Chatbots and the Rise of AI in Banking
When is the last time you checked your phone? Chances are, not long ago.
Today, communication has become ubiquitous. Whether it is voice, text, or tactile based, there is some form of communication happening all the time in the form of an app update, a text message, a weather report, or something else. In the last couple of years there has been an increase in the adoption of 1:1 chatting applications and the reason for it quite simple; it is instantaneous and straightforward.
As businesses slowly start integrating chat interfaces to engage their customers, banks too have started offering chatbot services to better engage their customers. And since chatbots ride on existing applications, there is little friction involved in getting people to use them.
X, Y, and Z
The 80s was the age of packaged software. Then there was the internet explosion, followed by arrival of smart phones and app ecosystems. Today we have chatbots. If we look at the generations that have passed in that time; X to Z (millennials), we can see changing mindsets, priorities, and expectations. The passage of time has seen a sharp decline in attention span and a strong resonance with instant gratification. Loyalty is a thing of the past and people today expect the products and solutions they use to be like how they perceive themselves – quick, agile, and efficient. Failure to meet expectations will result in a swift change of service providers with no regrets.
Expecting your customer to adapt to what you have to offer is a thing of the past. Financial institutions are held in high regard as the ones that facilitate economic stability and if banks can help their customer make smart financial decisions, they would have successfully spoken the language of their customers.
So what’s different with how millennials communicate?
The millennials communicate differently than their previous generations. They prefer texting over talking, emoticons over words, and talking to Siri or Alexa instead of talking to a real person. If you grew up in the 80s and 90s, you’d definitely find this strange; if you are a digitally native millennial, this seems quite normal.
Millennials like to be in charge of when and how they do things. They expect to open a messaging platform to schedule their meetings, chat with friends, order a pizza, and make a fund transfer, all the same time. The reason chat is being favoured so much these days is because of the high levels of engagement it offers with relatively low levels of commitment involved. As the future moves in a direction where disrupting businesses models is becoming the way forward, it’s only a blend of automation and innovation that would help businesses stay in the race. And intelligent chatbots will definitely play a sizeable role in redefining how customers engage with businesses.
So what is a chatbot?
Some might think of it as an innovation that could beat the Turing Test and be indistinguishable in the way it communicates with a human. This is what most chatbot developers hope for but few achieve. A chatbot is unique like a baby and based on its programming and exposure, learns and evolves over time. Based on the kind of artificial intelligence (AI) and levels of natural language processing (NLP) involved, a chatbot could respond more intelligently than others.
Broadly, chatbots could be rule based or AI based. The rule based ones have functionalities limited to what they have been programmed to do. The AI based ones, uses high levels of NLP and evolves as it converses with more people.
But the reality is that many of the chatbots you find today are just not smart enough to hold intelligent conversations or give advice. If all a chatbot can do is telling account balance, it’s not really serving much of a purpose. An intelligent chatbot must not only tell the current account balance, but also initiate a fund transfer, pay a bill, report recent spending activity, and give financial advice. What would be even more desirable would be to use predictive analytics to suggest personalized financial advice or caution a customer regarding fees that would be incurred due to a future transaction that would take place during an overseas travel.
GIGO All the Way
However, like all man made systems, there is a risk of chatbot behaving strangely. Most machines work on the garbage in garbage out (GIGO) concept. So if the bot has not been programmed well, it is highly likely that it will give out some absurd or unintelligible responses.
Also, the financial world has been at the receiving end of being accused of wrong doing and malpractice. Hence it is important that a chatbot must interact with a customer in a way that inspires trust. As we make instructions simpler to perform transactions, we should also pay attention to the fact that it is their hard earned money we are dealing with. Hence, it is important that chatbots behave intelligently without being too pushy about making suggestions or cross selling.
The advantage of using artificial intelligence to interact with customers is the nature of relationship that is created between a chatbot and a human. It involves human elements combined with technology that makes certain processes and tasks more efficient and effective for millennials. A good chatbot helps their customers to conduct financial business on their own terms with the tools they are most comfortable with. Banks in turn can gather data from every interaction in order to learn more about their customers and use these insights to make their chatbots better.
To serve customers better with bots, banks would have to:
Feed the chatbot with existing content (process / technical / non-technical / compliance) so that they can provide accurate responses to general queries.
Seamlessly integrate front end and back end systems to make it easy for the chatbot to access transactional data as part of a conversation.
Build a trigger based system that pushes useful insights with respect to customer activity.
Build a self-learning chatbot that evolves based on its interaction with different customers so that they can offer personalized financial advice based on a customer’s financial activity.
Engaging the Future
Banks can solve the problems they have with engaging millennials by speaking their language; the language of convenience. For this, banks can leverage technology to help the younger generation in creating a stable financial future. That could be defined as a mutually beneficial relationship.
While some might see chatbots as an evolution of user interface others might view it as the next wave of disruption. Whichever the case, the outcomes are similar. In the case of evolution, the fittest survive. In the case of disruption, innovators succeed.