AI-powered solutions are maturing with incredible speed. They have become a powerful tool for many industries, especially finance. According to the Markets and Markets report , the global chatbot market size was valued at $ 4.7 billion in 2022 and was expected to grow to $ 15.5 billion by 2028.
Chatbots are now much better at responding to human language, and models like GPT 4 can even help them understand patterns and user behavior in a new way to provide personalized services.
Chatbots and AI have a pivotal role in transforming customer experiences in banking, according to Business Insider's article, but especially when we can see how they can be used for conversational banking to prevent risks and credit underwriting.
Banks that use advanced AI-based chatbots can quickly communicate with their customers, gather more relevant information, and ensure they always know what their clients need.
Today, financial institutions use finance chatbots to communicate with clients and provide 24/7 support all year round. They can easily answer commonly asked questions but are also able to handle many different requests all at the same time.
AI and Banking Chatbots
AI has been growing fast in the last few years, and its growth has been propelled by generative AI and LLMs. Using large datasets, these models can generate new content and learn what makes them ideal for customer communication. But this can happen only when a bank successfully transforms its legacy systems and reimagines its approach to customers.
AI, including rules, natural language processing (NLP), and machine learning (ML), powers chatbots to process data and promptly respond to various requests.
There are two basic types of chatbots used in banking: Task-Oriented Chatbots and Data-Driven Predictive Chatbots. Task-oriented bots use rules, limited ML, and NLP and focus on specific functions like FAQs or simple transactions. On the other hand, Data-Driven Predictive Chatbots are more advanced.
These chatbots, such as Siri or Alexa, learn from interactions, personalize experiences, and predict user needs using NLU, NLP, and ML.
What Are the Functionalities of AI-Powered Chatbots?
Addressing Customer Queries. Financial chatbots use Natural Language Processing to address customer questions for quick and accurate information dissemination. Automated customer service and support help customers with all their questions about account balance, transactions, paying bills, using different payment methods, and even financial education.
Expense Tracking. Finance chatbots can now track clients' expenses, provide bank users with reports, and support them in managing their finances. They are very helpful when it comes to advising on saving money or providing reports. Chatbots can also send alerts when there is a balance change or when a client should consider a new offer.
Budgeting. Chatbots find applications in managing personal finances and aiding individuals in budget management. They empower users with immediate insights into their spending behaviors, allowing them to monitor expenses, establish budgets, and make well-informed financial choices.
Alarms and Notifications. These bots offer reminders and notifications, assisting users in maintaining financial control and preventing excessive spending. As an illustration, a chatbot could notify a user upon nearing the limit set for a specific category, like dining or entertainment expenses, helping them manage their budget effectively.
Recurrent Payments. Utilizing chatbots extends to bill payments, simplifying and enhancing the management of expenses for users. These bots enable users to establish automated bill payments, eradicating the necessity for manual bill settlements monthly. Additionally, this technology seamlessly integrates with diverse payment platforms, granting users the flexibility to settle bills via their favored payment modes, encompassing credit cards, debit cards, or bank transfers.
Savings and Financial Planning. Chatbots serve as valuable sources offering insights into various financial planning approaches, encompassing strategies like retirement savings, emergency fund creation, and debt repayment. Furthermore, they assist users in crafting personalized budgetary structures and savings plans tailored to their income, expenses, and financial aspirations.
Benefits of Using AI-Powered Chatbots for Banks and Fintechs
Chatbots come with a number of benefits for both banks and their customers. Some of the most common benefits include cost optimization, contribution to proactive engagement, and better data collection.
24/7 Service and Availability
Since every agent has working hours, chatbots are able to provide bank clients with support 24/7 every day of the year. The availability significantly influences client satisfaction as they can have their questions answered in different timezones, countries and basically at any time.
Faster Response
Time Every AI-based finance chatbot works in real time and is able to support bank client in resolving their problems. Every user can access it through the banking application, add all information without having to wait for a long time, and get an immediate response.
