US Bank Division Sees AI and APIs Meeting Customer Expectations

If trust between financial services firms, merchants and consumers is essential for commerce to take place, it’s a fragile bond.

There are five main threats to that bond: credit risk; counterparty risk; fraud risk; security risk; and compliance risk.

Rob Seidman, senior vice president and chief product officer at U.S. Bank Avvance, told PYMNTS that “trust is a fleeting thing. It takes a long time to build and very little time to ruin.”

There’s a lot more connectivity between a broadening range of stakeholders, including technology firms, device makers, wallet providers, banks and their customers.

For banks — and particularly for U.S. Bank Avvance, which offers a point-of-sale lending solution that enables installment loans with merchants in a B2B2C model — there’s a balancing act to it all.

There’s a certain level of friction that needs to be injected into the digital interactions to make sure that “you’re saying ‘yes’ to the right people and ‘no’ to the wrong people,” Seidman said. “But you also need to be doing this in a way so that the customer finds it all highly transparent.”

It also helps when the interactions are fast and convenient, but that’s easier said than done in an environment where risk is exploding, Seidman said. Data breaches occur rapidly and frequently. For banks and merchants, data must underpin credit decisions so that the best interests of lenders, merchants and consumers are protected.

New Risks Are Taking Shape

“The newer risks are the ones that keep you up,” Seidman said.

Banks aren’t well-versed in digital identity verification and account opening. For firms such as Seidman’s, the company has found that credit risk is changing rapidly. He added that there are new credit types and new participants granting credit that don’t always show up in the traditional underwriting for credit.

Third-party risk is evolving too as open banking takes root around the globe and consumers can take their data with them between all manner of providers, as permissioned data is used to craft personalized services. What used to be a bank-to-bank transaction or bank-to-aggregator transaction is now bank-to-software-platform-to-aggregator-bank-to-third-party-identity-management-tools and back again, Seidman said.

“There are a lot of ‘hops’ that take place to enable all the functionality that we have,” he said, and no matter the use case, consumers want to be assured that their data is being protected.

For U.S. Bank, APIs power layers of security and connectivity to allow users to apply quickly and easily online, Seidman said. If approved, users can view qualified installment loan options without impacting their credit score. Merchants offer the bank’s product as part of their checkout flow.

A Real-Time Mandate

In today’s world, the customer experience needs to be in real time, Seidman said, adding that latency cannot be in the mix, especially with younger consumers who are digital-first and less concerned with which firm is doing what and when during a transaction. They just want to get things done.

As Seidman told PYMNTS, “sometimes you’re the front player, and sometimes you’re just in the back, but you’ve got to do both really well.”

Artificial intelligence will become a key tool here, and a careful approach to using AI in underwriting and other functions has been an important factor in crafting a seamless experience, he said. Regulations and clearer rules of the road, along with the standardization of data flows through a consortium approach and security protocols, will help all players understand AI’s risks and rewards more fully.

At an optimal level, Seidman told PYMNTS, the customer experience matches the moment to meet the needs.