How Generative AI for Payments Motivates Customers to Pay on Time

It’s tough out there. Inflation remains high, and job layoffs continue in many sectors. Consequently, more Americans are relying on credit cards and personal loans. All that increased debt goes hand in hand with an increase in missed payments. The New York Federal Reserve reported that the share of payments late by 90 days or more rose to 4% during the last quarter of 2022. Banks and lenders can’t change the economic environment, but they can change how they motivate customers to act by using better communication about payments—including by leveraging Generative AI for payments messaging.

AI-generated language in customer communications is a proven solution for financial institutions looking to reduce the rate of late payments. Here’s how.

Financial stress is increasing, but better messaging can help

Late payments have real consequences for lenders and customers. Though the current crisis that started with Signature Bank and Silicon Valley Bank is not connected to non-performing debt (the formal name for delinquent loan and credit card debt), it still remains that lenders are constantly striking a delicate balance between the amount of capital they have available in cash and how much they “owe” customers in deposits and savings. That balance can tilt if a larger-than-predicted share of customers miss their payments. In today’s environment, that’s a real possibility.

KeyBank’s 2023 Financial Mobility Survey shows that more Americans will experience financial stress this year. 2022 already showed that 55% of the population faced financial challenges, up from 37% the year before. The biggest worry? Sticking to a budget when inflation drives sky high prices. Recent research from the Pew Research Center finds that one-in-four U.S. parents struggled to afford food, or pay their rent or mortgage in the past year.

These financial pressures are showing up in credit card activity. In the last quarter of 2022, credit card balances increased by $61 billion to $986 billion, a record high. According to LendingTree, the national average balance for cardholders with unpaid credit card bills in December 2022 was $7,279. Americans carried a balance on 53% of all active credit card accounts in the second quarter of 2022.

The most recent delinquency data from the Fed shows the 30-day delinquency rate—which is the percentage of total outstanding credit card balances that are at least 30 days overdue—rose from 2.09% to 2.25% in the fourth quarter of 2022.

It may feel like too much of this is outside a bank or lender’s control. Yet there are actions credit card issuers and lenders can take to motivate borrowers to stay current with their payments. More effective, timely, and personalized messages that reach customers at the right time with the right message can increase payment compliance. Delivering them at scale requires enterprise Generative AI.

Motivation-Aware Generative AI for Payments Can Drive Better Outcomes for Both Customers and Financial Institutions

The pandemic drove a global increase in the use of digital financial services, especially digital payments. Digital channels massively increase the volume of customers that financial institutions can reach and the variety of channels on which to reach them. Too many channels, in fact, for human creative talent to populate with new, fresh, on-brand, customer-relevant messages.

That’s where leveraging a specialized Generative AI for payments comes in. The Persado Motivation AI Platform is an enterprise Generative AI based on a knowledge base of 10+ years of marketing communications. It analyzes a brand’s marketing language and produces variations predicted to drive more engagement, conversion, and business impact. In the context of credit card and loan payments, optimizing the language used in monthly billing emails and text reminders has been shown by Persado to boost the share of on-time payments. It can even motivate a larger share of borrowers to sign up for automatic payments, which further increases on time payment rates.

For example, Persado worked with a Fortune 500 bank on messaging for customers that had missed a payment. Subtle adjustments to the language in the email subject line increased engagement rates above those achieved by the bank’s original message by 22%.

The power of precise AI-generated language

Successful payment interventions can start with at-risk customers before they miss a payment, and engage across channels by evoking emotions that make the interaction more human.

For example, a credit card provider worked with Persado on a campaign to increase autopay enrollment for at-risk customers. The objective was to prevent customers who’d missed payments or fallen behind in the past from missing payments again.

The winning message evoked fascination in the subject line, resulting in 50% more autopay enrollments.

Generative AI to Improve the Customer Payment Experience

Through these experiments and others with financial services customers, Persado has discovered three best practices to improve the customer payment experience:

1. Provide Clear Directions: Stress interferes with a consumer’s ability to process information. To overcome that:

• Be explicit about what they need to do at each step of the payment process.
• Use clear calls to action like “Continue here” or “Press 1 to continue.”
• Outline steps using 1-2-3 lists that are visually clear and actionable.

2. Give Details: People are more likely to react to payment reminders when a message includes:

• The payment date in the subject line.
• Add “Action required” high in the body copy to capture attention.

3. Communicate Urgency: Prioritize key pieces of information and word them so customers know what they need to do and by when, as in: “Your payment is due in 5 days.”

We all need a reminder every now and again. Persado helps financial institutions proactively nudge customers to make their payments. Strategies include:

1. Engaging early and identifying the most at-risk customers
2. Deploying Generative AI-tested language to improve the performance of interactive voice-response prompts, call center scripts, and digital self service options
3. Ensuring messages align to changing customer expectations for communications

Companies that get this right see immediate benefits. Along with a reduction in missed payments, Persado clients report improved ratio payments (e.g. full, partial, plans) as well as cost reductions from call center operations, third party collections, and charge offs.

To learn more about how Generative AI for payments and machine learning can drive better payment outcomes for your company, contact Persado today to request a demo.

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