Detailed Guide to Conversational Banking: Benefits, Use Cases, Tips to Create the Best Conversational Banking Experience for Customers in 2024

As of Q2 2023, conversational banking has seen a staggering 150% increase in user adoption compared to the previous year, according to the Financial Tech Insights Report. The landscape of banking has transformed significantly, placing the power of financial management at your fingertips, quite literally. The era of conversational banking in 2024 is here, where artificial intelligence and natural language processing have seamlessly integrated into the way you manage your finances.

In this comprehensive guide, you'll delve into the intricacies of conversational banking – from its inception to the latest advancements, and from its benefits to potential concerns. Whether you're a tech-savvy individual curious about the future of banking or a seasoned financial professional navigating this evolving terrain, this blog will equip you with the knowledge you need to understand, appreciate, and make the most of conversational banking in the present day. So, let's embark on this enlightening journey through the world of finance redefined.

What is Conversational Banking?

Conversational banking, also known as chat banking, is a transformative facet of modern finance that harnesses AI and chat technology to reimagine traditional banking interactions in a digital landscape. Rooted in the principles of conversational commerce, conversational banking brings the personalized experience of in-person banking to digital platforms. 

This paradigm shift is driven by the desire to offer customers real-time, personalized interactions that mirror face-to-face engagements. By utilizing AI chatbots, intelligent banking assistants, and voice bots, banks can efficiently handle the high volume of interactions while maintaining a high level of customer service. Through messaging apps, mobile applications, websites, and other digital channels, customers can seamlessly engage in conversations to complete tasks like money transfers, balance checks, and bill payments.

Conversational banking isn't just about convenience; it's a strategic response to the changing dynamics of the banking sector. As traditional banking touchpoints make way for digital platforms, customer service emerges as a vital differentiator. Conversational banking enables banks to anticipate customer needs, provide round-the-clock personalized assistance, and gather valuable insights for tailored solutions. This approach aligns with the broader trend of harnessing data-driven personalization to enhance customer experiences and drive revenue growth in the digital era.

How Does Conversational Banking Work?

Traditionally, the process of making investment decisions offline involves tailored customization. Creating a personalized investment portfolio entails the collection of pertinent information, including risk tolerance, desired return within a specific timeframe, and the client's income particulars. Typically, such interactions transpire within the confines of a physical bank branch, where bank employees and customers communicate, gather required documentation, and perform verification processes.

Conversational banking, on the other hand, transposes this process into the digital landscape by harnessing various digital communication channels, such as messaging apps like WhatsApp, banks' mobile apps, website chatbots, email, and SMS for banks and financial services. Although human agents do assist in these endeavors, the sheer volume of interactions prompts the use of automated mechanisms like AI-powered chatbots, intelligent banking assistants, and voice bots. These conversational AI solutions capitalize on customer data to provide personalized notifications and recommendations.

At its core, conversational banking represents a form of digital banking that enables real-time interactions between banks and customers through text messaging, voice, mobile applications, and websites, culminating in an unparalleled level of service.

Underpinning conversational banking is the integration of Communications Platform as a Service (CPaaS) and conversational platforms. These technologies amalgamate various communication channels and artificial intelligence capabilities, allowing banks to track, personalize, and learn from customer interactions. This results in a seamless experience across multiple channels, where customers can readily seek assistance through text, calls, or video chats with virtual and human agents, from any device and location.

As a key differentiator, customer service plays a pivotal role. Conversational banking exemplifies this shift by delivering swift, helpful assistance, replacing arduous in-branch queues and labyrinthine phone trees. Such proactive engagement fosters accuracy, expediency, and ultimately enhances brand loyalty.

In the contemporary financial landscape, conversational banking emerges as a strategic imperative for anticipating customer needs, meeting them on preferred digital platforms, and ensuring personalized experiences around the clock. By leveraging AI and chat technology, this innovative approach allows customers to conduct routine banking tasks and foster a deeper understanding of individual preferences, thus facilitating more tailored and effective future interactions.

