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Chatbots

The Why and How of Using Chatbots in FinTech

Unlike before, the financial sector is enriched with many evolving revolutionary technologies
The Why and How of Using Chatbots in FinTech
Image credit: Shutterstock
Contributor
CEO of Prismetric
12 min read
Opinions expressed by Entrepreneur contributors are their own.

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Step back in the year 1990; standing in a queue in front of a teller’s window left the people with no other option. Later, in the year 2000, the era of the internet ushered that has turned the table upside down. Internet banking reduced the level of friction with the digitization of everything. After that, mobile banking reshaped the banking experiences where every banking and financial activity become viable in a few taps. Then by 2010, artificial intelligence chatbots were added to the equation, which has now become a disruptive force that’s transforming the way banks work and deliver services.

The changing phases of the banking and financial industry completely removed the friction from the banking, meet customer expectations, give the banks an upper edge, and increased the return on investment in addition to the customer delight.

Let’s scratch the surface of recent AI Chatbots:

The chatbot is an acronym of chat robots, that is the conversational robots trained to provide data for natural language processing (NLP) using artificial intelligence technology to mimic the human interactions through a conversational interface.

The bots have evolved from a simple digital tool to a digital assistant that impeccably performs the complex operations. Now, they are available in varied shapes and forms that are integrated by the various sectors according to the needs.

In this post, we will keep the content confined to the bank and financial industry and discuss the future of chatbots in FinTech and the traditional banks that are catching up. The technology holds the potential to manage complex economic reality, address the pain points, remove the stress factor from the financial planning, earn the millennial loyalty, win increased market share and drive more revenue.

A brief of the significant advantages with chatbots in FinTech draws the attention of the financial institutions and even of the stodgy banking incumbents to become better with increasing pressure from various angles. Let’s begin!

Why is Chatbot integration becoming indispensable?

Remove the Complexity from Banking Apps

For sure, the banking apps have busted the long queues in the banks and enabled the customers to operate from the comfort of the couch. However, the cumbersome interface with too many features makes the app fail to live up to the changing customer expectations. The ruined customer experience means the customers will stop banking with the bank.

Understanding the customers' embarrassment, the banks are looking for ways to improve the customer experience by allowing the customers to conduct transactions directly from the messaging platforms. The banking bots show the amount transferred, the recent bank transactions, and balance available without even visiting a bank or an ATM just by using your mobile. The third is mind-boggling, chatbots are not only able to comprehend the customer needs but the context as well. After that, with predictive analysis, the smart suggestions are provided to the customers.

Answer the Competition and Regulatory Pressure

The traditional banks are standing at the bleeding-edge of the competition where the chatbot innovation is a must; else it won't be long before such banks become extinct from the world. With chatbots, banks can technically, culturally and operationally answer the competition in a better way.

Further, the nations regularly update the financial regulatory requirements. It merely means that the dollars to spend on the system and processes around compliance would also increase. Thankfully, AI chatbot ticks the compliance box by taking care of all the financial regulatory requirements related to customer on-boarding and upcoming changes.

 

For instance, the latest GDPR enforced with stricter terms and conditions on how and why banks can use and store the customer data. The chatbot provides a simple and easy-to-use interface for various systems and databases, where specific time and date stamp of every individual, when they give their consent for the processing of personal information, is saved. Due to distributed computing, extracting the data is more comfortable as opposed to manual searches; thereby the cost of compliance is decreased by a considerable margin.

Build Financial Health with Personal Financial Advice

According to research, most of the Americans struggle financially due to the wrong decisions taken on the grounds of emotions during complex circumstances, which sabotage their financial health. Here, the chatbots developed to assist the banks, come to the rescue that works beyond the transaction.

The bots track the transactions, understand the spending habits and create the perfect financial tips for the customers to help them manage and save money. The bots guide the customers in their day-to-day cash management, inform about their budget status at regular intervals, remind for timely payments, provide investment portfolio update, and empower them to make smarter spending decisions. The personalized financial planning services also help the banks earn a potential client and open up better opportunities to sell other products to the customers.  

Bank of America made a bold move towards AI technology integration after celebrating ten years of mobile banking, which is considered the world’s largest payment and financial services innovation. The Erica chatbot leveraged by the bank use predictive analytics and cognitive messaging technology to financially guide and provide customized messages to over 45 million customers.

Maintain a pace with Next-Gen Customers

The largest generation of America comprised of Millennial known for their significant spending power and considered as the driving force behind banking innovations aptly fuelled by the sense of distrust that emerged towards financial institutions after the financial crash of 2008 and market volatility. Plus, this generation has digital natives with high standards for convenience and customer services.

That’s the reason; the FinTech chatbots earned their space in the system, the banks can now easily secure the millennial market share and retain the competitive edge. This is also one of the reasons that the banks are adopting technology to the core. The Millennial grew up using messaging apps, and the bots work within the popular messaging platforms, which meant reaching the Millennial where they are and allowing them to conveniently access the services that help the banks gain a larger share of the Millennial customer base that will mushroom throughout the financial journey.

Automate Fraud Detection and Prevention

The breach of trust - it’s the biggest nightmare for every bank and their customers as no one wants the security compromised. However, unwillingly and unlawfully it happens, and the numbers of frauds are continually increasing.

The increasing cases of fraudulent activities have made customers skeptic about the banks and the reluctance towards technology adoption, in some cases even chatbots too.

