Beyond apps: How chat and AI are taking over payments

The jury is still out on the future of mobile wallets, but a new digital option has started to share the spotlight: social messaging.

In yet another hint of Amazon’s encroachment into every single aspect of our digital existence, the company is reported to be working on a messaging platform called Anytime. This would put Amazon in league with Facebook, Alipay, Venmo and other companies that are betting on the fusion of payments and social media.

While this latest development could be dismissed as Amazon being Amazon — after all, the company has had its share of flops in payments — there are macro trends occurring that are attracting many tech-savvy companies to the post-app retail environment.

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What is 'conversational commerce'?

While the term “conversational commerce” is relatively new to the fintech lexicon, it has been around for a couple of years.

In a 2015 blog post by Chris Messina (inventor of the hashtag), he describes his vision of conversational commerce as “utilizing chat, messaging, or other natural language interfaces (i.e. voice) to interact with people, brands, or services and bots that heretofore have had no real place in the bidirectional, asynchronous messaging context."

Messina anticipates that this will evolve to a point in the near future where “the user can’t detect the difference, and will interact with either human agent or computer bot in roughly the same interaction paradigm.”

DBS, Singapore's largest bank, already claims this is the case with its own chatbot, called Kai.

“Our customers often do not realize that they are talking to a bot and not a person as the interactions are so natural,” Sandeep Lal, group head of digital bank at DBS, told American Banker in June.

The massive appeal of messaging

Though Amazon, Apple and Google have placed a significant emphasis on their voice assistants — Alexa, Siri and Google Assistant — text is a far more compelling proposition for today’s transactions since there is no need to buy a dedicated always-on speaker.

According to BI Intelligence, the top four global chat apps (Facebook Messenger, WhatsApp, WeChat and Viber) collectively have 3.7 billion monthly active users. Were there no overlap in usage, this would equate to half of the entire global population.

Inserting the ability to shop and pay into messaging media is a massive yet mostly unaddressed opportunity.

Although some messaging apps such as AliPay and WeChat in Asia have been incredibly successful in being the backbone to mobile commerce, in Western markets this opportunity remains largely untapped. One reason for this is that while consumers are spending a large amount of their time in a chat environment, the technology for finding products and transacting within the chat channel invariably involves handing off the last mile to an app or website — a step that may be considered an unnecessary detour or even a roadblock.

This is where third parties can come in, such as American Express' work with Facebook Messenger or the growing range of Alexa "skills" from third parties.

More channels, more spending

There is another advantage to conversational commerce — exposure to multiple retail channels can have a positive impact on sales.

A comprehensive Harvard Business Review study of 46,000 consumers conducted in 2015 and 2016 demonstrates that shoppers who used multiple channels (online, mobile, in store, etc.) spent an average of 4% more on every shopping occasion in the store and 10% more online than single-channel customers. Further, with every additional channel they used, the shoppers spent more money in the store.

For example, customers who used four or more channels spent 9% more in the store, on average, when compared to those who used just one channel. Thus, adding chat as another channel for commerce could serve to boost spending across all channels.

But are apps and chat programs really different enough to be considered separate channels? Messina notes the way we describe apps and messaging solutions are very distinct: “The verbs we use with traditional apps are irrelevant in the conversational paradigm. We 'buy,' 'download,' 'install' and 'trash' apps. The conversational paradigm is more social, and therefore less technologic. We use humane verbs like 'add,' 'invite,' 'contact,' 'mute,' 'block' and 'message.' "

This mental distinction may be one of the key components to the future success of conversational commerce and moving beyond an app based digital retail experience. Conversational commerce at this time is handicapped by the current state of Natural Language Processing (NLP) and artificial intelligence, and therefore comes over as robotic.

However, the ability to ask real-time conversational questions — via voice or text — opens the ability to conduct digital transactions to basically anyone who can speak or type. In the near future, consumers may no longer distinguish between human and machine interaction, and the big tech companies want to be there when it happens.