Chatbots: the entry point into larger digital banking transformation

To most financial institutions (FIs), chatbots are viewed solely as a customer support tool. Consumers often encounter chatbots on websites as immediate pop-ups, or interact with them as they begin their service journey. Businesses employ this self-service technology to free-up human agents from responding to frequently asked questions, or to initiate a seamless support experience between chatbots, support staff, and other customer support solutions.

But chatbots provide more than a one-and-done customer service experience. For FIs, chatbots function within the broader digital banking platform, enabling users to complete transactions or transfers as well as get answers to frequently asked questions. In this blog, we’ll show how chatbots can not only enhance service, but also be the entry point to FI-wide digital transformation.

Why chatbots anyway?

Since one of the first instances of chatbots in banking launched in 2015 in the form of Ally Bank’s Ally Assistant, adoption has increased along with improvements in the technology. Cornerstone Advisors found FI chatbot implementation rocketed from 4% to 13% in 2020, with an additional 16% planning to invest in them the following year.

FIs can differentiate themselves by providing personalized assistance with chatbots, but that level of personalization begins with data. FIs continue to face a pesky problem: a lack of clean, usable data among the wealth of user data they’ve been collecting for the life of their business. Chatbots make a case for themselves by collecting data more efficiently and cleanly than people. Better data in turn empowers chatbots to further personalize the digital banking experience. Think of personalization at this stage as more than just tailored messaging or giving advice. Imagine personalized conversations. There’s the data problem to confront first, then FIs must create a chance to hold those conversations.

Chatbots can facilitate personalized conversations while addressing high abandonment rates during account opening or product application. As a part of the digital account opening process, chatbots can take on a crucial role beyond general service through the digital channel. Paired with useful user data, AI-driven technology completes a differentiating product application experience by recognizing if a user routinely uses their digital banking app to, for instance, transfer money to savings, then intervening to direct users to solutions relevant to their behavior. All this factors into holding a deeply customized conversation that utilizes natural language processing capabilities and sentiment analytics to accurately measure a user’s tone and facilitate completing applications.

According to Cornerstone Advisors, FIs are starting to take advantage of these opportunities: “The percentage of financial institutions that deployed chatbots in 2021 grew significantly, and the percentage that plan to deploy the technology in 2022 will accelerate that adoption.” In 2021, banks specifically were planning to invest or deploy chatbots and other AI technologies at a higher rate than ever, leading to a doubling in chatbots among banks by 2023. Credit unions have more actively implemented chatbots: “18% have already deployed some form of chatbot and another 18% plan to in 2021.” FI investment in chatbots in the last few years shows that they have become a necessary part of digital banking solutions.

The first step toward greater transformation

Chatbots offer more potential than just engaging users when they visit a website or log into their account. Considering chatbots’ ability to capture user data, FIs can consider chatbots their first step in larger organizational transformation. These uses all rely on data that chatbots could gather in their conversations with users, or could be augmented by the functionality of chatbots:

Back-office operations — Chatbots aren’t just for customers or members. FIs can employ them to provide automated support, from managing internal processes to training.

Security and fraud protection — Since conversational AI is tied to FIs’ backend, chatbots can catch fraudulent behavior in real time, improving the efficacy of fraud prevention initiatives with the right implementation strategy.

Financial Wellness — Chatbots can suggest products and services customers or members may not be aware their FI offers.

Along with digitally transformational benefits, The Financial Brand projects that chatbots will provide savings for FIs in the billions this decade alone. They’re on the less expensive side of the development spectrum, and cost less to maintain compared to human support costs.

In addition to using less code than a digital banking platform, chatbots are simpler to use than an app. With their ability to provide service around the clock, chatbots meet digital demands of the modern consumer, providing an edge to FIs. But, as we’ve seen, there’s even more to chatbots that impacts FIs’ back office, making them more competitive now and into the future.