Artificial Intelligence Ushers - Conversational Banking

4, April 2017

Artificial Intelligence and The Era Of Conversational Banking 

The world we live in is an interconnected highway. Not only is it shrinking, but various parts of it are syncing with each other. These days – with the quantum leaps taken by the digital age to connect customers with brands, it is more evident than ever.

In fact, Gartner predicts that by the year 2020, there will be 26 billion IoT connected devices. The dramatic increase in smart machines such as chat bots, virtual personal assistants, virtual consumer assistants and automated devices is creating radical shifts both in business practices and customer behavior. The line of capability between man and machine is getting blurred as machines continue perform more and more intrinsic tasks. But just being connected alone is not enough. It is now time for man and machine to define and develop harmonious relationships. Man needs to engage with these machines in an intuitive way. Constant innovation is important to keep up with newly emerging digital technologies.

It is indeed the age of the robots. But, like those old science fiction story-plots once claimed, they aren’t there to take over our planet. Or throw laser beams at us. They are making our systems more efficient and devices – smarter.

Conversational AI is emerging as a powerful tool in the digital world. Let us look at changes happening and how conversational AI is set to impact the Banking and Financial Industry.

Rise in Digital Banking

Digital transformation is at an inflection point. It impacts every aspect of the banking operation, right from product development to capital management. Gone are the days when banking meant interacting with customers in a brick-and mortar branch.  Customers are quickly taking a shine to digital banking. But user expectations are already set by UX-friendly and highly-responsive giants such as Amazon and Facebook. This means that banking institutions must evolve to an iterative environment of innovation or moving to a technology stack that is responsive to such frequent changes. Banks must take action in order to remain not only competitive but also relevant. Remaining stagnant is not an option anymore!

Today, customers expect a personalized pricing and portfolio mix. Customer loyalty greatly hinges on how well banks are able to meet these expectations. While all banks sell every product to every customer, only digitization will provide the necessary data and analytics needed to examine each customer’s profitability and offer a personalized solution. Adopting a fully digital strategy not only requires an end-to-end modernization of a bank but also transition from a purely account-based interactions to one that offers personalization and enhances customer experience with relevant, convenient and personalized solutions.

Digital Banking - online payment

Rise in Messaging App Usage

There is an upsurge in messaging app usage. While there is a slowdown in mobile app downloads, messaging apps seem to have surpassed them. According to BI Intelligence report, usage of the top four messaging apps consisting of Facebook Messenger, WhatsApp, WeChat, Google Duo, and Viber have overtaken the top four social media apps such as Facebook, Twitter, LinkedIn, and Instagram. As one-to-one messaging begins to dominate, it creates numerous opportunities for banks. With people being able to chat with one another anywhere in the world, messaging apps are being viewed as affordable and a practical alternative to video call etc. Another important reason for messaging apps popularity is because they allow people to interact in a much more conversational style using Natural Language Processing (NLP). Moreover, these apps allow customers to conduct in-app commerce activities.

Messaging apps presents a new business opportunity for banks to connect directly with their customers and will help to build long-term customer relationships. However, banks must remember that customers will expect timely personal and contextual response. And if they get it wrong, this channel could turn into a channel to vent their negative experiences.

Rise of Chatbots

Chatbots represent the next step in customer-facing evolution in the banking industry. Chatbots are computer programs that use artificial intelligence and imitate conversations with people. They can transform the way a customer interacts with the bank from a series of self-initiated tasks to the quasi conversation. For example, Google’s Allo, powered by AI learns how the user replies and then offers relevant suggestions. It has its own search assistant bot that extracts knowledge from Google’s knowledge graph and existing Google’s services.

Bank of America, Master Card and several financial start-ups have now introduced chat bots that allow customers to ask questions about their financial accounts, initiate transactions and get financial advice through either text messages or services such as Facebook Messenger and Amazon’s Echo Tower.

While chatbots are still at a nascent stage in the banking industry, bots will quickly gain in sophistication to the point that they will be able to perform all tasks previously owned by customer service representatives. Bots are set to change the entire tenor of the conversation between the bank and its customer. They will also free-up time for representatives to perform more complex tasks for their customers.

Chat bot and artifical intelligence

Conversational AI

When bots and messaging apps are combined with conversational user interfaces and machine learning, the virtual assistant is born! The fundamental element used in conversational user interfaces is natural language. The direct correlation between the evolution of bot platforms and Natural Language Processing platforms signals a shift to ‘conversational commerce’ where virtual assistants have the potential to impact customer experience and loyalty. Leveraging the power of natural conversation, these technologies facilitate two-way interactions that allows banks to establish genuine relationships with their customers while providing a more seamless experience across multiple digital touchpoints.

However, it is not yet possible to provide flowing natural-language conversations with a software, though efforts are channeled towards that. For conversational AI to truly transform customer facing bots, event-driven programming models, sophisticated algorithms and machine learning have to converge on one platform. These platforms will provide the shift from request driven activities to automated activities that push information and choices to the users according to their need, in real time, adjusting the conversation flow with the users as preferences are learned.

Banks that leverage this technology can benefit in a number of ways.

   a) Personalized service – Conversational AI makes it possible to provide personalized services in real-time at lower costs. By tracking users’ habits, interests and activities financial products can be tailor-made to meet and anticipate each user’s unique and changing needs. Thus, it makes it possible to have one’s own digital personal financial assistant.

   b) Improve customer experience – Conversational AI provides a seamless digital banking experience. It allows for easy authentication and easy access which generally translates into higher customer engagement and retention.

   c) Make informed decisions – It also allows the management to make data driven decisions. Management can ask questions to machines rather than humans that will analyze the data and provide recommendations.

   d) Reduce fraudulent transactions – AI tools monitor users’ behavioral patterns and identify anomalies and fraud attempts and thus help in reducing frauds.

   e) Increased operational excellence – Conversational AI can be used to automate customer support through digital conversation. This will reduce the number of calls the agent has to attend and they will be able to deal with other complex issues. By automating tasks, cutting down inbound calls and resources in branch offices, transaction costs can be saved up to 90%.

There is no doubt that banks need to embrace Conversational AI to cope with the digital demands of today. However, this requires not only investment but also a deep understanding of the technology and the security risks involved in implementing the same.

Conversational AI is making a difference now and it is time for banks to embrace this technology.


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