Questions the article answers:
The past decade has seen traditional banking evolve and lean towards digitalisation at a slow but steady rate. However, in the past two years, with a global pandemic pushing the entire world into sudden lockdowns, even sceptics have now switched to online banking options in an almost overnight fashion.
According to a joint study by the World Bank, the Cambridge Centre for Alternative Finance at the University of Cambridge’s Judge Business School, and World Economic Forum, the fintech market has continued to help expand access to financial services during the pandemic—particularly in emerging markets—with strong growth in all types of digital financial services except lending.
Interestingly, customer support is one of the main reasons behind the increasing popularity of fintechs and digital banks. A study found that globally, 66% of customers are choosing fintech because of the range of functionality and features, 55% due to the availability of services 24/7, and 53% due to the ease in setting up, configuring, and using the service.
With changing customer expectations, where they increasingly seek better, easy-to-use interface, and 24/7 assistance, for fintech and digital banks to survive and thrive in a post-pandemic future, engagement will be key. Digital banks and fintech can leverage the latest technologies, such as artificial intelligence (AI) and data analytics to provide a better, more holistic customer experience. This is where conversational chatbots can help by incorporating consumer data to offer a completely tailored digital banking experience that perfectly suits their customer's needs with the customer's consent to send such data to the smart bots.
Let us understand the emerging consumer trends in fintech and banking in the IR 4.0 era and how fintech startups and traditional banks can prepare to survive and thrive in the post-pandemic future by leveraging conversational chatbots.
What are conversational chatbots and how are they different from rule-based chatbots?
Data from Google Trends shows that interest in chatbot solutions has increased ten-fold over the last 5 years. Over time, with the rise in interest, chatbots have evolved from traditional rule-based bots to AI-powered virtual agents or conversational bots. These chatbots provide a more human-like customer experience. Unlike rule-based chatbots, they are capable of carrying on a natural conversation. They even understand the meanings of words and are even capable of identifying misspellings. Furthermore, these bots learn from real interactions and are easier to adjust and retrain.
Here’s a quick look at some of the key differences between rule-based chatbots and AI-enabled conversational bots.
Combines Natural Language Processing (NLP) with machine learning so it’s more natural and human-like and provides a more conversational experience
Continuously improve without much assistance
Difficult to scale
Highly scalable as it evolves and learns from context and interaction
To optimise the bot performance, companies have to explicitly update rules and constantly make improvements manually
Easy deployment and integration with existing databases, text corpora
More robotic than conversational
Owing to their dynamic features, AI chatbots have opened up new avenues for the banking sector by empowering financial institutions and fintechs to provide an altogether new kind of service known as conversational banking.
Conversational banking is where a non-human interface allows users to discuss finances or even seek financial advice. This type of banking leverages AI chatbots to exchange messages, ask questions, or give commands. In other words, it is about managing customers’ financial lives through voice or text messages. ChatGPT has emerged as a powerful tool in providing a seamless banking experience for financial services. This means that members can use ChatGPT-powered chatbots to check their account balance, retrieve transaction history, and get information about the bank's products and services.
Conversational banking, such as one powered by ChatGPT can enable more personalised experiences and offers many benefits.
Conversational assistants are becoming increasingly popular across all industries and banking is no exception to this trend. A Capgemini study summarises how conversational assistants are becoming mainstream in the table below:
Plus, conversational banking offers some key benefits over traditional banking:
1. Reduced customer support and operational costs - One of the main advantages of conversational banking is reduced customer support and cost savings. In fact, Gartner predicts conversational AI will reduce contact centre agent labour costs by $80 billion in 2026. Furthermore, some projections suggest that conventional financial institutions may save up to $1 trillion by 2030 with the adoption of AI to decrease expenses by around 22%.
2. Upselling and cross-selling opportunities - Another great thing about chatbots is their ability to access more data for future customer conversations with live reps. This helps with upselling or cross-selling purposes; chatbots help gather preliminary research about a potential customer that a live rep can later use to upsell or cross-sell with greater ease.
3. Fraud prevention - Financial fraud and cyber attacks have been one of the main challenges faced by banks in APAC. In fact, a report shows that one in four consumers fell victim to online fraud in APAC, whether it is through banking or payment scams on eCommerce sites. This is where AI chatbots can help. Fraud detection in AI chatbots works round-the-clock. So, if there is any suspicious activity in the account or card, the system is trained to create a temporary block and alert the user.
