OCTOBER 10, 2019
9 min read
The financial services and banking industry is actively adopting conversation. Today we are surrounded by gadgets and applications that listen, analyze, and answer our questions and concerns. We easily share information that we’ve used to keep private, helping companies get insights into how we choose, shop, and pay.
Conversational banking is forcing the next wave of digital growth. Artificial intelligence chatbots are skyrocketing and becoming an essential part of our daily life, thanks to progress in natural language processing (NLP) and speech capabilities. However, most innovative financial technology companies go much further. For instance, Morgan Stanley utilizes AI to recognize fraud, JPMorgan executes trades, while HSBC employs robots to reveal fraud, money laundering, and terrorist funding. Business Insider Intelligence expects that integration of AI to the front (conversational banking) and middle (fraud detection) offices can potentially save banks up to $416 billion by 2023.
With the technological advancements today, ‘conversational interface’ serves as an umbrella term for text-based and voice-activated chatbots. Messenger bots interact with customers through texting, including media and various UI elements. Meanwhile, voice-enabled assistants accept instructions in both written and oral forms and provide clients with instant replies through voice. In a recent survey, the Capgemini Research Institute has found that voicebots are making a big splash, and around 70 percent of consumers expect voice assistants to replace banking interactions and retail purchases in the following three years.
Reimagining the Rules of the Game With AI-based Chatbot Services For Financial Industry
Despite the fact that conversational banking is in the early days, the way we interact with financial businesses is evolving with increasing speed. Tech-savvy customers have a craving for messaging and look for personalized experiences. The rising sophistication of mobile technology and the growing demands of users have raised the bar of intelligence over the last few years. Subsequently, bots have developed from simple online tools into digital assistants, while the use of Fintech services has increased from 16% in 2015 to 64% in 2019.
Analyzing the evolution of such a dynamic industry, Hendrik Nordmark, Head of Data Science at Profusion, expects that around 85% of all interactions with financial firms will be done via chat by 2020. While, according to the 2018 State of Chatbots Report, customers expect to enjoy the following features provided by chatbots:
- 24-hour service — 64%;
- Getting an instant response — 55%;
- Answers to simple questions — 55%;
- Easy communication — 51%;
- Complaints resolved quickly — 43%.
Fintechs have translated from startups that want to contend with incumbents into a broad ecosystem open for partnerships, all while the impact of information technology on financial services is still gaining traction. They are initiating and nurturing the market movements by investing in emerging technologies that will ensure advanced experiences to their end-users.
As innovators utilize new solutions — chatbots, natural language searches, and biometric security — their aim is not just to improve customer service, but also to enhance safety and efficiency, make operations agile, and cut costs. Additionally, PWC DeNovo notes that companies that embed AI technology to financial services are supported more extensively — with $1 billion funding on average over recent years.
Chatbots in Financial Services: The Outcomes of Fintech Innovation
In the current form, conversational user interfaces (CUI) have taken shape and can be called mature. Financial chatbots save over four minutes on every interaction, equal to $0.5-$0.7 per query. Additionally, customers use them to check account balance, get spending details, transfer funds, pay bills, and more. Supporting some of the most innovative financial technology companies with product development and fintech consulting services, we keep track of industry events and new opportunities and witness how AI is rapidly transforming the banking sector.
#1 Enhanced Financial Service Speed
Today the majority of fintech trends are focused on both advanced ease and safety of payments, while the adoption of mobile technology in financial services is among the key drivers. Obsolete payment solutions that take several days rather than seconds for execution are already seen as unacceptable, motivating the challengers to integrate innovative financial technologies and enable global transactions in real-time.
At this point, customers appreciate the speed, so does Fintech. Today companies introduce chatbots with payment options to social media and messaging platforms to enable financial interactions for users without leaving their favorite social media. Voice authentication and facial recognition are offered to identify and verify customers and quicken transaction approval, thus omitting repetitive actions and saving users’ time.
#2 Detect Patterns and Anomalies
The capacity of AI technology to sift through a vast amount of data and detect patterns that can elude humans is one of its biggest strengths. Fraud prevention and pattern recognition are those areas where this ability is particularly relevant to maintain client trust and enhance company image. Rippleshot states that 61 percent of fraud losses for banks arise out of identity fraud, while McAfee notes that cybercrime costs around $600 billion to the world economy. That’s why financial service providers are actively investing and integrating chatbots into websites_,_ mobile applications, and entire security infrastructure.
AI systems are used to automate certain anomaly detection processes and ramp up the capabilities of the internal security team to analyze and detect threats with greater accuracy and at a larger scale. In fact, fraud management is all about gaining insight into client behavior, grasping what’s ordinary and what’s not, to save people from losses. Fintech chatbots continually perform high-volume data analysis to prevent fraudulent transactions and notify customers instantly, if any suspicious activity is trapped.
Additionally, some innovators combine chatbot technology with facial and voice recognition abilities to add another security layer and preclude identity fraud. Intelligent robots investigate voiceprints (voice biometrics) in real-time to verify users and so better elicit potential money laundering activities and personal identifiable information (PII) theft attempts.
#3 Make Regulatory Compliance Easier
New rules and standards contribute to the need for streamlined regulatory compliance, consequently forcing banks and financial institutions (FIs) to look for time- and cost-efficient ways of conforming to the regulatory requirements. Leveraging AI-based Regulatory Technology (RegTech) solutions financial technology companies facilitate actual challenges and processes associated with new regulations.
