Here’s Why Pentagon Credit Union (PenFed) is Turning to AI for Hyper-Personalization

Artificial Intelligence (AI) is revolutionizing multiple industry sectors, notably banking. Already, AI can deliver automated customer service experiences, critical financial analytics, and other capabilities.

Hyper-personalization, the process of tailoring services or products to individual customers based on their preferences, behavior, and real-time data, is becoming the norm rather than the exception thanks to the technology. AI's role in facilitating hyper-personalization lies in its capacity to sift through vast datasets, identify patterns, learn customer behaviors, and generate insights.

These capabilities allow banking institutions like Pentagon Credit Union (PenFed) to deliver customized services that meet their customers’ unique needs, creating a more personal and efficient banking experience.

Here's why PenFed has embraced AI, and what it could mean for the future of personalized banking.

PenFed Treats AI as a New Channel

According to a recent interview by CIO Magazine with Joseph Thomas, PenFed EVP and CIO, PenFed views artificial intelligence as an additive feature that can create new avenues for engaging with members.

"What’s happened in our business over the years is every channel is expensive and it doesn’t ever replace another channel. It’s just additive,” says Thomas. "But we realized that with AI, we could add another channel of engagement but very cost-effectively. We could add chat with a bot-enabled interaction to solve the early, simpler questions.”

Thomas noted that today, 80% of PenFed's interactions are digital. Only 15% occur via a call center, while just 5% rely on physical branches.

In the past, the credit union successfully used chatbots to support both employees and members. AI represents a natural progression by blending human interactivity with data analysis. The goal, according to Thomas, is to turn PenFed into a "cognitive credit union."

AI is Now Available to Smaller Banks and Credit Unions

PenFed's pivot toward AI is considerably noteworthy because the technology has long been the sole purview of large banks with considerable technology budgets. Although PenFed has more than 2.9 million members, it is still a credit union, so it doesn't have the same resources as a large bank.

PenFed doesn't have any type of laboratory or innovation center, either.

What it does have is considerable experience leveraging machine learning for credit risk modeling. It has also got a leg-up into the world of AI thanks to a third-party AI service provider. Indeed, other small banks and credit unions could mimic PenFed's success by accessing turnkey AI solutions and delivering them to customers.

According to CIO Magazine, the credit union began its project by using an Einstin-powered chatbot provided by Salesforce. Originally, this bot existed to internally support the credit union's IT service desk.

"We wanted to use AI internally before we unleashed it on the members,” Thomas said.

The bot quickly provided its effectiveness. It now handles about 25% of common internal service requests.

More importantly, the exposure to the bot gave Thomas and his team the experience they needed to start building external-facing chatbots. Now, those bots do everything from providing loan application status updates to technical support and product information delivery.

According to Thomas, PenFed now resolves 20% of cases on first contact with Einstein bots. That's a 223% increase in chat and chatbot activity over the past year.

PenFed is Excited for "Phase Three" of Its AI Project

On the horizon, generative AI will play a much more important role in PenFed's AI project.

Adding Value to Digital Transactions

According to Thomas, generative AI has the potential to add value to digital transactions by understanding and responding to the underlying reasons for a member's actions. This strategy aims to transition PenFed from a digital credit union to a cognitive one, utilizing both collected data and digital platforms effectively.

For example, a member might switch their CD from automatic to manual renewal, intending to transfer their investments once the CD matures. In traditional transactions, the reasoning behind such a move might be overlooked.

However, with generative AI, the system could recognize this as a possible indication of the member planning to move their money due to a better rate elsewhere. Armed with this insight, the system could then present a personalized offer to the member.

This AI-driven approach to personalization could save the institution from extensive broad marketing campaigns while providing a tailored experience to its members. Thomas believes that this hyper-personalized business transaction initiative could revolutionize the member experience, providing benefits to both the credit union and its members.

Deploying an AI Co-Pilot

PenFed is set on incorporating generative AI initially as a "copilot" for the credit union's internal employee support line, before extending this technology to its members.

The next step is likely to involve the call center representatives handling member calls. Furthermore, PenFed plans to use Einstein GPT on the Salesforce Financial Services Cloud for its knowledge articles and is preparing to set up the Salesforce Data Cloud. This will connect to other data sources, allowing for real-time data from Salesforce clouds and PenFed's Snowflake environment.

Thomas envisions this combination of real-time data and AI insights transforming PenFed's customer experience into an intelligent, mutually beneficial one.

Keep an Eye on PenFed

PenFed's AI developments serve as excellent examples of how smaller banks and credit unions can introduce the technology. By integrating a pilot program internally, staff can grow accustomed to the technology and start imagining use cases for it. This can lead to future innovation, and eventually a host of customer-facing products that could significantly improve business.

To learn more, don't miss Future Digital Finance 2024. The event is happening from April 2nd to April 3rd at the Hyatt Regency in New Orleans, Louisiana.

Download the early agenda and register for the event today.