How Chatbots and IT Will Transform Banking

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Over the past year or so, chatbots have started to become turbo-charged with artificial intelligence (AI), enabling them to engage with customers in a natural way and on a sophisticated level. AI-powered chatbots can converse with customers, make proactive recommendations, and suggest courses of action based on data, logic, and specific circumstances. In other words, this new breed of “cognitive” chatbot is gaining the ability to understand, communicate, and learn.

The banking industry is moving aggressively to harness and expand the abilities of AI-powered chatbots, in large part to serve the needs of millennial consumers, who 1) are wary of banks, 2) underwhelmed by existing mobile-based banking services, and 3) prefer communicating through text-based messaging platforms and channels.

Yet Forrester Research cautioned banks last summer to cool their chatbot plans until the technology improves and their existing IT infrastructures are upgraded to handle the data-driven, real-time requirements of digital customers.

Nonetheless, giants such as Bank of America and Mastercard are embracing chatbots — BofA’s digital assistant, Erica, is slated to be available inside the bank’s mobile app this year, while Mastercard’s AI chatbots for banks also should debut on Facebook Messenger in 2017. In addition, a number of well-financed startups also are developing capabilities for chatbots to provide superior banking services and personalized financial advice.

Traction Technology Partners and American Banker recently hosted an online session for the Digital Banking Leadership Council in which speakers outlined the challenges and opportunities that chatbots and AI offer financial institutions eager to win the trust and loyalty of tomorrow’s consumers.

A trusted advisor

Cristiano Oliveira, founder and CEO of Olivia, said during the Digital Banking Leadership Council session that banks must change their fundamental relationship with customers from transactional to advisory.

“Today’s technology emphasizes channel convenience and process automation,” he said. “Tomorrow’s will focus on channel personalization and decision automation.”

Olivia is a chatbot financial assistant being developed by the Silicon Valley startup directly for consumers, who will be able to choose which of their bank accounts Olivia can track. The app’s AI then will continuously analyze a consumer’s spending habits, with the chatbot offering helpful financial suggestions, including spending, savings and budgeting tips.

The key to connecting and building trust with users, Oliveira said, is to start with simpler topics such as how to save money on groceries by shopping on Wednesdays, when prices typically are lower. Olivia also might suggest other alternate grocery stores with lower prices, and will even provide directions and set a reminder to shop on Wednesdays. From there Olivia can progress to discussing financial strategies, retirement savings accounts, and other longer-term topics.

Olivia currently is accepting reservations on its website to download the app when it’s ready for distribution. Chatbots are “in the very early stage,” Oliveira said, “but will progress faster because of increased computing power and the ability to collect and analyze data.”

“In the next two to three years, chatbots won’t be unique,” he said. “They will be mainstream.”

Cognitive banking

Digital technology has allowed banks to lower costs by providing consumers with online and mobile access to information and services. But technology also has created a challenge, according to David Sosna, co-founder and CEO of Personetics, a company that has developed an AI-based “Personalized Guidance” chatbot for banks to offer customers.

“While the costs of delivering service are reduced, banks are becoming less connected to customers,” Sosna said during the Digital Banking Leadership Council session.

One of the results of this increasing lack of connection is unhappy consumers. A 2016 global survey by digital ID verification vendor Jumio showed that more than 75% of millennials are dissatisfied with their mobile banking experiences, either because of accessibility issues or failure of the app to successfully complete a task.

Personetics’ solution is what Sosna calls “cognitive banking,” in which AI, analytics, and chatbots are integrated in a single platform that provides customers with personalized guidance, conversational self-service, and automated programs to help enable financial goals.

“Financial institutions can use cognitive technologies to provide a new level of engagement from customer service to retirement advice and automated micro-savings,” Sosna said. “The more we can predict, the more we can proactively reach out to the customer, increasing the odds of a successful engagement.”

Because millennials are leery of banks, AI-powered chatbots initially must establish trust by proactively sending simple and accurate informational messages, such as notifying the customer of a charge against their account from an auto-renewal.

“There’s no gain for the bank at this point, but we’re showing the customer we’re watching over them,” Sosna said. “We’re not doing it to make money. We’re using a machine that picks up the most relevant thing, and presents that to the customer.”

These simpler messages pave the way for two-way conversations regarding financial advice and action strategies, further building trust with consumers, Sosna said.

Deep Links:

5 Steps To Prepare Your Bank For AI — Implementing any disruptive technology requires strategy, planning, and execution. AI is no different. Here’s a good list from The Financial Brand, a digital publication focused on marketing and strategy issues affecting retail banks and credit unions, that guides banks through the process of planning an AI integration. It all starts with defining a desired outcome.

Banking on AI to Offer Better Customer Service — Swedish bank SEB began integrating an AI help desk platform called Amelia in early 2016. The key takeaway: There are no “best practices” in using AI to serve customers, so it’s important to experiment and rely on customer feedback to make improvements.

5 lessons learned from making a banking chatbot — A developer who built and launched a banking chatbot for credit-union members in Brooklyn says that while interest in banking chatbots among consumers is strong, “almost no one tried commands that weren’t suggested.” More education for consumers about banking chatbots and what they can do is in order.

How Kasisto avoids the financial chatbot fatigue — We’re at the point of fatigue with an emerging technology? Seriously?

(Want to get insights into emerging tech on a more regular basis? Sign up for the official Traction Report newsletter here, or learn about the Digital Banking Leadership Council here).