As McKinsey suggests, the revenue potential of personalization for digitally native enterprises stands at an impressive 25%, a stark contrast to companies with limited access to first-party data. Hence, conversational banking's commitment to personalization positions it as a potent catalyst for revolutionizing the banking industry and enhancing customer engagement.

Advantages of Conversational Banking 

1. Swift Response to Customer Queries

Engaging with live agents can be time-consuming due to traffic volumes. AI chatbots in customer service can handle multiple conversations simultaneously, resulting in faster query resolution times. For instance, IIFL Securities reduced average query resolution time by approximately 45 seconds using an intelligent virtual assistant (IVA).

2. Multi-Language Support and Personalized Service

Conversational banking caters to a global audience by communicating with clients in their native languages. Chatbots or IVAs can fluently respond in numerous languages, enhancing customer comfort and accessibility. Around 30% of customers are willing to pay more for personalized service, according to PwC. Conversational banking achieves personalized service through data collected during conversations, augmented behavioral analytics, and the intent recognition capabilities of chatbots.

3. Flexibility and Cost Reduction

As approximately 35% of Americans engage in omnichannel interactions, banks must be accessible across various platforms. Conversational banking extends support through platforms like Facebook, WhatsApp, mobile apps, and websites, ensuring customer satisfaction. Investing in scalable solutions like conversational messaging systems leads to reduced overhead costs over time. Some finance chatbots achieve up to a 90% end-to-end automation rate, decreasing the need for extensive customer service staff. AI conversational chatbots can help in loan origination automation and commercial lending automation. 

4. Improved Customer Lifetime Value and Enhanced Data Security

Conversational banking enhances customer satisfaction, leading to reduced churn rates, increased customer loyalty, and positive word-of-mouth referrals. This sustains customer engagement, ultimately increasing customer lifetime value. Personalized notifications enhance data security through two-factor authentication messages. Banks can secure transaction information before sharing it with third parties. 

5. Workforce Augmentation and Fraud Frequency Reduction

Conversational banking automates frequently asked questions, freeing up human agents to focus on more complex issues. This optimizes workforce allocation, improving overall efficiency and service quality. AI-driven tools detect and prevent fraud effectively. Conversational banking facilitates customized transaction-related notifications, enabling customers to promptly confirm or address fraudulent activities.

6. Consistent Customer Service and Unparalleled Accessibility for Customers

Chatbots provide consistent messages across different communication platforms, ensuring uniformity in wording, formality, and visual elements. This alignment enhances the overall customer experience. Conversational banking offers self-service options and personalized customer service across various channels, ensuring convenient and efficient engagement. This saves customers time and eliminates the need to visit physical bank branches.

7. Revenue and Customer Lifetime Value Increase and Lower Operating Costs

Conversational banking enables customers to engage with banks through preferred channels, resulting in heightened value and increased engagement frequency. This strengthens long-term relationships and translates to improved revenue and customer lifetime value. Conversational banking solutions optimize customer support by automating routine queries and empowering live agents to handle more complex issues efficiently. This results in cost savings, resource allocation, and improved customer experiences. Text messaging automation by using solutions like App0 for financial services, can also enhance customer communication in banks and financial institutions. 

8. Accelerated Innovation and Reduced Call Volume

Conversational banking unlocks new data for innovative insights. By analyzing customer behavior and interactions, financial institutions gain deeper understanding, enabling the development of relevant products, services, and tailored recommendations.  Conversational banking reduces call volume by automating interactions handled by customer service representatives. Voice assistants automate as much as 50% of calls, alleviating pressure on contact centers and enhancing customer experiences.

9. Bridge between Digital and Phone Services

Conversational banking seamlessly links digital and phone services by directing customers to relevant digital resources via SMS or push notifications. This eliminates the need for agents to guide customers through lengthy processes.

10. Improved Customer Experience and Improved Agent Retention

Conversational banking offers customer-centric experiences through various channels, ensuring efficient engagement and satisfaction. Voice assistants minimize wait times, creating a positive customer interaction. Automating repetitive queries relieves contact center agents from monotonous tasks, enhancing job satisfaction. By reducing wait times and improving interactions, both customers and agents experience increased satisfaction.

