Everyone is talking about generative AI and the new possibilities that it offers. Particularly in the banking and insurance sectors, the way that customers are choosing to interact with their providers is changing and one reason for this is the availability of more real-time personalized solutions and services based on generative AI, which include AI chatbots in banking. But how do they work and why are they becoming more relevant? In this article we will explore AI-based chatbots in the context of digital banking, possible use cases and the pros and cons of using them in your daily business.
What are AI chatbots?
A chatbot, or chatterbot, is a software application which simulates human conversation. Newer chatbots based on generative AI (Artificial Intelligence) do this through using automated rules and extracting information from its data set with natural language processing and using machine learning processes. Scientists have worked in depth to build more sophisticated chatbots for different purposes.
Applications of chatbots in banking
Onboarding support
Chatbots streamline onboarding processes by providing efficient and user-friendly interactions. They guide new Customers through account setup, explaining terms and procedures in a conversational manner, making the onboarding experience more accessible. Chatbots can assist with identity verification, ensuring a secure onboarding process. They also offer immediate responses to frequently asked questions about account features, transaction processes, and security measures, reducing the need for human intervention. Additionally, chatbots can collect necessary information, such as identification documents, in a structured and interactive way. This not only expedites the onboarding process but also enhances Customer engagement. Through their 24/7 availability, chatbots ensure a seamless and convenient onboarding experience.
Financial literacy
Customers can inquire about basic financial concepts, terms, and explanations in a conversational manner, making complex topics more accessible. Through interactive learning, gamified content, and demystifying financial jargon, chatbots make financial education engaging and comprehensible. Via personal finance management tools, they already empower users to make informed decisions by analyzing spending patterns, visualizing transaction histories, and delivering real-time responses to queries. Additionally, chatbots play a proactive role by sending alerts and reminders for bills, savings goals, and market updates, fostering a continuous learning environment and reinforcing positive financial habits. Overall, chatbots contribute significantly to enhancing not only the financial knowledge but also the decision-making capabilities.
Since a growing number of banking customers choose to interact with their bank through digital channels, and AI tools such as chatbots are more and more popular, banks are constantly evaluating new use cases for services. Major consideration factors include making services as seamless and readily available to customers as possible, without jeopardizing security. In this line of thinking let’s take a closer look at how can it impact the usual suspect the fraud prevention domain but also the human resources intense services such as the call center and financial advisory.
Operational management
In the domain of fraud prevention, AI-based deep learning is extensively employed to combat online payment fraud. This commonly involves risk-based assessment (RBA), where models are trained on a customer's past transaction data to evaluate if the current transaction aligns with established patterns. Another emerging use case is for internal purposes within banks is facilitating information sharing among employees/systems. In this scenario, an AI-powered intelligent assistant is trained on an internal knowledge bank exclusive to the organization and within respective access rights, offering information in response to employee prompts.
Automated customer service
Transitioning from internal functions to customer-facing roles, chatbots take center stage. Customer service chatbots emerged as pioneers, empowering customers to troubleshoot issues efficiently, reducing the need for lengthy telephone calls. In the future, these initial chatbot iterations can transform into virtual digital banking assistants, offering human-like assistance 24/7. Advancing further, there's potential for predictive conversational digital assistants that analyze customer data and preferences, delivering tailored support and advice seamlessly.
Advisory service
In the advisory domain, banking apps have incorporated personal finance management features, extending their reach beyond financial literacy and planning. The emergence of virtual banking assistants provides a platform for advisory services, offering a virtual alternative to in-person branch visits for personalized advice. Various banking and insurance providers are exploring robo-advisors, already well-established in assessing investment decisions. The expectation is that nearly 30 percent of banking customers will utilize intelligent advisors by 2030.
Braingroup is the market leader for modern hybrid financial advisory software in the Swiss banking and insurance environment. Its solutions cover both online and face-to-face advisory formats – from preparing the discussion to closing the deal. This turns the advisory meeting into an interactive experience and creates the basis for a lasting bond between the advisors and their customers.
An AI banking assistant empowers you with personalized, conversational, and efficient mobile and web banking services at your fingertips.
As is almost always the case when adopting new technologies, there are several factors to consider in order to determine whether using an AI chatbot is right for your business. Here we will provide an overview of some aspects to consider when it comes to evaluating the use of AI chatbots in digital banking
Advantages of AI chatbots
There are some obvious gains to be had when adopting chatbots in banking, one being the potential for notable cost savings in the long term by optimizing branch operations and not losing customer interactions but rather elevating them to a new hyper personalized level. Chatbots also can be activated at any time and do not get tired, providing assistance more flexibly. If the customer wishes it, they can also analyze their banking and spending data to provide them with more personalized advice, leading to higher customer satisfaction.
Disadvantages of AI chatbots
Again, when dealing with new technologies, there are bound to be costs tied to initial implementation. These can seem high to begin with, but often pay off over time with saving on other costs. Another issue to consider is making sure data security concerns are covered. The bank system must be absolutely secured against unauthorized access and customer must feel reassured that the chatbot is treating their sensitive information with confidentiality. Finally, although chatbots have made great strides in natural language understanding, they are not on the same level as humans and may misunderstand context in some queries. Periodic supervision of chatbot answers is advisable, to make sure they are not providing irrelevant information and that ethics codes are being followed.
The AI banking landscape today
Several banks have already started using AI chatbots for various purposes.
The American Citibank is using AI for early fraud detection, risk management and customer relationship management. Deutsche Bank is testing possible applications for them in evaluation of loan risks, trading strategies and customer service, and the Dutch bank ING is trialing solutions for credit scoring and improving customer satisfaction. It’s still early days, but feedback suggests that customers are responding well to a more unified and coherent approach in responses from the bank.
Netcetera has also made progress in this area, developing a AI Banking Assistant which can search transactions, block cards and carry out other essential functions while in conversation with the customer.
Outlook for the future
At the end of the day, each banking institution must weigh up all positive and negatives to make their own decision on AI. However, judging from decisions made by some of the major players suggest that now is the time to jump on innovation so as not to fall behind competitors and keep abreast of market evolution. In view of the many opportunities that Generative AI opens up for banks and insurance companies, it is best to stay informed and may be too costly an option to take a “wait and see” approach.
Want to know more on this topic? You can always contact Netcetera experts for more information.
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