How to Leverage Chatbots in the Banking Sector

Igor Izraylevych

7 min read

Chatbots in banking are helping make regular financial service tasks easier. The technology of conversational AI programs is changing how banking and fintech sectors engage with customers, helping you locate and solve customer needs with better company efficiency. 

Some examples include: 

  • Customer web help
  • Automated Q & A
  • Up-sell services
  • Find and check inventory
  • Offer new services
  • Collect customer data
  • Improve customer query speed
  • Increase digital customer engagement
  • Collect feedback

As consumers demand online and digital access to their banks, chatbots have become a customer service necessity, propelling the software solution into rapid deployment growth. 

The Popularity of Chatbots For Banks and Financial Services

Bot interaction apps are poised to become a common feature in personal finance management.

By the end of 2020, the number of financial institutions using chatbots tripled (up to 12% compared to 4% the previous year), with an additional 16% of banks intending to invest in the technology. 

Research also suggests that chatbots will handle between 75-90% of customer queries by 2022 and create an $8 billion per year reduction in business costs. 

Using the software tools that increase customer loyalty and lower business costs (especially with digital savvy consumer markets) is crucial for your success as digital innovation alters the banking industry. 

To learn all about the benefits of chatbots, how you can use them in business services, and possible concerns involved with conversational AI programming, read on.  

Use Cases of Chatbots in Banking 

The central purpose of chatbots in banking is to leverage technology for an improved and positive customer service experience. 

Most chatbots function as a streamlined support system within customer-to-bank interactions, such as automating routine tasks, initiating fast responses to customer queries, or sending personalized messages. 

Here are some direct use-cases that demonstrate the possibilities an integrated chatbot presents to your financial service:  

1. Review account information

A chatbot allows your customers to check balances, adjust their account settings, apply for products and services, review loan details, and update security information, all from the convenience of their home. 

Users do not need to spend time on phone calls or questioning internal teams, granting ease of use and a level of anonymity. 

As chat software applications improve in their programming, they can also add individual guidance for digital services such as money transfers, bill payments, or the purchase of new services you offer. 

2. Create Personalized Alerts 

Chatbots can pleasantly remind customers of upcoming bill payments, changes to accounts, or expected transactions, all from a mobile banking app. 

Additionally, the technical service can flag suspicious activity, late or missed payments, or large incoming and outgoing money transfers and deliver a warning to the customer in a personal way that will inspire safety, security, and trust.

3. Handle Customer Service Complaints 

Chatbots can provide immediate, 24/7 support to customers, globally. 

A well-programmed virtual assistant can resolve non-complex but urgent problems, helping lower a user’s total queuing time with less frustration or impatience over a simple issue. 

Banking Chatbots can further engage unhappy clients with feedback forms that are unobtrusive and easy to respond to. The degree of convenience, speed, and privacy that a chatbot presents can encourage engagement, especially if personalized messaging is involved. 

4. Responsive and AI-capable Q&A 

68% of survey respondents said they like how fast the chatbot could answer a problem. 

From location-specific answers to instant messaging, a chatbot can leverage immense computing power to locate and offer direct answers to common questions. 

With machine learning, a chatbot can pre-empt the most requested user questions and respond according to each customer’s stored profile, increasing the efficiency, speed, and personalization a user feels when asking questions from your service.  

The Benefits of Chatbots for Your Banking Service Customers 

The use cases of conversational programs will continue to expand as chatbots in banking and finance increase in popularity. 

As machine learning continues to improve its technical integrations, the potential deployment opportunities that investment banking and corporate banking can initiate is likely in its infancy. 

As of 2021, Each of the use-cases stated above provides a variety of customer-centric benefits: 

1. Improved Online Customer Service 

The ability to provide round-the-clock assistance is the consumer-voted #1 benefit of conversational AI software

It is a convenient mode of communication for your digital users, and as a rapid method of online access to information, it helps to boost consumer engagement with your brand. 

Chatbots can recognize, verify, and present personal information to customer inquiries, leading to benefits such as: 

  • Faster responses 
  • Communication in the correct language 
  • Customized offers 
  • Personalized help
  • Programmed politeness

Virtual assistants relieve support representatives from routine tasks, which means support teams can better aid customers with complex tasks, further improving customer satisfaction.    

2. Create Positive Online Experiences 

As customers interact with their banks online, engagement differentiates those with robust customer loyalty and growth in market share. 

1.9 billion people bank online, and that number is expected to grow to 2.5 billion by 2024. 

Online experiences create repeat user engagement, and financial chatbots offer your customers pleasant and personalized access to your digital service. The average satisfaction rate with a chatbot currently rests at 87.58% — that kind of user experience will result in better retention rates, especially as chatbots improve in their execution of human-like conversations. 

3. Solve Customer Needs More Efficiently 

As machine learning increases in its technical capabilities, expect chatbots to solve customer service requests with greater accuracy and improved speed, further delighting customers. 

Virtual assistants can present new services specific to the target demographic it is chatting with, helping increase engagement in less time. 

Insights from collected data and customer profiles can increase the effectiveness of marketing strategies, helping to predict and solve customer issues faster than any manual or human responses. 

55% of businesses that use chatbots report a higher-quality lead generation strategy, most likely influenced by the customer-focused brand messaging. 

The programmability and the endless patience of a chatbot can far exceed the limits of humans, and that is an opportunity that banks should take advantage of. 

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Digital Transformation in the Financial Sector 

The advantages of chat AI are not limited to your customers. 