11. Handling Peak Call Volumes and Increased Revenue and Lower Costs

Conversational banking equips banks to manage unforeseen spikes in call volume, enabling swift responses during crises and reducing negative customer experiences. Conversational banking supports customer engagement and efficient resource allocation, leading to revenue growth and cost reductions. By optimizing communication and service, banks achieve a positive return on investment.

Conversational Banking Channels

Conversational banking can be provided through text-based and voice-based interactions.

Conversational Banking via Chatbots

A number of financial institutions initiated their venture into conversational AI by implementing chatbots to complement their existing digital self-service avenues.

This serves as a logical starting point, as chatbots can be integrated into established communication channels. They contribute to reducing call volume by addressing various fundamental banking tasks, such as providing account information, updating balances, and facilitating the reporting of lost cards.

Conversational Banking via Telephone

In the past, conventional voice technologies exhibited limited automation capabilities over phone interactions, resulting in the availability of only basic conversational Interactive Voice Response (IVR) systems that would prompt callers with requests like, "Please briefly state the purpose of your call."

These conventional IVRs possessed limited utility, capable of answering only a small set of generic Frequently Asked Questions (FAQs). 

Now, thanks to AI-driven voice assistants, conversational banking can be extended to phone interactions. These voice assistants emulate the communication style of human agents, comprehending and responding effectively to customers' queries, regardless of how they express themselves. This functionality remains available 24/7, 365 days a year.

Conversational Banking via SMS

Conversational banking via SMS is a modern approach to providing banking services and customer support using text messaging. It leverages the convenience and ubiquity of SMS (Short Message Service) to facilitate real-time interactions between customers and their banks. This method allows customers to engage in a natural and text-based conversation with their financial institution, similar to how they would communicate with friends or family.

In conversational banking via SMS, customers can perform a variety of banking tasks and inquiries through text messages. This could include checking account balances, reviewing recent transactions, transferring funds between accounts, paying bills, setting up alerts, and even receiving personalized financial advice.

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Conversational AI's Role in Banking

Thanks to Artificial Intelligence (AI), chatbots have transcended their ability to merely comprehend customer voice or text interactions. They now possess the capacity to engage in responses that mimic authentic conversations. AI employs Natural Language Processing (NLP) to enable chatbots to genuinely extract meaning from language using shared data components. 

An article within the Global Banking Finance Review elaborates on how AI is reshaping the banking sector beyond conventional ATMs:

"Through conversational AI, banks can reintegrate chat within the banking relationship and gain a deeper understanding of their customers' preferences. Instead of speculating, banks empower customers to swiftly locate desired information on their own, or guide them through pre-designed menus or forms."

One significant aspect of Conversational AI in banking is its round-the-clock availability. Traditional banking hours and queues for customer support become irrelevant as customers can engage with the AI-powered systems at any time, receiving quick responses and assistance without delay. This not only improves customer satisfaction but also contributes to operational efficiency for financial institutions. 

Moreover, Conversational AI excels at personalization. By analyzing customer data and transaction history, the AI can offer tailored recommendations and advice. For instance, it can suggest suitable saving strategies, investment opportunities, or credit options based on a customer's financial behavior and goals. This personalized touch enhances customer engagement and loyalty.

Security remains a paramount concern in banking, and Conversational AI is no exception. Banks must implement robust security measures to safeguard customers' sensitive data during interactions. This includes secure authentication methods and encryption protocols to prevent unauthorized access. 

Conversational AI also extends beyond customer support to include sales and marketing. By understanding customer preferences and behaviors, the AI can offer targeted product recommendations and promotions, further deepening the bank's relationship with its customers.

Use Cases of Conversational Banking in 2024

1. Managing Accounts

Customers can avoid enduring the frustration of hold music and extended wait times when it comes to handling routine tasks like changing addresses or managing account rewards. Through the utilization of conversational banking, customers gain swift and convenient access to necessary information, allowing them to manage their accounts according to their own schedule. This eliminates the need to wait for a customer service representative or make visits to a physical branch.

