Table of Contents
Introduction
Closely on the heels of digitalization, Conversational banking AI technologies are reshaping our personal and professional lives. The banking industry stands on the foundation of trust and relationships and is witnessing a fundamental shift towards conversational banking.
With growing customer expectations, implementing conversational AI is not merely a choice but a strategic edge. Imagine a situation where you ask your bank about a savings scheme and are provided with information about the latest schemes, with personalized premium advice and a step-by-step approach to everything in a conversational engaging manner. It may sound like a scene out of a science fiction movie, which is to come true in the future, but conversational banking is now the reality.
Recently, personalization and quick support are of the highest demand, which traditional banking approaches fail to deliver. Conversational AI redefines banking services from a mechanical approach to a more seamless personalized experience.
In this article, we explore the role of conversational AI in personalizing financial services and its features with real-world applications for personalized services.
What is conversational banking?
Conversational banking involves artificial intelligence, especially conversational AI, for engaging interactions between banks and customers through various channels, such as SMS, WhatsApp, mobile apps, websites, or voice assistance.
In recent times, customer expectations for personalization have been rising and are turning into a strategic measure for companies looking to improve customer experience and ensure customer retention. According to a survey by Deloitte more than 50% of bank customers believe personalized services are one of the key factors for them to have trust in their banks.
Using conversational AI, it has been possible to provide superior experience through personalization and deeper contextual understanding. Customers received relevant responses, customized services, and support quickly 24/7.
How does conversational banking work?
Conversational banking practically manifests through chatbots and virtual agents that interact with users in a natural human-like manner. They use natural language processing (NLP), machine learning (ML), sentiment analysis, and intent recognition to interact with users with queries such as account balance information, credit card dues, paying bills, transaction failures, etc.
These chatbots are efficient at conversational banking through multiple channels, offering a consistent customer experience no matter whichever channel a customer chooses to interact with. The convenience of interaction through any channel without having to repeat themselves, all the while receiving synchronized support and service across channels has been one of the prime factors for improving customer experience.
The benefits of conversational banking are not only for customers, but banks also gain tremendously. As common queries or FAQs are handled by chatbots, it relieves human executives from an extensive workload of resolving regular queries, and instead, they can focus on complex banking operations.
What are the key features of conversational banking?
Let us look at some of the key features of conversational banking, which are essential for future banking with tailored experience.
Predictive analytics
Assume a banking app not only notifies you about the upcoming utility bills based on your past expenses but also suggests adjustments to the budget according to the real-time expenses and expected income. The only thing AI can do is to take a look at your historical data, external market patterns, and social media with your permission and give you the most probable future. It is not merely about one’s budget, as it provides the latest and most updated forms of financial planning that may change with living situations.
Automated savings and investment recommendations
Not only does AI manage simple rule-based savings, but it goes a step further. This means that apart from being able to save your money, the AI gets information about your risk tolerance, financial goals, and the time you are willing to invest your money so that it can recommend the best investment strategies. Automation-based micro-investing, round-ups, and goal-based savings will be an easy and unnoticeable implementation with daily transactions.
AI will also make the necessary adjustments to your investments by changing them based on the market and your personal goals. The AI will make the majority of decisions for you by scanning the market and sending notifications.
Proactive financial advice
Conversational AI would imitate a personal finance consultant by giving customized guidance that matches your current situation. It would foresee your demands by suggesting that you start with saving, investing, and managing debt before the need arises.
Think about talking to your bank’s app and saying, “Shall I refinance my mortgage?” and in turn, getting all your options clearly outlined along with details specific to your financial situation.
Omni channel experiences
Conversational banking with the help of chatbots offers customers the convenience of interaction through multiple channels without any gaps, bringing a consistent experience no matter the mode of communication.
Contextual understanding allows chatbots to follow your conversation, even when you are shifting through various channels. For example, you can send a query through email but pick up your phone to get an update. Later the same day, you receive an update via email and WhatsApp regarding your query.
