Banking Tech Awards 2020 Winner: au Jibun Bank – Best Use of AI
au Jibun Bank – building trust in investing with AI
Japan’s digital-only bank, au Jibun Bank, is seeking to rebuild consumer confidence in investments with an AI-driven market forecasting capability within its banking app.
The stated corporate mission of au Jibun Bank when it launched as the first mobile-focused bank in Japan in 2008 was to “Become the closest bank to every one of you”. This was reflected in the name of the bank – Jibun means myself in Japanese (the ‘au’ prefix was added last February to reflect the brand of its co-parent telco, KDDI; its other parent is MUFG Bank).
A new feature for its banking app, released in May 2020, furthers that goal. AI Japan Market Forecast combines economic indicator figures, stock market price index figures and AI technology into a simple user interface. It is a free service for the bank’s account holders.
That capability follows on from two AI-based foreign currency savings services, for forecasting across five currencies and for auto-execution in five currencies. For these, as well as the latest app, the bank worked with Japanese AI specialist, AlpacaJapan Co. Ltd. MUFG Bank is one of the shareholders in the company.
According to the Japanese Government, Japanese households lack interest in investing in financial instruments, preferring deposits and savings and lacking the understanding of the effectiveness of long-term diversified investment in other financial instruments. The Financial Services Agency noted in its 2016 report that savings and deposits accounted for around 52% of Japanese households’ financial assets (compared with 24% in the UK and 14% in the US). There is a deep-seated distrust among Japanese people towards the stock market due to the after-effects of the bubble economy, which collapsed in late 1991.
Chisato Nakamura, au Jibun Bank
“We believe the improvement of education for investors is a basic element for encouraging more people to invest in risk assets, or even to start thinking of asset building for their sustainable future,” says Chisato Nakamura, manager of the Innovation Business Division at au Jibun Bank Corporation. It is important to promote the provision of information on financial instruments in an easy way for individuals to understand, so that they can make straightforward comparisons with other products. The new app capability is part of that journey.
AI Japan Market Forecast covers five-day and one-month forecasts for the Japanese stock market (TOPIX), with daily and monthly updates respectively, with graphical representations. The artificial intelligence (AI) technology extracts the characteristics from daily charts and searches for similar scenarios from the previous three years.
For the daily forecasts, after identifying ten similar scenarios, an average range of future returns is calculated by stock price increases or decreases. This is then compared with ten-year historical back data. Depending on where the daily figure sits historically, certainty levels are defined about future stock prices for five days. Users can check the certainty via a simple colour-coded bar chart UI.
For the monthly forecasts, the engine analyses the most recent PMI index, for both manufacturing and services, together with the TOPIX movement of the recent month. The combination of whether PMI shows above or below 50.0, where 50.0 represents a no-change or neutral point, and the percentage change of the monthly stock price, based on its closing price, is allocated into eight patterns in a simple indicator pie chart.
“This combination of AI, good old economic indicators and stock market prices in a single banking app screen and UI means this is not just for investors but also for those who have not yet started to build their assets for their future,” says Nakamura.
Users can then act on the information. There is a link from the app to investment services run by online brokerage, au Kabucom Securities Co., Ltd., which belongs to the same au Financial Group (KDDI) as au Jibun Bank.
What has been the uptake? Since its launch in May 2020, the number of monthly average page views has been 40,000. The percentage of correct daily forecast ratios was over 64% for the latest quarter (October to December 2020). As the AI engine improves by analysing charts accumulated on a daily basis, the accuracy is expected to improve by learning the market.
One of the most difficult challenges for au Jibun Bank, says Nakamura, was to gain the agreement of their business partners to refer to their indices together with AI. It was a new concept and there needed to be discussions to explain how the AI technology would work and how important it is to enhance customer experience in financial markets.
For the future, outside of the AI Japan Market Forecast capability, au Jibun Bank is planning to implement a user-friendly AI-enabled feature on its banking app to recommend investment trusts to its retail customers. Through AI, the recommendations will be tailor-made for each customer.
“We believe the AI utilisation helps to lower the barrier people feel towards investment activities, especially by implementing cutting edge technologies into their smartphone app,” concludes Nakamura. “As the first digital bank in Japan purely focused on the mobile channel, we will accelerate our innovations to support our customers’ investment activities and to support asset-building along everyone’s lifelong journey.”
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