4. Improved customer engagement - With conversational banking, financial institutions can rely on bots, interactive voice response (IVR’s), and video calls to reduce customer waiting time by almost 92% and increase first call resolution by 80%. So, there is a minimal wait time to start talking about customer’s issues and to get a resolution. This allows for faster response times, which ultimately results in faster resolutions to customer support issues. Banks are able to quickly engage customers before they get frustrated.
5. Greater business flexibility - With conversational banking, there is greater speed and 24×7 availability. Customers enjoy higher-quality service with features like the flexibility of applying for a personal loan 24X7 without the manual completion and submission of application forms and more.
Conversational chatbots use cases in finance and banking
Virtual banking assistants
There are more than 600 virtual banking assistants all over the world today. They greet customers, answer basic questions, and propose products and services after identifying the needs of customers. From informing customers about account balance, answering general FAQs and giving financial advice, virtual banking assistants do it all.
Automated customer support
Conversational chatbots provide automated customer support through features like ATM and bank live locators. They also help in facilitating regular banking transactions like fund transfers between accounts of the same as well as other banks and bill payments.
Prevent fraud in a secure and encrypted channel
Conversational chatbots can facilitate the OTP-based authentication experience over messaging applications such as WhatsApp. Unlike SMS, WhatsApp offers end-to-end encryption, which is why it is a safer channel to prevent fraud and to protect customers’ security and privacy. ADA currently works with several leading companies in BFSI in Indonesia to improve app security, protect customers, and prevent fraud with WhatsApp OTP.
Integration with cloud contact centres
Cloud-based systems enable banks to scale quickly to manage the increasing call volumes better. However, when communicating with users, a chatbot must understand their specific needs. So, if the user writes a key phrase such as “I need help from someone,” the language understanding service can provide the handoff intent to the chatbot, signalling the human agent to connect to that conversation. AI chatbots are smart enough to facilitate this bot-agent handoff.
One of the biggest pain points cloud centre integration can solve is a complex and painful CX (user) experience caused due to factors, including slow customer support, high operation costs, and low agent productivity.
The cloud centre integration can help customers and agents get in-depth insights and solve issues quicker, which will result in a smoother experience, higher customer satisfaction, and double agent productivity.
Acknowledging that conversational banking is a prelude to the transformation of the industry, a structured approach to improve CX will help banks reap significant returns.
As conversational banking is a shift in the way banks operate involving AI, Machine Learning and Big Data, Natural Language Processing (NLP), new skills and operation model, it is imperative to have the right implementation approach and framework.
Based on our unique capabilities at ADA, we developed a high-level framework to guide organisations through CX transformation.
1. Design a conversational banking strategy
This is where banks can define and frame the goals of their conversational banking strategy. The focus here is to elevate and transform the customer experience. For example, the goal here could be to:
Banks need to start by identifying the appropriate use cases and choosing areas of maximum impact in terms of customer value as well as the rate of return for the bank when AI chatbots are implemented. This transformation journey will allow banks to quickly scale to different communication channels such as WhatsApp and Viber. Conversational interfaces must be designed in the context of their use and follow familiar sequences and cues that encourage interactions and further engagement.
2. Design a CX map by visualising the entire customer journey in the organisation where conversational banking transformation can happen
A clearly visualised customer journey map will help banks shift systematically towards the effective applications of AI for implementing conversational banking. In the absence of this, banks will not be able to implement changes in the operating model, which will result in slow and patchy implementation with poor customer experience.
The journey map would allow use cases to be prioritised along with the systems and technology in place at the organisation to enable transformation.
3. Connect systems and technology to enable transformation
Banks need to set up an integrated team that brings together IT, CX, Sales and Marketing to connect the systems and technology where the bots will be implemented. It is essential to apply natural language processing (NLP) to understand human language to automate certain document processing, analysis, and customer service activities when the teams integrate to enable smooth transformation as banks embark on their transformation journey to be future-ready.
In a digital-first world, conversational banking is not only a competitive advantage but rather a necessity in a remote-everything world. For banks and fintechs in APAC and around the world, looking to serve their customers better by keeping them engaged and informed round-the-clock, CX transformation powered by chatbots will be key.
To learn more about CX transformation on WhatsApp, Viber, and more and bring your digital bank to the future, visit https://ada-asia.com.