Personalization
Chatbots used in banking can gather information to intensify certain customer behaviors and reveal patterns successfully. The data gathered allows banks and financial providers to solve similar problems faster and provide product recommendations or educate customers on new products.
According to McKinsey's report about AI in banking, AI technologies can help banks boost their revenues through increased personalization of services to customers. Many banks and neobanks worldwide are already seeing the positive influence of personalization on their relationships with clients and the quality of their services.
Countering Fraud
AI-based chatbots in finance can easily work with a massive amount of requests, which helps banks reduce the workload on their representatives, allowing them to handle only the most complex tasks or spot security problems on time.
Engagement
AI-based chatbots in finance greatly contribute to a more proactive engagement. Chatbots can be a useful tool for cross-selling and upselling financial products. Banks can inform users about the new promotions or cards they could use, all tailored to their specific needs. Finance chatbots are also good for distributing updates and financial information that will go directly to users.
Data and Feedback Collection
There are a lot of users who would rarely leave feedback in the bank due to privacy reasons or feeling that it won't make any difference. However, the younger generation of users, like Millennials and Gen Z, are very open to leaving feedback, especially if they can do it with the help of an AI-powered chatbot. Also, chatbots proved to be a good way to gather valuable insights through conversations with clients.
The Future of Chatbots in Finance
The Rise of Voice-Driven Financial Assistants
In the ever-evolving landscape of financial software development technology, a noticeable shift is underway toward voice-enabled chatbots. This transition aligns with the surging popularity of smart speakers and voice assistants, offering users a more intuitive and conversational approach to managing their finances while on the move.
Voice-enabled solutions represent a leap forward, delivering a seamless and natural experience that resonates with users seeking convenience and accessibility in their financial interactions.
Evolving Integration of Chatbots in Finance
The evolution of chatbots in finance extends beyond mere assistance. These bots are now integrating with cutting-edge technologies like artificial intelligence and machine learning to refine the delivery of financial advice.
By delving deep into user data and behavior patterns, these integrated solutions offer tailored and nuanced recommendations, aligning precisely with the distinct financial goals and preferences of users. This synthesis of technologies marks a pivotal leap toward personalized and refined financial guidance.
Embracing Diversity through Multilingual Support
As financial services transcend geographical boundaries, the imperative for multilingual software becomes pronounced. Financial institutions are recognizing the importance of inclusivity, aiming to cater to users from diverse linguistic backgrounds. Offering multi-lingual support enhances the inclusivity quotient, paving the way for a more personalized and inclusive financial experience tailored to users in various regions and countries.
Emergence of Hybrid Financial Models
The future of financial assistance lies in hybrid models that seamlessly blend the efficiency of chatbots with the expertise of human advisors. This paradigmatic shift ensures a more comprehensive and personalized service. A combination of the accessibility and efficiency of chatbots with the irreplaceable human touch of financial experts will allow these hybrid models to deliver a holistic advisory experience.
Fortifying Security in Financial Interactions
As cyber threats loom large, the demand for robust security escalates. Banks and financial institutions are bolstering their defenses by investing in chatbots equipped with advanced security features. Biometric authentication and other stringent security measures fortify these bots, safeguarding users' sensitive financial information. This proactive stance toward security underscores the commitment of financial institutions to protect and preserve users' financial well-being.
Final Word
The trajectory of chatbots in finance is set to soar in the upcoming years, poised to revolutionize how financial institutions cater to their customers. This evolution rides on the quest for greater efficiency, accessibility, and personalization, and we recommend turning to a reliable financial software development partner to ensure you can deliver a solution that will truly serve your users.
Leveraging emerging technologies and adopting progressive trends is the conduit to ushering in a future where managing finances is more streamlined, accessible, and tailored to individual needs. If you are interested in developing new financial products to make you stand out on the market, contact our team.