Chatbots can be the ideal solution not just to detect the frauds, but prevent them in an automated fashion in real-time. The bespoke initiative has re-structured the data security in such a way that  it has made fraudsters attack nearly impossible. They continuously monitor every banking activity of every customer. In the attempt or occurrence of such an event, the customers are warned instantly via messaging apps and are advised to follow the steps required for fraud resolution.

Market the services like a Pro

The banks have a plethora of products and services to be pitched to their customers. However, traditionally providing the best fit for every customer is beyond the bounds of possibility. The reason is banks have a wealth of the data, but the lack of actionable insights of the data won’t enable the banks to offer personalized services to the customers.

The AI chatbots deal with this problem brilliantly. The bots communicate directly with the customers where they get unique insights into customer behaviour, concerns, and desires, in addition to personal financial transaction information. Combining both types of data and distilling them unfolds the brilliant ideas which unlock the new market opportunities for the banks. The marketing team can best capitalize with personalized offerings.

Innovate the Product Strategy

To seize an edge over the competitors, the banks have to innovate the processes, services and the products they offer. In the evolving landscape, the internal innovation is no more enough; the external change is essential to ensure the product remains competitive, follow regulatory compliances and help in achieving the bank’s strategic future vision. However, such innovation cost is too high, demands massive technological resources investment and involves processes that are burdensome as well.

Here, partnering with an adept application service provider and embracing the FinTech chatbots is a smart solution for the banks to quickly start reaping the benefits with swift product innovation strategy implementation and comparatively at the minimum expense of time, efforts and dollars.

The One-Size-Fits-All Solution

The customers of a bank do not necessarily have accounts or credit cards from one bank. It makes difficult for the customers to manage the accounts spread out across various financial institutions. Here, the banks can turn the challenge into a lucrative opportunity with AI technology.

Some chatbots feature built-in account aggregation, where the customers will have their entire financial information available at a single location so that it can be easily accessible through a chat interface. The streamlined access to all the necessary information makes the bank, an all-in-one-banking solution which differentiates the bank in the market and also become a source of customer engagement.

The significance of chatbot technologies showcases that experimentation with future chatbot technologies drives the canter of excellence in every corner of the banks. Let’s take a look at the benefits of making chatbot a natural extension of conversation interface in the FinTech industry niches:

Cost Savvy

The banks invest millions of dollars in the operations and processes executed by humans. Often, they are inefficient, less accurate and expensive. On the other hand, the chatbot is an inexpensive alternative to human that’s jam-packed with high power, better efficiency, and accuracy.

The chatbots are integrated with lesser lines of codes and further built as an extended support system for the standalone banking apps developed. Also, with the support from a diverse range of channels and they don’t need any sky-high data storage in place due to a cloud-based system.

Can Be Used On-the-Fly

No doubt, the banking apps have added convenience to the customers’ lives, but there are some instances that cannot be solved or the adequate information cannot be passed to the customers without a helping hand. In such a case chatbots are a boon for the customers, which provide an intuitive interface and personalized experience to the users over the time. Moreover, with chatbots, every banking activity is possible right away through messaging apps.

Round the Clock Support

The customers find calling the centre reps full of friction because often connecting with the call centre reps takes time and sometimes, resolving or having an answer is not quick. Also, the banks have to spend a considerable sum of dollars on customer support.

The chatbots turn the table upside down with 24/7 automated customer service where the customers no longer have to undergo the frustrating calling experience, the issues get resolved with the right content by accessing the bank’s knowledge base, and the customer support cost comes down dramatically. Besides, there will be no peak times, or extra staff is required during the holidays to meet the customer needs.

Improve Customer Engagement

According to a survey, “The customers demand exceptional services from the bank that includes personalized services based on the customers spending and saving patterns, a complete range of 24/7 customer service, remembering their preferences like utility bills and so on plays a vital role in engaging them.”

The chatbot technology is offering a lot more than digital banking. It’s a competitive tool for the banks to drive engagement as the bots push the relevant content and continuously test the customer’s interest level in the response provided. These attempts drive higher levels of customer engagement.

Zero Turnovers and Increased Revenue

When an employee replaces another, it costs too high for the businesses considering the interview, training, the recruiters' salary paid and time for productivity. Using chatbots eliminates both the risk and cost. However, the chatbots require professional monitoring, regular maintenance and reporting which is significant, but when compared to the expenses tied to employee turnover is far less.

In this manner, when chatbots accomplish the same work and execute the same operations at the lower cost with high efficiency, the revenue increases exponentially in the years to come.

Conclusion

Following the digitization rat race, the financial institutions have gone mobile, and now the rapidly innovating market and customers’ needs demand AI chatbot technology adoption. This has lead to an increase in the need for app development services and help with planning the next phase of internet banking will enable the banks to take decisions proactively and align themselves for the future in addition to the improved customer satisfaction, streamlined customer experience, increased market share, and high profitability through marketable customer insights.

Prioritizing strategic technology advancements with AI applications has paid off to the industry-leading banking and financial institutions regarding better service, improved performance and increased revenue. Bank of NY Mellon Corp, PNC, US Bank, Bank of America, CitiBank, Wells Fargo, and JPMorgan Chase are a few to be named.

The emerging FinTech AI chatbots that are continuously evolving and becoming smarter and intelligent have set the stage for the banks worldwide. Are you ready to turn to the disruptive technology to transform, compete, and deliver value? If so, let chatbot begin a conversation and explore the endless opportunities for you.

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