Contrary to what one might assume, and despite the overwhelming odds, the answer here is a resounding no. Audio banking is not dead (or even dying), as the outdated system still holds strong for many members.
Over the last few years, the financial industry has seen mobile banking become the preferred option for users to make deposits, transfer funds, and monitor their account activity. Especially after the pandemic, during which even the most intense technology-aversed members were seemingly forced to deal with digital banking on some level, it was easy to imagine many made the permanent switch to mobile and online banking.
Based on that, one would suspect that more traditional phone banking, the kind you dial in to and interact with touch tones on the phone to access the same set of transactions would be on the decline, but in fact, many institutions are seeing the opposite and investing in taking this technology to the next level.
The demand is still there
A few years ago, I was talking with a credit union that was interested in phasing out its audio banking. For reference, these types of systems were some of the first in the marketplace that allowed members to interact with their account without going into a branch or talking to a staff employee on the phone. Members would call a number, enter their account and authentication information, and using their phone keypad, they could perform a traditional set of transactions.
While revolutionary at the time, in comparison to modern-day systems audio banking seems antiquated at best and rife with fraud at worst. Therefore, it came as no shock that credit unions were looking to give it the axe. On the surface, the technology is outdated enough to justify removing it and it can be difficult to believe that most members would truly want to dial into a phone, answer a bunch of questions, and have to audibly hear (then write down) the information they were seeking about their accounts instead of simply going online or opening up their app.
The credit union in question agreed with this sentiment, only to quickly backtrack later upon learning that 80% of their board members still used audio banking, and that some of their largest depositors did as well. All plans to sunset the service were thrown out.
This credit union’s example is not an outlier though. Many members—more than one might think—are still holding on strongly to audio banking. Our CUSO has only had one user in over a decade opt out of audio banking, and across our network, we use over 1.4 million minutes per month. But what is the draw to such an inconvenient system when there are many alternatives in place?
Dependency vs refusal to change
Though it may seem impossible in the year 2023, many of the examples I have seen over the last few years of members invested in audio banking have been from those without smartphones and/or without internet service to connect to online and mobile banking.
Often, these members are located in remote areas and lack a reliable internet connection or cell phone signal. I know of many members in Michigan’s Upper Peninsula, for example, who are just now seeing constant, reliable internet. In these cases, the members still had landlines they used to call the credit union and get the information they needed. Though they are limited by credit union hours and ease of access, these members still depend on audio banking.
The other uses are typically either Ludites—those afraid of technology—or those simply disinterested in learning new technology, either due to age or stubbornness. A friend of mine in particular refuses to use any kind of banking other than audio banking because that’s what he likes. While it may seem illogical for him to stick to such methods when he hasn’t even tried digital banking of any kind (and I am fairly certain he would love the tools available to him if he did), it is members like this that keep the technology alive.
As long as the above continues to be true, there will be members who need and prefer audio banking over the rest, ensuring its longevity in our industry.
A hotbed for fraud
Now that we have established audio banking is unlikely to go anywhere anytime soon, despite all reason, what’s next? Should credit unions work to update the systems in place or should they simply let sleeping dogs lie? After all, don’t fix what isn’t broken, right?
While I would certainly argue to leave audio banking well enough alone—considering the members still using it are not prone to enjoy change—there are a few issues to consider. Primarily, the amount of fraud that occurs through this system. Unlike digital methods, audio baking often lacks two-factor authentication. Members are usually only asked for their bank account and PIN, which are not too difficult for fraudsters to figure out one way or another, especially considering elder financial exploitation is greater now than ever.
Furthermore, it is a very low-stakes game for these criminals. If they get it wrong, they simply hang up or claim they need to double-check their information and will call back. There’s little risk involved. My CUSO has even had to remove certain features from audio banking, such as transferring funds to other member accounts, for instance, to combat some of this fraud.
Depending on what service a credit union uses for their audio banking, leaving things alone may lead to increased fraud and future issues for the credit union. At a minimum, credit unions should consider what they can do to increase security either through multi-factor authentication or by removing transaction types that can lead to fraud.
Ways to improve the system
Based on the continued use by members across the country, many credit unions are looking to not only improve security but build on this platform to better serve members who prefer this type of account interaction and to potentially target reducing the overall volume of calls their support staff have to handle. For those credit unions looking to lean into audio banking and support those members who still love it or perhaps streamline things for their credit union, there are a few options for doing so.
We are currently seeing two different strategies in the marketplace, and each is focused on attacking this challenge in different ways.
The first is by partnering a credit union’s phone system (Mitel, Ringtail, etc.) with its core. This process leverages the phone system’s growing interactive capabilities by connecting it to data from the core to offer more functionality and additional member authentication options. It can also use data the core has to validate the member is who they say they are, even if they do not know their account information. In addition to the traditional functions that can be performed once authenticated, because it is connected to your phone system, you can leverage the core information to add features like call routing, marketing messages, account reminders/alerts, etc.
The second, and growing ever more popular, is to connect a traditional phone system not only to a credit union’s core but to a third party (or in some cases as an option/module within your phone system) chat artificial intelligence (AI) technology. These technologies leverage an AI engine fed with both account and credit union data in an effort to lower costs while providing the best possible service. They do this by interpreting the client’s input and automating procedures to decrease the human labor and meet customer expectations using Natural Language Processing (NLU) and AI engines.
In many phone platforms, credit unions integrate these AI engines not only in the phone system but as part of a chat interface on the credit union’s website and online banking. Often marketed as an omnichannel approach, this provides multiple ways to leverage an investment of this type, and serve members in multiple platforms.
Choosing a strategy
When deciding on the right approach for a credit union, the first step is to make sure they can clearly define their goals and objectives. Not just on the technology side, but on the business side as well. Once a credit union has that vetted and defined, they should reach out to both their core and phone providers and see what solutions they offer in this space and what data points they would need or can provide. Often times the cheapest and quickest solution can be found by leveraging the platforms the credit union is already using…but typically these will come with additional modules/fees to integrate this functionality.
If they do not offer a solution that meets the credit union’s needs or the price point is not within the desired budget, there are a growing number of third-party products (Interface.AI, Zendesk, ChatGPT, etc) that can be integrated into the credit union’s current process.
Audio banking isn’t going anywhere…yet
With over 75% of financial institutions investing in this space in 2022, and with each vendor we talk to investing more and more development to improve and expand the functionality they can provide, these types of integration seem poised to be part of our future for many years to come.
While it is possible that in time audio banking will eventually fall into disuse, more than likely it will be on the credit unions to either update the system or finally call time of death on the service and force members into more modern methods.
