The Beginner’s Guide to Chatbots in the Financial Services Industry

By Danni White - Published on July 31, 2019
Chatbots in the financial services

The use of chatbots in the financial and banking sector continues to expand, with most finance companies using some form of chatbot technology. The trend is to improve chatbot performance with advanced artificial intelligence (AI) programming

Benefits of using chatbots in the financial services include cost-saving from the reduced need for human staff to accomplish things that can be handled by a chatbot. Customer acquisition costs may be reduced by using chatbots. Another benefit is the ability to create more consistent customer service because a chatbot may collect real-time feedback from customers for quality assurance purposes.

Chatbots in the Financial Services

The use of chatbots in the financial services to personalize financial management is a major trend. Chatbots help consumers with personal financial questions and provide suggestions to help them select financial services and products, which are appropriate based on their customer profile.

Chatbots in Banking

There is already widespread usage of chatbots in banking. Chatbots in banking may be voice-based, text-based, or both. Voice-based systems were the first chatbots that were made popular when the capability of natural language recognition became sophisticated enough to provide a quality customer service experience. Human custom service operators in banking have been reduced significantly by these voice-activated chatbots.

Chatbots for banking and financial services are used for:

  • Customer Service: The most popular use for chatbots is to provide 24/7 quality customer service. A chatbot system using AI builds up a large database of answers to common questions by its use. This extends the FAQ data library. Any inquiries that the chatbot cannot answer adequately are directed to a human customer service operator for further help.
  • Self-Service: Account holders can check balances, transfer funds, and pay bills.
  • Customer Acquisition: Chatbots assist new customers when applying to open an account.
  • Loan Application: Chatbots guide customers when making a loan application.
  • Credit History/Score Monitoring: Chatbots send real-time notifications when something changes in a person’s credit report.
  • Mobility: Chatbots may be enabled to send communications using messenger systems on social media such as Facebook Messenger. These can be used for many convenient things, such as a two-step verification process to enhance online password security.
  • Sales of Financial Products and Services: Chatbots recommend financial products and services as part of customer service efforts. This helps to create more customer engagement, improves customer retention, and increases revenues.

Chatbots for the Unbanked or Underbanked

Chatbots that operate on mobile devices are being used by industry-disruptive finance companies to provide financial serviced to individuals who do not have a bank account. These services are very attractive to those who do not receive enough services from the banking industry at a competitive price.

Retail Bundling Using Chatbots

One megatrend is for online retailers to bundle financial services with their retail offerings. They use chatbots to help bring new customers into the system easily and provide customer service so that these systems can scale to support an enormous number of users

An example of this is to be able to conduct bill paying through an online system such as Alipay. Alipay was created by Alibaba. Alipay works on the WeChat messenger system. It has over one billion global users.

Other examples are the ability to purchase insurance, such as policies for home, auto, and life insurance, from Amazon or get tax preparation assistance through Walmart online via a chatbot interface.

Amazon provides, through its cloud-based services, a highly-developed chatbot for call centers to other companies, which is widely used in the finance sector.

Artificial Intelligence in Finance

Using artificial intelligence in finance is now widespread. One application of AI in finance is to use algorithms to conduct automatic computer trading of stocks, bonds, commodities, and foreign exchange (FOREX). Chatbots may be part of this process.

Here are examples of the use of AI chatbots for financial services:

  • Trading: Systems that use allow human interaction with AI trading programs make use of chatbots to notify the human user of trading opportunities. These personal assistance chatbots can be preprogrammed with specific algorithms and then learn to improve trading success automatically by usage over time.
  • Credit Approval: AI provides faster credit approval based on a more accurate assessment of an individual’s credit history. A chatbot serves as a virtual financial officer for the intake of the financial application information. Then, the AI programming verifies the identity of the applicant, checks the credit history with the credit bureaus, and makes a credit decision for approval or rejection in a matter of seconds.
  • Financial Advice: Chatbots are used to provide personalized financial advice by first developing each user’s profile and then by using AI algorithms to compare the profile with trends from the data mining of Big Data about the public. These intelligent systems track income, monthly expenses, and spending patterns to develop an optimized financial plan for each user.
  • Supervision of People: One surprising application of AI chatbots in the financial services is the supervision of telephone sales calls made by human sales agents. Using natural language processing, chatbots “listen” to the calls made by the sales agents, analyze them, and then make suggestions about how to improve sales effectiveness. This is done by comparing the calls, which did not make a sale, with the all the other ones in the database that did result in a sale to uncover insights about how to improve the results.

The financial sector was one of the first industries to fully embrace the use of chatbots. Anyone working with AI and chatbots sees plenty of opportunities that come from significant industry disruptions through innovation in the financial sector. As the application of AI improves the performance of chatbots, their successful deployment will expand based on their usefulness.

Senior-level executives for finance companies need to enthusiastically support the continued deployment and improvement of these developments because of the already-proven, value proposition of using AI chatbots in the financial services.

Danni White | Danni White is the CEO of DW Creative Consulting Agency, a digital marketing firm specializing in elevating the visibility of small-to-midsize businesses and nonprofits. She is the author of 17 books and hosts the #Hashtags and Habits Podcast, which merges digital marketing, entrepreneurship, and personal growth.

Danni White | Danni White is the CEO of DW Creative Consulting Agency, a digital marketing firm specializing in elevating the visibility of small-to-midsize busi...

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