Chatbots in the Banking Industry – Everything You Need to Know

According to IBM, a chatbot is a computer program that uses Artificial Intelligence (AI) and Natural Language Processing (NLP) to understand customer questions and automate responses to them, simulating human conversation.

Sounds interesting!

But how do we use chatbots in the banking context?

Before getting into the use cases of chatbots in the banking industry, let us look at some of the industry statistics.

44% of repetitive finance tasks will be automated with AI-driven chatbots in the next 3 years.

Banking agents save 4 minutes of their time for every query handled by a chatbot. This saves up to 0.7 USD per query.

Conversational banking research shows that 90% of the interactions in banking and financial companies will be automated by 2022.

65% of the customer queries are repetitive and can be solved by conversational banking chatbots, while the rest can be solved with artificial intelligence and agent support.

Examples of Banking Chatbots

Some of the documented uses of chatbots in the banking industry are:

1. Bank of America’s Erica

Bank of America’s Erica, AI-powered chatbot, tops 1 billion client interactions. Launched in 2018, Erica has helped nearly 32 million Bank of America clients manage their financial lives.

Erica gives information about the account balance, sends various notifications to the customers, provide updates, share credit reports, pay bills, and help customers complete their transactions. It also offers financial advice to customers to make intelligent decisions.

2. JPMorgan Chase

JPMorgan Chase is the largest bank in the US and controls over $2 trillion in total assets.

JPMorgan’s AI-powered chatbot initiatives include:

• Natural Language Processing in equity investing
• Anomaly detection for recognizing fraud and risk mitigation
• Natural language processing for virtual assistants, utilizing news, and client intelligence
• Predictive analytics for smart documents and intelligent pricing

3. Wells Fargo’s Fargo

Wells Fargo’s new virtual assistant, Fargo, will leverage Google Cloud’s artificial intelligence to provide a more personalized, convenient, and simple banking experience.

Fargo will provide customers with a simple, intuitive means of servicing their accounts. From turning on/off debit cards and checking credit limits to searching for specific transactions by date, amount, or type, users can ask Fargo instead of hunting for the answer.

If Fargo cannot address a query, it seamlessly connects customers to a live agent.

4. HDFC Bank

HDFC bank improved its lead generation by 30 times using an AI-powered chatbot.

HDFC had a high rate of drop-offs of customers from the informational page to the application page for personal loans.

HDFC deployed a conversational AI chatbot on the informational page to educate customers in real-time and qualify leads by setting up an automated outgoing call.

It allowed HDFC bank to increase the qualified leads by 30x.

Why Should We Consider Chatbots in Banking?

Chatbots can enhance customer experience, improve engagement, and ease legacy processes, making banking more accessible and quick.

A well-defined chatbot strategy will help banks with the following:

1. Provide instant responses to queries without making customers wait. Reduces TAT and performs mundane tasks at high speed
2. Capable of remembering customer choices and preferences, and suggests recommendations, and helping in cross-selling.
3. It can streamline legacy processes, send updates and notifications, build customer profiles, and provide recommendations on those profiles. This can result in better customer experience and retention
4. Learns from customer feedback and follow-up queries and improvises on the fly, enhancing the user experience
5. Available round-the-clock for customer conversations

So, AI-powered chatbots have a massive role in the banking industry. Let us look at some use cases in the banking industry.

Potential Use Cases of AI Chatbots in the Banking Industry

Here are some of the most compelling use cases of AI-powered banking chatbots.

1. Customer Support

Chatbots in the banking industry can handle various tasks – answering frequently asked questions, processing transactions, and providing account information.

For instance, customers can use chatbots to check their account balance, request a chequebook, view recent transactions, and make payments.

2. Improved Customer Service

Chatbots are available 24/7, unlike human beings. They don’t have to do night shifts and won’t feel tired, so customers can get all the help they need anytime.

They also provide immediate responses, reducing wait times and improving the overall customer experience.

3. Streamline Processes and Improve Efficiency

Chatbots can automate repetitive tasks, such as processing account applications, freeing up employees to focus on more complex tasks. This not only saves time but also improves accuracy, as chatbots are less prone to errors.

4. Fraud Detection and Risk Mitigation

Chatbots can analyze data in real-time and identify suspicious activity, alerting banks to potential fraud before it occurs. This helps protect customers and also saves banks time and resources by reducing the need for manual interventions.

5. Lead Generation

Chatbots can seamlessly collect data from the very first conversation and build on interactions to make personalized suggestions.

They can help you reach new customers directly with custom products and services and convert them into qualified leads

6. Financial Advisory

Do you have a chatbot to keep track of your spending habits?

Chatbots can keep track of it and use it to give valuable financial advice to users – set spending limit reminders, payment reminders, and updates on habit development

7. Feedbacks and Reviews

Banks can integrate chatbots on websites and apps to collect feedback and reviews instead of using long survey forms.  

This feedback can be used to improve customer service and CSAT scores.

Limitations of Banking Chatbots

It is important to note that chatbots have limitations and are not a straightforward replacement for human interaction.

For example, chatbots may struggle with complex or uncommon requests like:

• A customer wants the interest rate on his loan to be reduced, or he wants to foreclose the loan
• A customer has a dispute on the insurance claims he received, and he wants to address it
• A customer has had a fraudulent transaction on his account, and he wants to register a complaint
• A customer has been charged twice for the same transaction, and he wants that to be rectified

A customer may want to speak to a human representative for these requests.

Besides, chatbots are only as effective as the data and the algorithms they are built on. So, it is crucial for banks to consistently update and improve their chatbots to ensure they provide the best possible experience for customers.

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Using chatbots in the banking industry has enormous benefits like improved customer service, increased efficiency, enhanced fraud detection and risk mitigation, lead generation, improved customer retention, and robust feedback and survey assistance.

As technology advances, chatbots will likely become even more integrated into the banking industry, providing customers with more convenient services.

However, it is crucial to strike a balance between using chatbots and human representatives. You should always provide an option for your customers to reach a human whenever they feel a need. This would help you offer the best possible customer experience.

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