24/7 personalized support
AI is not limited to simple queries and FAQs as they are efficiently capable of handling complex financial issues such as loan applications, insurance advice, credit score updates, etc. With their ability to interact in near-human fluency, conversational chatbots ensure that their
communications are clear, logical, and precise. They can even personalize conversations for individual customer preferences.
What’s more? Conversational banking can be achieved 24/7 even beyond the working hours of the bank, consistently serving customers from across any time zone.
Proactive alerts and notifications
AI is consistently vigilant and active round-the-clock, unlike human agents. They can proactively send alerts based on your account activities and behavior. For example, when a credit card bill is due in a few days, it can send notifications to remind the user of the payment. Even when an EMI deduction is due, it can alert the user to maintain sufficient balance to avoid default.
Secure voice-activated transactions
AI is not only capable of recognizing text-based inputs, but it can accurately recognize and execute voice-based commands. Conversational banking adds a layer of security by customizing tasks for specific voice commands. Additionally, it offers hands-free operations letting users do multi-task activities as needed.
Advanced biometric authentication
Passcodes, pins, and pattern security locks are now passe. Conversational banking integrates biometric authentication such as facial recognition, retina scan, behavioral analysis, voice recognition, etc. It has been integral in account security and thwarting various attempts of fraud. Conversational banking even requires biometric verification during various transactions, password changes, changes in personal details, etc. to confirm user identity throughout the session. AI-based systems are attentive, and any sign of fraud or identity theft will enable them to secure the account and raise an alert.
Proactive fraud detection
If our present systems allow us to detect fraud faster, AI takes us further by ensuring proactive steps in fraud prevention and detecting areas of risk. AI systems keep an eye on our spending habits, transactions, device usage, and location among various other factors to determine the authenticity of the transactions. They are equipped to freeze accounts and cards, and log users from devices, even at the slightest risk of fraud detection.
Real-world application of conversational banking for personalized service
Conversational banking is no longer a classroom theory, but it has found real-world applications with positive results. In this section, we explore some of its real-world applications;
Personalized Financial Advice and Planning
Consider a scenario, where a user has an ongoing EMI for a vehicle. With a conversational banking context, the AI chatbot will analyze the user’s recurring payments, spending habits, and cash inflows to draw a customized financial recommendation. They can provide a step-by-step plan for savings, and loan repayments along with investment opportunities at any point in time.
It all happens through natural human-like conversation, ensuring that the user is engaged as the AI chatbot provides accurate and contextually meaningful suggestions that match their financial goals. Conversational banking liberates users from waiting long hours to connect with their relationship managers, ensuring round-the-clock personalized support and guidance.
Proactive Fraud Detection and Prevention
Let’s assume a situation, where a multiple login attempt is detected through an ATM to a user’s account. It can be a genuine case of missing the right ATM PIN or an actual scenario of unauthorized access. In such cases, the AI chatbot can promptly notify the user through various modes and engage in conversation to authenticate the user’s identity in real time. It engages in behavioral questions and requests for biometric verifications to ensure account security.
Through this, if identity verification fails, AI chatbots can freeze the account temporarily along with various associated cards to thwart further unauthorized access. Proactive preventive measures allow early fraud detection and safeguard users from financial losses
Automated Bill Payments and Subscription Management
Today, digital conveniences allow us to set up automatic payments ensuring consistent services. With conversational AI it becomes even more seamless as users can interact with AI chatbots through voice commands to activate or deactivate subscriptions or set up recurring payments. AI chatbots keep a vigilant outlook on our subscriptions, notifying users of due payments.
They can analyze the subscription usage and advise further continuation based on past usage data. Occasionally, if there is any rise in charges, they can proactively inform the upcoming changes to allow the user to decide on continuing the plan or stopping.
