UBank adopts Basiq's AI-powered tools to help Millennials budget

UBank has joined forces with Basiq to predict the spending of Millennials and help them save money.

The National Australia Bank-owned digital bank, which has 550,000 customers (up 100,000 over the year), is using the Basiq data analytics platform to provide budget management software to customers, more than half of which are Millennials.

And new NAB boss Ross McEwan is keen to extend the customer personalisation technology across the group more broadly.

Sixty per cent of UBank's 250 staff, based in its own space in a separate building in North Sydney, are also Millennials (aged 23-38). NAB Ventures took a strategic stake in Basiq two-and-a-half years ago, alongside Westpac's Reinventure Group.

With explosive growth in the 'buy now, pay later' sector driven by the cohort's aversion to credit, UBank has developed the Free2Spend tool that uses Basiq's machine learning to flag upcoming spending and create budgets.

Influenced by fintechs like Pocketbook, owned by Zip Co, a leading 'personal financial management' (PFM) app, or Wildcard, which is helping Milliennials drip savings into transaction accounts to restrain excessive spending, Free2Spend has been designed to help customers avoid “bill shock”. It will flag when a utility bill or Netflix subscription is due, predicting if customers will have enough free cash flow to meet them. It also provides a savings goal tool to encourage pay, as soon as it is received, to be shifted into a UBank savings account.

It's a significant move by UBank, one which places even greater pressure on the major banks in the lead up to new open banking rules being introduced in February to develop and build out their own AI capability to help ensure they grow beyond their core product offerings, such as lending, and extend value across a customer's financial journey.

NAB's new CEO Ross McEwan, on his second day in the job last Tuesday, visited UBank, which operates out of a couple floors in a non-descript building in North Sydney opposite MLC. It was created more than 10 years ago. McEwan's efforts to create a stand-alone digital banking brand – Bo – for his former employer Royal Bank of Scotland is just hitting the market in the UK now.

"He knows the space well and is very excited about the UBank potential," says UBank CEO Lee Hatton. So what was his message to the troops last week? “Run really fast, accelerate as fast as you can," she says.

"We have had really solid investment for the last couple of years, and we feel confident there will be more, absolutely."

The new software will warn customers to dial down spending if they are displaying profligacy. Customers currently set utility and rent spending, but in the future this will be extracted from direct debit or BPay data. Similar to an Apple Watch, there are green (and red) rings mapping daily spending.

Basiq is providing transaction analytics allowing customers to see where they have spent, with particular retailers dotted on maps based on geolocation data. Customers working in the gig economy can enter income allowing Basiq's artificial intelligence to determine their ability to meet upcoming bills.

KPMG head of banking, Ian Pollari, said in an analysis sent to clients on Monday that getting a holistic view of customers will require banks "to take different approaches to understanding their customers – mining data for new signals, for example, or partnering with tech players who can broaden their appeal and data reach".

"The shift towards regulated open data and open banking will create significant opportunities for banks to become better acquainted with their customers."

"Banks will also need to get better at using the data they uncover to truly understand the circumstances and life events of their customers. That will take more agile platforms, better analytics and better collaboration over data so that products and solutions can be quickly modified and adapted as customer needs and desires evolve."

The app will help customers control spending on popular 'buy now, pay later' services like Afterpay or Zip. “It empowers you to use money that you have or are earning," Hatton says.

“This is not a parent child relationship. We talk about financial literacy, but now it is also about data literacy. How can I be empowered with my own money? Research shows too much stress anxiety about money among Millennials. You have data we can use to give people richer experiences.

“If I want to go and use a buy now pay later, at least I have budgeted for it. Someone is telling me how much I can use. This is about consciousness of spending.”

UBank research shows 84 per cent of Australians are unaware of monthly household expenses like bills and utilities and 85 per cent are unaware of what they spend each month on entertainment.

The government's open banking regime, set to switch on in February, will allow UBank to use a broader range of customer data by allowing customers to connect other data sets to UBank. “Open banking will provide a much broader view of financial services,” Hatton says.

Basiq CEO Damir Cuca says banks have worked in a centralised model but open banking introduces a decentralised approach. Customers will determine consent and have control over data.

“We have been waiting for this for a long time. Banks have the data, so what are you going to do with it? How are you going to help the consumer? Once you have the metadata, you can start to talk to your customers and see what they want.”

Other major banks are also ramping up investment in mobile banking applications using artificial intelligence technology.

At RBS, McEwan had the mantra of being "a smaller, simpler and smarter bank”.

Ms Hatton says UBank is true to that philosophy. She says it is developing a data ethics policy guided by a principle that “the customer needs to be educated, to know what is possible and what isn’t”.

“Consumers want choice and speed and experience on their mobile phone, and that is what UBank offers. We can be creative and our speed to market is significantly faster and there are great opportunities for this to be shared with the [NAB] group."