The Rise of Conversational AI & Its Implications on the Financial Services Industry

Conversational artificial intelligence (AI) is a technology that enables computers to understand and respond to human language in a natural and human-like way. Through the creation of applications and services that communicate with people via text or speech, such as chatbots or virtual assistants, conversational AI works “hand-in-hand” with human employees.

A recent McKinsey global survey showed that AI adoption in business has grown 2.5x since 2017, with service optimization functioning as the most common use case. More and more businesses, including financial institutions, have turned to conversational AI to support their customer care strategies. 

Conversational artificial intelligence will continue to play a significant role in all sectors of business and life. Let’s discuss where AI started in the banking industry, where we are now with current technology, and where the future of AI is headed.

Where We’ve Been

The financial services industry was one of the earliest adopters of artificial intelligence, with the first AI applications dating back to the 1980s known as “expert systems.” Stanford’s Edward Feigenbaum introduced these expert systems as they emulated human decision-making expertise in:

  • Financial analysis
  • Market analysis
  • Business development and international business
  • Currency exchange
  • Bank management

Fraud detection and prevention provided one of the earliest opportunities for AI use in banking. While early systems applied rule-based algorithms to identify suspicious transactions, later systems incorporated machine-learning algorithms to improve accuracy and reduce false positives.In the early 2000s, banks began using chatbots to handle customer service inquiries. While these early chatbots were initially limited in their capabilities, advances in natural language processing (NLP) made it possible to create chatbots that understand and respond to complex customer queries.

Where We Are

Conversational AI has evolved into an effective tool for financial institutions looking to support initiatives across departments in recent years. For example:

  • Investment Management: Some financial institutions recently started using AI to improve their investment management services. By analyzing vast amounts of financial data and market trends, AI algorithms can make fast, accurate predictions about stock valuation, helping banks maximize returns for their clients.
  • Regulatory Compliance: Financial institutions must follow a complex set of regulations. AI can help manage and automate the process of identifying potential compliance issues and ensuring that the relevant rules are followed.
  • Departmental Efficiencies: Conversational AI also optimizes IT, operations, and marketing activities by enhancing the speed and accuracy of human teammates while improving customer experiences, reducing costs, and elevating marketing strategy. 

Intelligent digital assistants (IDAs) are the most concrete example of conversational AI in the financial services industry. They use artificial intelligence to provide responsive, prompt, and accurate answers to customers or members. 

When your financial institution deploys an IDA as part of your digital customer experience, you benefit from the following:

Increased Personalization

Conversational AI enables financial institutions to interact with customers more consistently, accurately, and with deeper levels of personalization.

AI algorithms tailor recommendations and offer personalized advice by analyzing customer data and behavior. This advice helps build stronger relationships between financial institutions and their customers or members, leading to higher retention over the long term and providing revenue-generating opportunities via new products and services.

Faster Service

According to a recent survey, 77% of bankers believe that the ability to unlock the value of AI will be the difference between the success or failure of faster banking customer care.

This difference is because conversational AI powers digital assistants to deliver:

  • Real-Time Response: Reducing this response time to mere seconds satisfies customer demands for immediate answers to critical financial questions.
  • Around-the-Clock Support: Customers don’t have to wait on hold, navigate complex phone menus, or wait until 9:00 on Monday morning because your intelligent digital assistant is available 24/7.

Optimized Costs

IDAs handle multiple customer inquiries simultaneously, freeing staff to focus on more complex issues and higher-value interactions. This approach reduces costs and improves the overall value of the customer and member care teams.

Additionally, IDAs automate financial tasks such as balance inquiries, money movement, and budgeting functions, which reduces operational costs and increases containment rates.

Attracting and Retaining Customers

Traditionally, Sales departments have shouldered the brunt of securing new clients. Now, there are over 350 different providers of digital banking services, which means your potential customers or members have numerous sources constantly vying for their attention. In this frenetic environment, Marketing departments must step in and help with customer acquisition and retention. That’s why CMOs and marketing leaders focus more on delivering digital experiences that attract and retain. In fact, according to Salesforce’s latest State of Marketing report, 80% of marketers are now in charge of CX initiatives across their enterprise.

Stronger Compliance

The financial services industry is heavily regulated – you control the answers delivered to customers to ensure full compliance and the best portrayal of your financial brand.

Additionally, IDAs handle sensitive information privately and competently within a secure digital banking ecosystem, reducing the risk of data security incidents.

Where We’re Going

A combination of humans and technology powers the future of banking, working together to advance financial knowledge, promote financial wellness, and, ultimately, perpetuate human prosperity. 

This connected future leverages AI technology to democratize knowledge. It exists in a world where human beings can access information simply by communicating through the connection points around them. 

Kasisto’s mission is to ensure that when humans call upon the world’s information network, we meet them with accurate, personalized, helpful information that assists in making better decisions at that moment and beyond.

This will lead to new intelligent evolution in financial services and specialized partnerships.  Some examples might include:

  • Financial institutions that help digitally connect communities to advance the economy
  • Institutions that offer hyper-specialized services to micro-segments of consumers
  • Institutions that focus more holistically on human wellness, from financial to physical to mental
  • Fintech and healthtech partnerships that allow people to manage a holistic prosperity plan

The Future of Financial Services

Artificial intelligence is here to stay – industry leaders should look to this daily evolving technology to improve the digital customer experience and gain a competitive advantage. 

Interested in how conversational AI provides immediate value to multiple departments in your financial institution? Check out our report, The Chatbot Journey: Making Intelligent Digital Assistants Integral Members of the Team.

Ready to make the jump to conversational AI at your financial institution? Let’s start the conversation.

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