The Beginner’s Guide to Chatbots in the Financial Services Industry
Introduction
With the rise of artificial intelligence, chatbots are becoming more popular to businesses. This article aims at giving an overview of what chatbots are and how they can be used in fintech. The scope of the term ‘chatbot‘ will include all varieties of digital assistants / virtual agents / machine learning systems.
What is Artificial Intelligence?
Before we get started, let us try to understand what AI really is. We have often heard about machines beating humans at chess or go or cars that drive themselves but if one were to break down what these advancements truly mean then it would become clear that almost all of it boils down to three things: Sensing, Reasoning & Actuating. Machines have been able to replicate these three functions for several decades now. Yet only in the past few years have we seen a tangible impact of this technology on our lives.
Isn’t AI just a buzzword?
People often wonder whether artificial intelligence is just a fad. It can actually be useful for businesses and consumers alike. In the next section, we will explain that although chatbots are not a new thing. They do provide numerous benefits to banks and financial institutions that were previously unattainable due to their high costs and resource-intensive nature. However when compared with humans. It also has its shortcomings but at the same time. When properly trained these systems can easily outshine their human counterparts in terms of speed and accuracy.
What is chatbots?
In the simplest of forms, chatbots are computer programs that understand human language and give a human-like response. At their core, chatbots run automated tasks based on user input and can be used in several different scenarios. Such as customer service or for other business use cases. Chatbots have become so advanced that they can both hold conversations with humans. As well as mimic human emotions accurately to provide a more ‘real’ experience.
The idea of using artificial intelligence as a kneejerk reaction for helping people deal with complex tasks has been around since the 1950s. But it wasn’t until 2014 that we got our first glimpse of what was possible. When Microsoft launched its AI bot named Tay onto Twitter.
Tay was created with the aim of learning how to hold conversations by analyzing its interactions. But soon after it went live, it started to spew out racist and sexist remarks that were largely unmoderated. This resulted in Microsoft having to shut down the AI chatbot within 24 hours due to public outrage.
Chatbots:
Have come a long way and now they are able to communicate much more intelligently than ever before. This is not just evident in companies like Apple’s Siri or IBM Watson but also in startups such as Yap which has built an entire system that allows 3rd-party apps (such as Netflix) to be controlled entirely via text message. So where does this leave us?
Well, today we have chatbots that are intelligent, that can hold conversations with humans and even mimic human emotions accurately. However, when compared to humans they lack the ability to communicate in an emotional manner which is why for now they are being used in specific business cases where accuracy takes precedence over quality of communication.
Chatbots & Financial Services
Financial institutions around the world have begun exploring how chatbots can be utilized within their organization and while most of them were originally skeptical about the benefits of using this technology, some recent developments across multiple industries has brought about a sense of optimism among financial institutions too. As mentioned before, one use case is providing assistance to customers regarding queries related to banking services but on a global scale banks stand to benefit from using chatbots the most.
There are several reasons for this, some of which are listed below:
- Chatbots can help banks save millions of dollars by closing the service requests that used to go unaddressed due to low customer satisfaction levels
- Since chatbots allow customers to receive personalized services without having to wait in long queues; it will increase customer satisfaction & loyalty
- They can be reintroduced as an additional channel between banks and customers thus increasing the number of touch points within an organization
- It has become possible thanks to advancements in machine learning which is required for building bots that not only understand language but also context (e.g. If I say XYZ bank account balance today please, you need to specify whether I’m referring to my savings or checking account)
- Since chatbots can interact with humans and learn from interactions, they are able to answer complex questions where humans would otherwise need to employ the services of other staff members.
Chatbot Challenges for Financial Services
However, there are certain issues that must be solved before financial institutions will start using chatbots extensively. Some of these challenges are listed below:
- The first step towards building a successful chatbot is understanding the customers needs which requires banks to invest in building an integrated platform that connects customers digitally with their bank accounts
- Customers want 24*7 support but not every human agent works round the clock. So if banks fail to deploy enough number of agents during multiple shifts then customer satisfaction levels may take a hit
- Chatbots are not “human” in the sense. They can’t foresee customer needs in order to come up with relevant suggestions in real time. So banks must ensure that their chatbots are intelligent enough to answer questions accurately and efficiently
- Since financial institutions need to deploy extensive security measures for protecting customer accounts. There is always the risk of hackers who may attempt to take advantage of vulnerabilities within these bots. Which might lead to massive data breaches.
- If done correctly then chatbots represent an opportunity for banks by generating valuable information about their customers interactions that can be used for future endeavors e.g. using predictive analytics or marketing purposes however it also presents challenges related to data privacy & ownership since banks will not want their competitors to have access to their client’s data.
Conclusion
These challenges are not insurmountable and will likely be solved in the coming years. Which is why financial institutions should be taking action now. Chatbots can provide significant value for both banks & consumers so it won’t take long before the benefits of using this technology outweighs any risks that come along with implementing them. However, it is important for all stakeholders involved to understand the existence of these challenges. Which is why banks are required to invest heavily in developing chatbots that can maintain high levels of accuracy. While being intelligent enough to provide services at scale.