2. Addressing Frequently Asked Questions

Queries like 'how can I access my account' and 'where can I locate my nearest branch' constitute a comprehensive list of frequently asked questions that customers often seek online. Nonetheless, customers generally prefer formulating questions in their own language and frequently opt for direct communication with an agent via phone.

Leveraging technologies such as chatbots and voice assistants, banks can be accessible 24/7 to address routine inquiries on the preferred communication channel of the customer.

Banks can employ voice assistants to promptly provide solutions or use SMS for customer service or push notifications containing direct links to pertinent web pages or resources that specifically cater to customers' queries.

3. Tailored Customer Support

Conversational AI technologies possess the capability to integrate with backend systems, enabling the collection of customer information throughout their user journey.

By having access to precise and current customer data, banks can enhance customer experiences by offering customized greetings, recollecting details from previous interactions to assist with ongoing inquiries, or identifying occasions to propose additional services such as insurance.

4. Conversation-Based Authentication

While banking customers seek seamless experiences, they hold paramount importance to the security of their accounts and finances.

Leveraging conversational AI technologies, banks can furnish a secure and dependable identification and verification process without compromising the customer experience. Conversational banking technologies can validate vital security information such as a customer's name, address, and date of birth, authenticating it through a natural conversation akin to interactions with customer service representatives.

5. Customer Onboarding

Challenger banks have demonstrated that physical locations and intricate processes are not prerequisites for onboarding new customers. Banks like Monzo can onboard new customers within a mere 15 minutes, utilizing nothing more than access to a smartphone.

Conversational banking employs a diverse array of channels, encompassing mobile apps, video, and chat, to swiftly verify the identity of new customers and streamline their onboarding. Beyond heightened accessibility, conversational banking technologies obviate the necessity for manual intervention from bank customer service representatives, affording them the opportunity to concentrate on more intricate customer interactions.

5 Easy Steps to Create a Conversational Banking Experience

1. Determine the Customer Journey

Mapping the customer journey involves two primary stages:

Identify the digital platforms favored by your customers. By acquiring this information, you can formulate data-driven approaches to conversational banking. It's prudent for banks to consider generational patterns cautiously. For example, younger generations might lean towards WhatsApp over Facebook Messenger. Incorporating generational dynamics can help curtail legacy expenses.

The subsequent phase entails comprehending your customers to gain insights into:

• Frequently asked questions (FAQs) from customers
• Identifying current pain points in customer service
• Deciding which queries warrant human intervention and more.

2. Select an Appropriate Conversational AI Provider

Due to volume constraints, many businesses cannot sustain omnichannel messaging solely through live agents. Hence, certain interactions must be automated, employing:

• Chatbots
• Intelligent Virtual Assistants (IVAs)
• Or, on certain occasions, voice bots.

However, scarce IT resources within financial institutions often preclude the development of in-house conversational AI solutions. For most businesses, embarking on conversational banking necessitates identifying a fitting conversational AI vendor proficient in creating effective chatbots. 

Banks should take into account the following criteria when choosing a vendor:

• Competency in Natural Language Processing (NLP) and Understanding (NLU), crucial for discerning intents and formulating coherent responses.
• The vendor's repository of finance-related training data sets. The quality and extent of this dataset directly influence the sophistication of conversational AI solutions.
• Vendor experience in finance chatbots, an essential factor to be evaluated through case studies and references to gauge their financial expertise.
• Omnichannel capabilities, ascertaining the messaging channels candidate vendors can accommodate for building conversational AI solutions.
• Multilingual support, a determinant of enhanced customer experience. Evaluating the spectrum of supported languages is vital when selecting a vendor.
• Assessment of chatbot performance using chatbot analytics. It's essential to ensure the chosen vendor provides this functionality.

3. Incorporate Live Agents

Conversational AI tools must be complemented by live agents for several reasons:

• Over 80% of users anticipate the availability of a mechanism to connect with a live agent when interacting with chatbots.
• Current technology confines chatbots' ability to fully replace humans.
• Chatbots encounter limitations due to factors like insufficient AI capabilities.
• Human communication often comprises typos, grammar errors, and linguistic blending, posing challenges for bots to comprehend.
• Therefore, AIMultiple recommends amalgamating conversational AI technologies with human operators. Chatbots can handle straightforward consumer queries, while customer care agents address more intricate problems necessitating human intelligence.