Tailored Customer Support
Imagine a user has a query about a recent credit card transaction for which the outstanding payment is due in a few days. As the user connects with the customer support team, the AI chatbot springs into action, replying to the user in a natural human-like conversation. While it can resolve simple queries without intervention, for detailed information, it can also connect the user to a human executive for further assistance.
While transferring the call to the human agent, the chatbot can summarize the conversation and highlight relevant user details. Conversational banking ensures users are supported 24/7 through relevant resolutions without extensive need for external assistance, improving customer satisfaction and reducing the workload on support teams.
Simplified Loan and Mortgage Applications
Now let’s consider a scenario where a user wishes to get a loan. As the user initiates a conversation with the chatbot, it guides the user to the loan application, directing them through every step. It can guide them through the documents required for the application and help them track their application in real-time.
A chatbot can also analyze past financial data to determine their credit score and provide them with the various loan options they are eligible for. Conversational banking streamlines a complex process as traditional banking may lag in serving the customer promptly. With a predictive understanding of credit score and loan eligibility, a user can approach the bank accordingly for exemption or negotiation for the discount on interest.
Conclusion
Altogether, conversational banking is likely to become the new model of personal banking by 2025 or sooner, with many changes for the better in the way it is accomplished. This change brought about by AI technology, NLP, and biometric security will ensure people utilize it to have control of their finances as they want. Every aspect can be seen as an advantage: financial management advice, clients’ customer service, voice identification for safe transactions, and financial planning.
Still, some obstacles are yet impassable, such as issues related to data privacy, regulatory matters, and the morality of developing AI. However, the development in the industry gives us the confidence that those factors will be overcome. Understanding the user-provider relationship involves taking cognizance of the following critical factors to avoid neglecting the social and needful aspects of human factors in enhancing conversational banking.
However, it is to be asserted that banks and financial institutions should get ready for this transformative technology by integrating customers’ perspectives and continually developing a trustworthy and responsible AI system. In this way, they can get the most out of cognitive ‘conversational’ banking and make the concept of personalized finance not merely an idea for the future, but actuality.
Frequently Asked Questions
Yes, recent advancements in natural language understanding, intent recognition, sentiment analysis, and large language models have enabled conversational banking to handle complex queries easily.
Yes, banks can use an API or an integration tool to merge conversational banking with their existing banking systems.
The recent demands for personalized experience have been one of the key factors driving the adoption of conversational banking along with advancements in AI and the development of voice-based chatbots and AI assistants.
AI has evolved to have a multi-dimensional application in banking, such as;
• Personalizing customer service and support
• 24/7 quick service
• User authentication
• Risk modelling
• Fraud detection
• Task automation
Conversational AI uses artificial intelligence to generate human-like conversations between banks and customers through various digital channels, such as chat, websites, voice assistants, etc. With conversational AI, banks can offer personalized customer support, recommend financial advice, provide account security, etc.
Conversational AI in banking is essential for enhancing customer experience, streamlining processes, improving security, etc. Their capabilities can be implemented in various functions, such as providing support quickly 24/7, tailor-made banking services, financial planning based on personal goals, biometric user authentication, product recommendations, etc.
Conversational AI interactions are very secure as they encrypt user data and use a multi-step authentication approach for data security. Also, it continuously learns about new threats, identifies areas that are risk-prone, and strengthens itself with enhanced security measures.
The speed with which banks can implement conversational AI solutions depends on several factors, such as;
• The complexity of the AI solution
• Existing bank infrastructure
• Available data for training the AI model
• Vendor expertise
- • Compliance with security protocols.
Nisha Sneha
Nisha Sneha is a passionate content writer with 5 years of experience creating impactful content for SAAS products, new-age technologies, and software applications. Currently, she is contributing to Kenyt.AI by crafting engaging content for its readers. Creating captivating content that provides accurate information about the latest advancements in science and technology has been at the core of her creativity.
In addition to writing, she enjoys gardening, reading, and swimming as hobbies.
