Personetics leverages AI to help chip away at student loan crisis
Cognitive analytics company Personetics has launched Personetics Act to offer banks a way to help customers repay their student loans ahead of schedule, reports Julie Muhn at Finovate (Banking Technology‘s sister company).
The new service uses the Nudge Theory to incentivise the 44 million US student loan borrowers who owe more than $1.4 trillion in student loan debt to pay down their loans early and avoid paying thousands of dollars in interest.
The Nudge Theory was demonstrated by 2017 Nobel Prize winner Professor Richard Thaler, who noted that people make better decisions to improve their financial health when the choice is made easy for them.
Personetics Act puts the Nudge Theory to work by helping banks identify consumers that 1) have a student loan and 2) can afford to pay it off faster. The programme offers these consumer a tailored, automated service that adjusts to changes in their spending behavior and continually analyses their financial picture to find unused funds that can be applied toward the existing loan balance. This can be set to automatically make payments on the customer’s behalf or to appear as a suggested recommendation. The company notes that applying an additional $50 per week towards a $40,000 student loan that bears a 5% interest rate can allow a customer to pay off the loan 3.5 years faster and save over $4,000 in interest payments.
“Existing bank plans are limited in scope and therefore unlikely to make a visible dent in any customer’s outstanding loan balance,” says David Sosna, Personetics’ co-founder and CEO. “By applying artificial intelligence (AI) algorithms to analyse individual customer cash flows, we’re able to identify windows of opportunity for customers to make these extra payments with no effort on their end.”
Personetics was founded in 2011 in Israel and to date has received $18 million in total funding. Personetics recently onboarded Royal Bank of Canada (RBC) to pilot an AI-powered financial guidance solution, NOMI Insights, and an automated savings platform, NOMI Find & Save.