4. Enhance Cybersecurity Measures

Data breaches pose multifaceted threats to businesses (refer to Figure 9). Amplified customer interactions correlate with augmented exposure of personal data in the bank's possession. Safeguarding this valuable data is imperative for compliance adherence and fostering customer trust.

To bolster cybersecurity measures, banks can consider:

• Regular assessments of chatbots, digital banking apps, and websites.
• Integration of data masking techniques.
• Education of employees about cyberattacks like phishing.
• Implementation of a zero-trust cybersecurity paradigm, among other strategies.

5. Gather Customer Feedback

To assess the efficacy of your conversational banking strategy, consistent collection of feedback from customers is vital. Employing surveys can facilitate the acquisition of customer feedback. Their insights serve as a data-driven blueprint for banks.

Feedback collection aids in gauging:

• Overall investment success
• Areas necessitating enhancement
• Subsequent steps for banks to initiate.

Tips for Having a Successful Conversation Banking Experience 

Conversational banking holds the capacity to accompany customers throughout their entire association with your bank or fintech solution. Below are three methodologies to cultivate gratifying relationships grounded in personalization, leading to enduring customer value.

Comprehend Customers' Desires and Requirements

In contemporary times, customers anticipate personalized interactions from brands, a sentiment that transcends into their banking encounters. Merkle's Customer Experience Impact report reveals that consumers hold an expectation for brands to furnish personalized and seamless experiences. To attain this, brands must conceive experiences that pivot around customers. This commences with a holistic grasp of the complete customer journey, enabling marketers to grasp and react to customer interests and needs. The outcome is the cultivation of more valuable, enduring relationships that furnish a competitive edge.

Coordinate Meaningful Customer Journeys

Banks, financial institutions, and fintech entities possess a distinctive chance to meet customers at various junctures of their life journey. Spanning from initiating a maiden bank account or credit card to clearing student loans, procuring a mortgage, and planning for retirement, each stage necessitates distinct dialogues along with a distinct array of products and resolutions tailored to their position. Conversational banking can orchestrate meaningful customer journeys that incentivize them to consistently choose your brand due to the foundation of trust established. 

Leverage AI for Customer Support and Engagement

Advancements in AI have endowed chatbots with the ability to engage effectively with customers at every juncture of their life journey. Historically, support needs that mandated the intervention of a live service representative are now amenable to digital handling. Younger generations have grown accustomed to these types of encounters and often seek digital solutions before contacting a customer service representative. Dispensing prompt, accessible, and contextually relevant solutions ensures active engagement and recurrent visits.

Conclusion

In conclusion, embracing the realm of conversational banking in 2024 can revolutionize the way you manage your finances. By integrating AI-powered chatbots and virtual assistants into your banking experience, you're not just simplifying tasks; you're opening the door to a more intuitive, personalized, and efficient way of handling your financial affairs. The fusion of technology and finance has never been more seamless, and as you navigate this landscape, you'll find yourself at the forefront of a new era in banking. Remember, as you embark on this journey, keep an eye out for the latest software in the conversational banking space like App0 that focuses on security and compliance while empowering banks, credit unions, and fintechs to develop next-generation consumer experiences through conversational interfaces and user-friendly design. 

App0 makes it easy for our clients in the banking and financial services industry to connect with their customers in meaningful ways by unifying communications across multiple channels and centrally managing user preferences to achieve enhanced business outcomes like:

• Improvement in deal closing and debt collection rates in banking and other financial institutions
• Faster origination timelines with superior customer engagement while reaching out on preferred channel and time
• Reduction in application drop-offs that happen primarily due to high friction & longer customer waiting times 

Request a Demo with App0 to enable conversational banking with your customers.

Engage with your virtual banking assistant, inquire about transactions, make transfers, and receive insights, all through the power of conversation, and shape your financial future with confidence.

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