hotel or restaurant reservations and Mezi provides personalized recommendations and makes travel arrangements at the travelers’ request,” says Elizabeth Crosta, vice president of public affairs and communications for American Express.
Later this year, American Express plans to incorporate Mezi in its AmEx mobile app.
AI-inspired tips to help you save money
AI can help you with your overall spending and finances, too.
While tallying up all of your spending in a year on Amazon could take 30 minutes of sifting through credit card statements, Bank of America’s Erica personal assistant can total all of your Amazon transactions almost instantly.
Amazon spending is just one example. Bank of America’s Erica, which uses AI, also can detail your transactions by retailer or spending category.
“I asked Erica to show me my grocery transactions and she showed me Fresh Market, Target and Harris Teeter,” says Michelle Moore, head of digital banking at Bank of America.
If you’ve set a monthly budget for groceries, books, restaurant meals or any other category you track on your credit card, Erica also will nag you, oops we mean alert you, that if you keep spending at your current level you’ll exceed that line item.
See related: Chatbots will help you with your cards, banking
Subscription and autopay monitoring
Remember that annual renewal that you keep forgetting to cancel before it hits your credit card again?
In August, Bank of America will add subscription monitoring.
Now you’ll get an alert in advance that the annual subscription to the magazine you never read but always forget to renew is about to automatically renew, Moore says.
When your bills are set on autopay, you may never look at them – until you notice that you’ve paid a higher-than-normal amount for your mobile phone bill for three months running.
At that point, it may be too late to get all excess money refunded.
The Wells Fargo mobile app, now with predictive banking, will alert you if payment for a recurring bill is higher than normal, a Wells Fargo spokesman says.
Capital One offers a similar benefit through its Second Look feature.
For example, if your cable bill jumped from $50 one month to $80 the next month or there were two identical charges from your grocer store on the same day, you’ll be notified in real time via Capital One’s mobile app and an email, says Youssef Lahrech, a senior vice president at Capital One.
“That’s the exciting part of this. AI will educate you on what your options are.”
Remind you to transfer funds
If your checking account is about to dip into the red, Wells Fargo now can remind you to transfer money out of savings to prevent bounced checks and the resulting overdraft fees, the Wells Fargo spokesman says.
On the flip side, if your checking account is growing quickly, the AI-enabled app may ask you if you want to transfer some money to savings.
The software learns your typical behavior and can alert you when you deviate from your spending pattern.
For example, suppose you always leave a 20 percent tip on your credit card. Then in a coffee shop, you quickly calculate the tip and leave 60 percent or more.
You’d get a text alert verifying whether you meant to leave such a generous tip to your barista, Kaluza says.
Catch fraud and empower cardholders
AI already is helping card issuers catch fraudsters, for example, by texting a traveler in Spain and asking whether the cardholder made a purchase the same day in England, Kaluza says.
“You get a text asking if this is your transaction,” he says. “First you reduce denied transactions. Second, you empower the cardholder.
“That changes the entire game. The cardholder feels like they have control over the product. If a fraudulent purchase pops up, you can stop it immediately.”
See related: Voice assistants begin to answer your credit questions
AI still learning, evolving
In the future, AI will help you make the best decision on how to pay for an item based on the credit cards and lines of credit you have available, says Cyndie Martini, president and CEO of Member Access Pacific.
If, for example, you were planning to buy a $2,500 couch at a department store, your AI app could outline the costs of available options such as a long-term bank line of credit, a revolving account with the department store or your bank credit card.
“That’s the exciting part of this,” Martini says. “AI will educate you on what your options are,” she says.
AI software is evolving and becoming more predictive as card issuers learn more about individual consumers and cardholders as a whole.
For example, who knew there were so many ways to say “Send money”?
“We thought there were three different ways to say ‘Send money,’” Moore says. “We thought they would use the words they see in the online form. We learned there were hundreds of ways to say ‘Send money.’ You can say ‘Send money,’ ‘Send cash,’ ‘Pay the babysitter.’”
Some financial institutions weren’t ready yet to comment on what they’re doing in this area, but banks and analysts are watching, investigating and working on new features.
“We’re still in the early days of what AI will do,” Kaluza says.
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