Are consumers ready for conversational digital banking experiences?

• Banks are making rapid investments into their digital customer experience
• Chatbots and conversational AI technology is proving a key technology, enabling customers to interact with their banks anytime, any place

If bricks-and-mortar bank branches don’t close altogether within the next decade, they will undoubtedly offer an experience a world away from that of the last few years. 

Stuffy queues at the cashier counter will be replaced by a combination of self-service points and customer service assistants with iPads, ready to check-in and seat customers — even hand them a coffee — as they await an advisor to help them with a more complex transaction, such as opening an account or applying for a loan. 

The experience will be seamless and personal because most customers will be conducting their financial affairs from their smartphone. 

Digital banking is evolving at an incredible pace and, while customers will continue to crave the versatility offered by evolving in-branch experiences (Chase’s new Manhattan emporium now offers a ‘digital advice bar’ and after-hours community Chase Chats), the technology is quickly closing off the need for customers to step foot through the door.

From an app, customers today can check their accounts, transfer money and make payments, apply for loans or overdrafts, freeze their accounts, and cash in a check with their camera among plenty of other nifty features. But it is data, and what banks can do with it, which holds the real potential, from personalized spending plans and rewards to unnoticeable tweaks to user experience that make interactions seamless and intuitive, tailored to the individual user at the right time. 

Conversational AI in banking

Banks are leveraging customer data to dramatically enhance the customer experience and communications, once again making that personal touch and face-to-face advice possible, without stepping foot in-branch. 

This is conversational AI or chatbot technology, and it’s making our interactions with banks, from fintech challengers to incumbents, much more seamless. It’s enabling customers to ‘talk’ to banks about their accounts in a way that’s comfortable and intuitive, whenever they like. For banks themselves, it’s generating increased customer acquisition, conversions, and retention rates, all at a lower cost.

AI is no new concept, of course, but its uptake in the banking industry has been accelerated by awareness of the need to enhance digital experiences and the availability of open-source tools from the likes of Google, Amazon, and other new entrants which — when combined with masses of the customer and industry data — have made the technology simple, fast and powerful.

Like any other business, banks are under pressure to move quickly with technology or lose out to more hungry and ambitious competitors and aggressive new kids on the block. With Gartner predicting that customers will manage 85% of their relationships with an enterprise without interacting with a human, and TechEmergence believing chatbots will become the primary consumer application within the next five years, conversational AI is now a series focus. 

And while digitization has been taking place in banking for decades, keeping pace with customers’ expectations for quick, convenient, secure services that can be accessed from anywhere on any device is no mean feat, especially as society barrels closer to a cashless future by the day. 

While established banks are shifting services online and investing heavily in front-end IT infrastructure, they are now vying for customers’ increasing expectations for “data-fueled, hyper-personalized experiences in real-time,” which incumbents in other sectors have been quicker to adapt to. Overall investment in new IT increased from 24% in 2016 to 33% in 2019, according to a report by Capgemini, but middle- and back-end operations are often still based on complex, manual business processes, leading to fragmented customer experiences.  

The rise of conversational AI in banking has been fueled by a rise in conversational interfaces and natural language processing (NLP) technology that enables us to interact, transact, and collaborate using natural chat. 

Leveraging the behavior we are most used to using in social or mobile communications with our friends, family, and colleagues on channels like Whatsapp, Messenger, Teams or Slack, conversational AI programs break down the formality of communications with our banks, changing perceptions of them as a flexible, accessible, personable service built to serve us. 

It’s not just challenger banks like Monzo, Revolut, or Starling that are employing this conversational AI. Bank of America’s virtual assistant Erica can take commands via type and voice command, to schedule payments or explore recent transactions — predictive analytics will also allow it to provide guidance for better financial health. Capital One, meanwhile, has a texted-based chatbot that allows customers to manage money by SMS, including credit card payments and viewing transaction history. Mastercard uses Facebook Messenger to conduct similar functions, including notifications about cardholder offers. 

As these communications channels continue to advance, customers can interact with banking processes, day and night, from enrolling new customers and walking through features, enabling the reporting potential fraud, applying for an increase on their credit card limit, or requesting a specific breakdown of spending on groceries, for example. 

The successful implementation of this technology has positive effects for the bank as a whole, which needs to invest less in customer service agents — while improving the attentivity of service among those remaining — with cost savings channeled into further innovation. 

The development in conversational AI would logically be further advances in the use of voice, negating the need for typing altogether. A customer’s app, in this sense, could become their own personal, financial advisor, able to answer any questions they have about their account or spending, drilling down into the data it has available. 

As conversational AI or chatbot technology continues to advance, customers will see a shift away from mobile banking to conversational user interfaces (CUI). If they prefer, all interactions could be carried out by simply chatting (typing or speaking) to a CUI. 

Moving towards this conversational banking strategy will not be solely a technology endeavor — it will require the banking industry to continue to attract human talent with AI and NLP skills to keep pace with advancements of technology and ensure they’re integrated. At the same time, security must become an ever-growing priority and investment, including things like voice biometrics and passphrases to verify that the customer is talking to the bot and not a stranger who has their phone.