Text-based services have been around since the dawn of time, but not until the past year have we seen the rise of chatbots, in part led by Facebook’s unveiling of Bots for Messenger towards the beginning of the year. Mark Zuckerberg led the reveal, saying: “I’ve never met anyone who likes calling a business, and no one wants to have to install a new app for every service or business they want to interact with … we think you should just be able to message a business, just as you would a friend.”
Since the Facebook launch, developers have created more than 11,000 bots, and some banks have been brave enough to dip their toes in the water already, keen to explore the role that bots can play within retail banking.
American Express recently launched a Messenger bot that gives customers access to their accounts, also telling them when a purchase has been made with their AMEX card, and also providing information about past purchases. Danish bank Lunarway has also introduced a Facebook bot that responds to simple customer queries, such as checking balance and making transfers, but has plans to rapidly increase its sophistication. In France, Société Générale has just launched a bot on Facebook Messenger and Bank of America has announced plans to do the same.
The promise is that, pretty soon, customers will be able to use their favorite messaging app, be it Slack, Messenger, Skype or Telegram etc., to communicate not only with friends and family, but with all sorts of online services (including banking) in a natural and conversational way.
But while a few banks might be in a position to experiment, for the majority it’s an ambiguous space which needs to be exceptionally well understood before significant investment is made. Where money and private information is involved, the stakes are currently very high. A recent Forrester report advised that banks should hold off and wait a further two to three years before investing in customer-facing chatbot services. Instead, for the time being, it states that banks would be better off working with their technology partners to focus on foundational digital initiatives that will enable better bots and artificial-intelligence-based services in the future.
There are several reasons for this, but fundamentally the technology simply isn’t mature enough yet and AI hasn’t quite progressed to the point where it can really carry on a conversation and always give a customer what they’re asking for. In order for banking bots to go mainstream, it’s essential that they’re easy to use, with high-functioning natural language processing capabilities. Within Forrester’s recent research it found that although some chat bots offered a quick and effective answer to a consumer’s question, about one-third of the time, existing chat bots either failed to complete the consumer’s request or provided a clunky, awkward experience. Banking customers can be unforgiving and if there’s an issue with a payment or a funds transfer, the repercussions can be significant.
There’s little doubt that AI and bot technology will improve, and there’s much being invested in this space at present by some of the world’s largest technology companies, as well as some innovative startups. With opportunities within apps dwindling, the greater opportunity is undoubtedly within bots, but according to Forrester it will be the tech companies that drive development and take the AI capabilities to the next level, not banks.
Are bots the new apps?
Studies consistently show that smartphone users have condensed their daily screen time into just a handful of favorite apps, often a browser, a couple of chat and social apps and maybe a game or two. It’s clear that consumer enthusiasm for new apps is waning, and a quarter of all downloaded apps are abandoned after a single use. Achieving a competitive edge in this market is harder than ever with the 20 most successful developers grabbing almost half of all revenues within Apple’s app store, presenting a significant challenge for banks. With the app economy maturing in this way, it seems certain that the text-based chatbot market is poised to take its place. But the question banks are probably asking themselves right now is “are bots the new apps?”
We are currently at an interim stage, where the line between apps and bots is a little blurred, and this is quite noticeable within the banking industry. Digit, for example, is an intelligent app that connects to an individual’s current account, analyzes their income and spending habits, and every few days identifies a small amount of money it can safely move to a savings account without the customer becoming overdrawn. ING has also rolled out a peer-to-peer-payment app called Twyp, which allows consumers to pay small amounts to contacts on their mobile devices in just a few seconds.
Another factor to consider is that instant messaging remains incredibly popular. Over 2.5bn people have at least one messaging app installed on their phone, with Facebook Messenger and WhatsApp (also owned by Facebook) topping the charts. WhatsApp users average nearly 200 minutes each week using the service. These usage figures are only predicted to rise and within a couple of years will reach 3.6bn—approximately half of the entire human population. It’s a trend that cannot be ignored when weighing up the consumer attention economy, and the continuing popularity of messaging apps suggests people will happily talk to bots in the future.
Bots will need much experimentation to find their place, but there’s no reason that they couldn’t co-exist on people’s smartphones with apps and other future technologies yet to be invented.
The long and winding road to digital banking
Speaking within the Forrester report referenced above, Zor Gorelov, CEO of AI company Kasisto, explains: “To build a truly smart banking bot we need access to clean, properly structured data from banks. The banks creating lifestyle banking with conversational AI are the ones that are investing in their data infrastructure right now. Our AI and machine learning rely on that data to create intelligent banking conversations with consumers.”
There’s no doubt that banks need to ensure they have an infrastructure in place to cope with the digital changes afoot. This requires time and money and a deep understanding of where efforts would be best placed. Instead of spending heavily on chat bots now, or other newly emerging innovations, such as voice assistants, digital teams at banks should use the next couple of years to get their houses in order, focusing on the integration of back-end systems, improving data infrastructure, and removing any restrictive legacy systems and silos. They need to be able to serve their customers now and in the future, while developing brand new services, incubating ideas and integrating FinTechs.
For many, this presents a sizeable challenge, best answered by the bimodal IT model, which is the practice of managing two separate but coherent styles of work: one focused on predictability; the other on exploration (as defined by Gartner). So, while banks should be focusing on digital transformation that is expected and well understood (including the evolution of their legacy infrastructure), they also need to be exploring and experimenting with ways to solve new and emerging problems, while also keeping customers happy!
Striking the balance between technology and human interaction
The global race for banks to be digital first is on, but it is still early in the game. Leading banks are in the process of learning how to take a mobile-first approach and re-imagine their customer experiences, from opening up a current account to buying a home or taking out a small business loan. While many have begun migrating their customers from the branch or call center to their digital channels, it’s critical to take a country-specific view and carefully consider the cultural differences and preferences before deciding on the pace of change. The Netherlands, for example, has among the highest mobile adoption rates for banking within the world, and according to recent research by Bain, Dutch mobile usage has risen fourfold in two years while the branch now plays a minor role. Contrast this situation with Italy, which is lagging behind quite significantly in the role digital plays within banking (Italy is at the bottom of European rankings, with 26% of the population using internet banking vs. 44% in the EU-28)
For the average bank, a current priority is how to migrate routine activities out of the branch to self-service digital channels. But it’s critical that the mobile or digital experience is enough to truly delight the customer and remove any frustrations they might have in a branch. Right now, customers aren’t ready to be faced with a purely automated customer experience, although they increasingly view having to use branches and call centres as an inconvenience for many transactions. Getting the balance right is critical. Human interactions still count for a lot, and according to Bain, those customers who use both physical and digital channels still tend to be more loyal and more valuable to their primary bank.
There’s little doubt that the role of the branch, and front desk staff, is evolving significantly. Employees still have an important role to play, and particularly within complex transactions, but increasingly they will see themselves conversing more with customers through online chat or video. This will enable banks to better pool their specialist talent and achieve higher levels of productivity. Dutch bank ABN Amro, for example, has begun advising customers on mortgages via webcam, so that customers don’t have to physically hand over documents at a branch.
Exciting times lay ahead for banks, particularly so in Europe. While chatbots might be our future bankers, right now, it’s critical to consider the bigger picture, and focus on the initiatives that will help drive customer loyalty. It’s important to stay ahead of the competition, but not every emerging innovation needs to be frantically implemented.