With the capability of artificial intelligence to recognize and predict hidden security risks, AI chatbot apps make compliance with KYC, AML, and other regulations related to financial crimes easier and faster. NLP technology can take on the part of a cumbersome and dynamic regulatory change management process, by following the fintech industry trends, examining new regulation documents, and highlighting the required obligations to help companies improve ROI and remove the human factor for the most part.
#4 Process Optimization
Automation and facilitation of low-value and tiered processes are among the most promising and anticipated applications of AI. JPMorgan embedded robots in the back-office to handle internal technical requests, including employee password reset. Back in 2017, bots were expected to process around 1.7 million access inquiries — equal to 40 full-time workers — thus growing the capacity and freeing staff to focus on complex high-value challenges and projects.
Recently, machine learning and image recognition turned into the biggest trends in fintech, as companies integrate them to scan and parse loads of documents and take further actions based on the regulations and laws applied.
#5 Smarter Savings With Personal Data-Powered Advice
Artificial intelligence has great potential to help people with better budgeting, and this is one of the samples on how technology can promote financial literacy. Fintech chatbots act as personal monetary assistants — they conduct income-expenditure analysis, define how much money they can set aside, and transfer it to your savings account.
Need assistance with your investments? — AI-powered bots can analyze financing statements, historical trading data, announcements, and related documents to gain insights and help clients build forecasts of the stock market. Additionally, they benchmark this information against your financial goals and macroeconomic data to assess the risk level and allow you to take well-grounded investment decisions or even automate the process of investment purchase and management.
Optimization of client-facing operations can boost client engagement and simplify their personal finance management. Fintech bots remind users of recurring payments, notify is they are scheduled or not after the due dates, and inform customers when their outgoings are higher than usual.
#6 Customer Service Automation
24-hour support is one of the benefits that come off the top of the head when we discuss chatbot development services with our partners. Natural language processing and technological advancements make it difficult for users to define whether they are interacting with a human or AI application. Conversational chatbots help financial businesses resolve complaints and issues instantly, regardless of the time or day of the week.
Dialog fintech bots take on mundane tasks and simple questions, allowing your employees to focus on more challenging requests and strategic activities. For many firms, CUIs become a perfect choice for saving on the population of the customer service department and improving the level of service in terms of response time, consistency, and personalization.
#7 A proactive approach to customer satisfaction
Banking and financial companies store a wealth of financial and non-financial data of customers. Thus, applying artificial intelligence and machine learning technologies, Fintech firms can create a comprehensive client view and anticipate their needs to offer personalized services and products based on individual behavior, habits, and status.
Chatbot intelligent technology suggests a lot more than traditional online banking. In fact, it is a holistic tool for financial startups to spur engagement. Bots for financial services can share relevant content on the smart insights, market-specific news, and opportunities to use the credit card rewards, all while continually test and analyze the clients’ level of interest, based on the response.
Erica, the virtual assistant by Bank of America (BofA), has already proven that chatbots can have a great impact on customer engagement, as it has exceeded six million users and processed over 35 million requests. Erica’s capabilities are rather broad, as it informs clients about an increase in regular payments, provides balance analysis and forecasts, notifies about bill payments, sends reward notifications, and other tips. Additionally, this AI-driven financial advisor allows customers to define and manage how much they withdraw from an ATM and spend on shopping every day.
Guide on Taking Conversation to the Next Level With Chatbot Technology
The potential improvements from conversational banking are up-and-coming. It’s crucial to have the right engineering approach and business concept to take full advantage of chatbot development and integration.
- Build a diverse talent. Natural language processing, machine learning, and conversational interface design aren’t the essential competencies in FIs, especially with the accelerated progress of AI tools. Fintechs need to seek emerging skills and talent — including AI experts, fintech app developers, CUI designers, neuro linguists, and others — while hiring and retaining these experts is time-consuming and challenging. Having a reliable technology partner with the necessary skills and expertise is a must-have for successful implementation and efficient further development and training.
- Understanding AI and financial technologies. CUI can produce results only if it is backed up by the right architecture implementation and tech stack. Select proper AI technologies taking into account their maturity, self-learning capabilities, accountability, and regulatory compliance (e.g., GDPR in Europe). Re-engineer your back-end systems to ensure that chatbots have access to real-time data and insights. The DashDevs team also helps fintech firms to adopt application programming interfaces (APIs) that bring agility to meet the fast-changing customer expectations and take the lead in the industry innovation.
- Prelude with a hybrid approach. Conversational technologies need time to mature, and that’s why it’s recommended to start with humans and AI working in tandem. Don’t set AI customer service bots free with your clients, but first supervise and educate them or nip into the communication based on the mood or questions of the user.
The AI revolution in the fintech field is in its infancy so far, but it has already exerted a significant influence on the way companies do business. To stay at the center of the financial industry, your innovation journey should align with your corporate goals and be a part of your high-level strategy. Accenture notes that FIs that invest in artificial intelligence and robot-human collaboration will grow their revenue by 34 percent by 2022. Isn’t it time to plan and build the financial workforce of the future?
Natural Language Processing is continually evolving, and today it can be challenging to tell for sure whether you’re interacting with a robot or a real person. With such improvements in NLP technology, financial institutions can automate customer data capturing, easily retrieve information from unstructured sources, and enhance the discovery and distribution of findings within their organizations.
Fintechs that introduce machine learning and chatbot technologies into different processes within the company will have a strong competitive advantage in the long run. Bots take customer support to the next level, by simplifying the payment and fund transfer procedures, growing clients’ wealth with smart investment advice, enhancing data security, and driving loyalty.
If you’re interested in learning about other AI use cases in the fintech industry, reach out to the DashDevs team, and we will share our experience with you.