Ally Focuses on AI and Tech to Build Online Banking Portfolio

Need to Know

• Ally Financial’s investment in artificial intelligence and digital banking is saving customers money by not relying on physical assets.
• The company now manages over $180 billion in assets.
• Ally’s retail deposits rose by 5% over the last two quarters and the rates paid on those deposits fell by 9%.
• Newly minted CIO Sathish Muthukrishnan is committed to prioritizing digital and AI as the bank continues to expand.
• 60% of Ally’s new customers are millennials.
• Ally does operate any physical branches, instead opting to do all business online.

Analysis 

Ally Financial has reported that its rate of online deposits is growing, even as the rates paid on those deposits falls. Ally is an online-only bank that does not operate branches, instead choosing to do business through online platforms.

While online banking has been around for many years, bankers used to worry that a branchless approach would not be viable. Skeptics who once looked at banks such as Ally are now realizing the business model is completely viable.

Ally’s total deposits have more than doubled over the last five years, and according to the company’s CEO Jeffrey Brown, “Our deposit portfolio is now within the range of our core funding financial objective.”

Deriving 75% of its funding from deposits, the company now holds over $180 billion in assets.

And they aren’t the only bank going digital-first. 

Goldman Sachs’ online offering has grown 67% in the last year and Sallie Mae’s retail deposits rose by 21% in the fourth quarter of both 2018 and 2019. American Express and Discover Financial Services also saw faster growth in online deposits over all other deposits. 

Better.com, a digital direct mortgage lender owned by Ally, is also disrupting the mortgage industry. Says Ally’s CFO, Jenn LaClair, “Better.com is an absolute top-notch digital, fully digital end-to-end customer experience that has some of the highest NPS scores across the industry. And I would say we are absolutely leading and cutting-edge in terms of the product that we have out there.”

A large part of Ally’s success is the company’s investment in AI. With Sathish Muthukrishnan stepping in as the bank’s new Chief Information Officer, Ally’s top priorities include innovating with artificial intelligence.  

Muthukrishnan wants to improve the user experience in its digital platforms and personalize financial tools for customers, explaining, “We have to strike a right balance between operating within a regulated bank, and bringing in innovation… Artificial intelligence plays a role in telling you that this is a product that you could use for your financial well-being.”

With a 20% increase in deposits from last year and millennials representing nearly 60% of new customers, the use of tech is paying off. 

Says Ally CEO JB Brown, “Our industry-leading retention reflects the combination of our award-winning digital experience, best-in-class customer service and consistently competitive rates.”