Plum and AI in Finance

by Startacus Admin

Plum is the first AI-powered Facebook Chatbot which allows you to start saving money automatically without any effort, fees or changes in spending. 

Alex Michael, Co Founder at Plum started his career writing software for retail analytics at EDITED in London and spent the last two years at Tictail in Stockholm where he joined as engineer #5 and then became team lead for payments, scaling the payments infrastructure for 100,000+ Tictail merchants. Here, Alex shares all on the current state of AI in finance and why the magic behind Plum lies in its algorithm...

"AI and finance is something that we here at Plum are very passionate about. Along with using AI to detect savings opportunities depending on your unique spending behaviour, our chat system users a layer of NLU (Natural Language Understanding) to identify and extract amounts, dates and even emojis!

This is just the start, as our algorithms improve and learn, we will be able to understand and predict users future spending before they are even considering a purchase. Pre-emptive impulse buying?

Whilst this all sounds groundbreaking and revolutionary, AI in finance is far from new.

Banks have long applying basic forms of AI to help generate huge profits. “Programme Trading” began in the 70’s but it was roughly a year after the SEC authorized automated electronic exchanges in 1998 that algorithmic trading really took off. These strategies allowed banks and hedge funds to generate huge profits and by 2009 they accounted for roughly of trades in the US.

(RPA) has been used to automate many bank and middle office functions. The standardised requirements of regulatory and compliance requirements has meant that these processes have been easy to automate, with huge amounts of data being processed into reports within a matter of seconds.

A form of AI within finance that many of us will be more familiar with is that which is employed by many banks and services in the form of customer services. For most companies, customer queries and requests are often highly concentrating around a few key issues.

Through the application of simple AI customers can find the information they require, or action a simple transaction without the need to interact with a “human”. These sort of streamlining hugely reduces costs and improves efficiency, albeit at the expense of traditional jobs.

So far the story has been one that we are all too familiar with, banks finding new ways to increase profits and drive down costs, having a very nice impact on the bottom line, but not necessarily a hugely positive impact on society in general.

It’s a line that you will hear those of us in Fintech shout from the rooftops as often as we can, but for whatever reason, the world of finance has been very slow to adopt technological advances to add true value to its users. And let’s be honest, the customers of banks could do with all the help they can get given the current economic climate.

The state of PFM, or Personal Financial Management, in the UK is pretty grim.

This year the savings ratio, that is the amount a household saves as a proportion of its income, reached its lowest level since records began. During the mid-nineties the figure hovered around the 15% mark, but for Q1 2017 it stood at just 1.7%.

If you can’t face more scary financial figures, look away now… There are a staggering 16 million people on the UK with less than £100 in savings, and by 2050, it is estimated that our savings gap (the difference between what we will have at retirement versus what we need) could be as high as £350bn. Ouch.

There’s a multitude of factors at play here. More recently, Brexit has really slammed the breaks on the economies growth, but spending in recent has got easier and easier. We now live in a world where you can order pretty much anything with just a few clicks, and before too long these will be delivered straight to your door by one of Bezos’ army of drones.

Whether it’s the pressures of social media, the realisation that you’ll be lucky to ever afford more than a cardboard box in London, or just the temptations of avocado on toast, millennials in particular are struggling to save.

Myself and my co-founder, Victor decided that there surely must be a way of using this advance as a way to make the boring task of savings something a little less tedious. What started as a personal duel to see who could save the most (which I am happy to say I won), our little savings chatbot has helped thousands start to save in a way that works for them.

The magic behind Plum lies in its algorithm, which to put it simply, looks at your historic transactions and builds an accurate picture of your usual spending and income. Using this picture, Plum is able to squirrel away small amounts of money that it estimates you won’t need by the end of the month. The data is refreshed and re-calculated daily to make sure that Plum adjusts to any new circumstances that might arise.

Our users save on average around £150 a month without even noticing.

This is just the beginning.

By the time you read this, many of our users will be being notified that they are overpaying on their utilities. By simply typing “Yes” in conversation with Plum, they will be able to switch to a cheaper, greener alternative, saving an average of £250 a year.

Through AI we will be able to achieve our goal of providing every user with their very own financial butler.

An assistant that saves without you noticing, that is always monitoring your bills and spending and making sure you get the best deal, and before too long an assistant that is investing these savings and building your own portfolio that is tailored completely to your needs. All of this without you even having to lift a finger (ok...may be a finger or two now and again)."

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Published on: 11th November 2017