Chatty chatbots vs. approachable apps for financial education
The following is a guest post written by Lucinda Revell from Boost Capital, a platform that enables small businesses to access financial services and learning through smartphones.
At Boost Capital, we are on a mission to make it cheaper and easier for people globally to access microfinance services and financial education utilizing chatbot technology. Small business customers can apply for microloans through our chatbot application — a fully digital process with no new app downloads required. We use chat channels that customers are already comfortable with: Messenger, Telegram, and WhatsApp. And we customize to each bank’s particular loan and savings onboarding process, enabling financial institutions to go digital under their own brand. Offering financial literacy education is also core to what we do — we believe there’s a virtuous cycle where small businesses that engage in financial literacy training are more creditworthy.
In this post, we take a closer look at using chat-based technology for financial education and offer our top tips for building effective chatbots. We also share a bit more about how we are testing that virtuous cycle in partnership with Strive Community.
Why is Boost’s chat-based technology well-positioned to provide financial education to small businesses?
Why not use a standalone app to provide financial education? Both chat and apps have the advantage of enabling access to learning anytime, from anywhere. When we first launched Boost back in 2018, the end goal was to make an app to deliver financial services. We initially launched a chatbot over a long weekend as part of our human-centered design approach: we wanted to test demand for digital financial services and use chat to rapidly prototype the customer journey that we’d build in the subsequent app.
But we soon found that chat has several distinct advantages over apps:
- Customers loved the chat experience. In comparison to a typical app experience of filling in a form, customers loved the interactiveness of chat.
- Some customers couldn’t use apps. Many apps require storage-capable phones and high bandwidth that customers don’t have. In contrast, chat works on all smartphones and in low bandwidth situations.
- Apps can require high levels of digital literacy to install and to understand. But with chat, there’s low digital literacy required; it works through existing chat channels like Messenger, Telegram, and Whatsapp that customers are already using.
Customer uptake is thus much higher and considerably easier with chat. Customers continue to rave about the ease of using chat since they already use it with friends and family.
Chat-based services are more effective for reaching new customer bases
Since customer uptake has proven to be higher with chat, fueled by ease of adoption, chat-based services allow us to deliver financial services and education to a wide client base: 100% of smartphone users. In contrast, an app only allows us to serve those who are willing and able to download it. From the point of view of a bank, that’s a small portion of their existing customer base and mostly excludes new customers.
All of this means that the chat channel has proven more effective in accessing new customer bases, especially those with tech barriers to entry. However, that’s not to say that apps don’t have a role to play in financial services and education. If customers can download and use apps, those apps can allow customers to learn and actively manage their financial life (think Nerdwallet, Zogo, or CreditKarma). But in emerging market contexts, the barrier to entry for app usage is high, so a chatbot is a great starting point.
We’ve recently seen confirmation of the appeal of chat-based services thanks to an interesting new technology that’s put chat in the spotlight: ChatGPT. Released in November 2022 by OpenAI, ChatGPT is a chat-based tool driven by artificial intelligence that lets users engage in conversational question-and-answer sessions with a chatbot using natural language. The tech is still early days, and many have made valid criticisms, but ChatGPT’s rapid and popular uptake illustrates how powerfully appealing customers find the conversational approach to service interactions.
Our top lessons for building effective chatbots for financial education
If you’re convinced that conversational interactions facilitated by chatbots have the merit of being accessible and appealing, then there’s also room to make sure you’re using the channel as effectively as possible. That means designing the content, architecture, and backend of the chat interaction to maximize uptake and impact. With over 500,000 financial service and education conversations enabled through Boost tech, our team knows how to use chat to access a wider customer base and maximize customer uptake.
So what are the key learnings that Boost has applied to financial education?
- Make content bite-sized and easily consumable. You’ve got between 3 and 12 seconds to get each point across to customers.
- Make content tailored. Customer responses should guide the additional content they are presented with. This applies to content’s complexity (if a person incorrectly answers an introductory question, don’t send them to advanced content straight away), as well as type (if a small business owner wants to learn about inventory management, it’s not the time to route them to a lesson on household budgeting).
- Make conversations interactive. Customer responses can be used in instantaneous calculations, so return instant feedback to customers based on the input they provide. For example, in a personal budgeting lesson, we can ask customers about their monthly income and expenses and reply with an instant assessment of their monthly budgeting prospects.
- Make it relevant. Use examples and imagery that are locally compelling, not generic. You can maximize uptake if you promote content tailored to each customer’s current situation relative to their financial life cycle.
- Make it measurable (with client consent). Rapid iteration to improve customer experience requires measuring what works and what does not work for customers.
The measurability of digital financial education consumption is what can help make it truly empowering for those doing the learning, by using this data to de-risk small business financing — something we’re testing through our partnership with Strive Community.
The opportunity to de-risk small business financing with financial education data
With support from Strive Community, the Boost Capital team is testing whether small businesses in Cambodia who are performing well in financial education training have better loan performance, and whether this data can be used to de-risk and expand small business credit. Proving our hypothesis could positively affect millions of small businesses globally.
Finding a correlation between financial literacy education and loan performance will benefit both borrowers and financial service providers. The idea is that small business owners who distinguish themselves as responsible and improvement-oriented by engaging in financial literacy education are rewarded with a tangible benefit: access to financial services with favorable terms. In turn, financial service providers can sustainably offer access and discounts to these businesses by factoring financial education data into their underwriting.
Boost Capital’s tech stack and human-centered design approach makes us well-positioned for this ambitious project. We’ve successfully deployed technology to allow entrepreneurs and small businesses to apply for financial services like borrowing and savings accounts, all through automated chat and video calls. We’ve learned how to maximize customer satisfaction in our chat-based financial service delivery and applied those lessons to financial education — creating interactive, customized, convenient chat-based content. In addition to leveraging our tech stack and product design to rapidly launch this project, we’re also leveraging our established relationships with financial service providers. The banks that use our technology to deliver financial services are eager to acquire customers who are interested in financial education, ensuring rapid project growth.
Check out our chat-based financial education for Southeast Asia-based entrepreneurs via Messenger at m.me/boostyourcapital or visit our webpage to learn about our tech for financial institutions.
