Bank of America is creating a digital financial coach to chase the ‘holy grail’ of banking – CNBC

Bank of America wants to pull off an unlikely transformation: from megabank to trusted financial coach for its 66 million customers.

For years, the second biggest U.S. lender has steadily released new digital capabilities, from updated banking apps to electronic payments and a virtual assistant named Erica.

Now, it’s preparing to unveil something that ties together these innovations. It’s called Life Plan, and its Bank of America’s bet at securing decades’ worth of loyalty from its customers. The product, due for release in the fall, is a digital portal that helps users work toward goals like buying a home or saving for retirement.

“The holy grail in financial services is maintaining a lifelong relationship with somebody,” said David Tyrie, the bank’s head of advanced solutions and digital banking. “But candidly, the thing that we’ve struggled with as an industry is trust. Life Plan is really about building trust and giving you that feeling that we are acting in your best interest.”

It’s the latest evolution for an industry in the throes of change. Just a decade ago, banks were reviled for ensnaring customers with an array of poorly disclosed penalties like $35 overdraft fees. While those fees still exist, banks make less money from them after post-Great Recession regulations made charging them harder and as mobile apps keep users better informed on their balances.

Now, the game is to entice customers to stay as long as possible while using multiple products, from checking accounts, to credit cards, mortgages and wealth management. The emphasis on what’s called customer lifetime value increases the profitability of each user in an era of shrinking margins on most financial products.

The shift has happened as fintech challengers like Sofi and Square start to encroach on banks’ turf by offering checking accounts. While Bank of America, J.P. Morgan Chase and Wells Fargo have gotten nearly half of all new checking accounts in 2017, according to consultant Novantas, they can’t rest on their laurels.

So in 2015, Bank of America made Tyrie head of all consumer and small business products, meaning one executive was charged with having a holistic view of the customer. In late 2016, Tyrie began holding focus groups across the country to determine what the bank could do to make people lifelong customers.

Tyrie said the bank plowed through more than a dozen of the consumer sessions until it had a breakthrough: A NASA engineer in Houston told the bank team that most financial firms wanted to push a button on a plan and walk away. Reaching your life goals is like firing a rocket at the moon, the engineer said: It requires constant course correction.

So the product had to have steady contact with users, Tyrie said. His team members distilled what they heard from people into seven priorities that everyone had: family, finances, work, health, home, leisure and giving.

“It’s almost like a periodic table that you assemble differently based on what your age is,” Tyrie said. “We’re going to anchor the relationship in your life priorities, and we’re going to help you set some goals, and then figure out what products and services match those goals.”

In the mobile app and website, users start by choosing priorities from a selection of bubbles. The program will generate personalized suggestions; for instance, someone who wants to buy a home can start saving for a down payment and improve their credit scores. It also suggests articles and videos to help improve users’ financial literacy.

“It’s advice for what you need, when you need it,” said Sofia Santos, a former McKinsey partner who joined the bank last year as head of consumer strategy. “We wanted to break it down into small, actionable steps that people can do.”