As a result of rapid digital transformation, chatbots are a clear example of how technical solutions create numerous business operation benefits within the financial sector. 

Natural Language Processing

Branching from artificial intelligence, natural language processing (NLP) refers to an applications’ ability to understand and recreate text or spoken word with human-like qualities. 

Since NLP can evolve, programs now compute complex language tasks such as multiple language translation, responding to spoken word requests, and indexing large amounts of text — all in real-time. 

Apps can sort and compile vast amounts of information in accessible ways, increasing internal data storage and speed. 

Computers can locate and communicate pertinent info to a user at a pace and volume that is far better than any human attempt. 

Chatbots can handle and directly influence the number of customer interactions, boosting sales and conversion rates with less labor cost. 

Zurich Insurance UK reported a 20% increase in total customer interactions within six weeks after implementing a chatbot into their online service, and business leaders have claimed a 67% increase in sales from conversational AI. 

Data Collection

Including chatbots within your bank’s data management strategy helps further your institution’s understanding of its demographics. 

Discovering a client’s needs and how to best serve those needs is a cornerstone of any business. Chatbots can help with that process, and the virtual assistant can record critical information that is given by the user, such as:

  • customer pain points, 
  • potential service bottlenecks,
  • technical issues
  • service requests 

Across thousands of users (and with the predictive abilities of AI over time), market trends from current and potential customers become apparent. Use the feedback provided to you by your chatbot users to find business inefficiencies, and remedy the problems for better engagement.

A chatbot can collect the supplied user data, index it, build a service strategy and further engage clients with the new information sets. 

AI chat assistants complete these tasks all while maintaining client communication. 

Decreases In Costs 

The wide variety of banking use cases for chatbots continues to offer direct cost savings to institutions, helping to lower the average 1$ trillion dollars spent on customer service calls

Physical branch bankers benefit from reduced lines and smaller help-ticket inquiries, while call centers and support teams experience dramatically fewer workloads. 

With time savings of 4 minutes per inquiry, it translates to $0.40 – 0.70$ in costs saved per interaction

As chatbots continue to handle more complex tasks, business efficiency increases — customer service costs are stated to have reduced by 30% with the introduction of chatbots. 

Beyond monetary savings, reports show digital conversation apps will save 2.5 billion customer service hours by 2023

While the initial overhead investment might deter institutions from integrating the modern feature, the long-term value is obvious.   

Compliance and Security 

Chatbots can help facilitate and ensure better data security and compliance measures

Through personal identification measures, automatic requests for regulatory updates, or accurate record-keeping, bots can help with the internal controls of your business. 

Since all customer interactions are stored and protected within digital chats, all business applications remain safe and compliant. Chatbots can even search and find a customers’ security and compliance documentation when they type a question, maintaining proper security. 

Additionally, internal chatbots can support live agents as they ask for proper documentation needed for various regulatory requirements. 

Businesses and financial services often experience company inertia when it comes to digital transformation (only 12% of banks interested in modernizing plan to invest in a chatbot). Luckily, virtual chat assistants can organize and streamline business operations for you — IT leaders in the financial sector are sure to take note.  

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Concerns to Look Out For When Selecting a Chatbot

Chatbots in the banking industry do have some limitations in their use. 

When selecting a chatbot, keep a few of these considerations in mind. 

Machine-language Limits 

While chatbots in banking and finance perform well, for some human-like tasks, machine learning can still fall short. 

For example, bots can fail to understand the context of a situation and cannot make decisions within that context. 

At some level, humans will still manage the responsibility for critical business decisions such as offering a mortgage, a personal loan, or a credit card. 

In fact, 46% of users think a chatbot prevents them from reaching a live agent, and using human agent names for a chatbot causes dissatisfaction from clients (it feels like they have been lied to). 

Other examples of machine limits include standard program errors such as reusing a single answer for two separate queries. 

Such language barriers should resolve as the infrastructure (better programming, more data to learn from) expands.  

Initial Startup Costs 

Chatbots require startup investments, continual maintenance, and technical repairs like any other digital solution. 

Your business may need time to implement the new infrastructure as well, which brings with it an opportunity cost. 

Lastly, as a financial service, building your own chatbot system may rest outside of your expertise, and attempts to use internal IT resources can cause issues and delays. 

Lack Of Customer Understanding 

With no emotion and the inability to research beyond the confines of its already learned data, conversational AI can struggle with certain types of human conversation. 

A bot is not a person, and humans are more capable of appealing to the individual nature of each customer better than a chatbot. 

Chatbots are of great use for non-complex tasks, but 60% of consumers say that humans are better equipped to understand their needs. 

While the conversational technology will continue to improve, at a certain point in each customer query, if the issue becomes complex beyond the AI’s program, a human service agent should step in. 

Key Takeaway

Conversational AI can help with non-complex customer service inquiries, live agent support, and personalized interactions with users. 

Each chatbot use case provides several benefits to your clients, promoting brand trust and engagement, especially as consumers demand more access via digital channels.

Still, building and integrating customer chatbot solutions is a difficult task that may strain company resources. Even with the present challenges, chatbots will increase in quality and quantity, especially in the banking industry. As financial institutions rush towards online personalized experiences and digital innovation, It is important for you to capitalize on the benefits chatbots offer. 

If you need help integrating chatbots into your digital transformation strategy or would like more information, contact S-PRO here — we would be happy to partner with you!

Igor Izraylevych