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Top 2021 Conversational Banking Trends Redefining Financial Services
May 2021
6 Consumer Behavior in Banking is Changing
7 Customers Demand Customer Service on Their Terms
10 Conversational AI Trends for 2021 and Beyond
13 Voice Assistant Usage is on the Rise
15 Conversational Banking in Use
17 Conversational Banking Shows Great Promise
18 Best practices for Implementing Conversational Interfaces in Banking
20 Conclusion
21 Report sources
Table of Contents
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Executive summary
The conversational trend is spreading across industries, and the banking sector is no exception. Just over the last few years, the global banking industry has undergone significant changes. Customer preferences have a direct impact on this refresh.
The key factors include:
The Covid-19 pandemic has also contributed. It has accelerated the digitalization of retail banks by 3-4 years, stimulating an active transition of customers from traditional banking channels to digital ones.
Voice technology innovation drives changes in consumer behavior right now and will do so for the next few years. However, a majority of financial institutions still underestimate the speed at which consumers demand such changes, as well as how quickly their competitors innovate on the voice experience.
Voice assistant usage is on the rise, conversational banking transforms financial services. Among the main use cases are solutions to facilitate customer identification and authentication, replace a human agent, provide personalized recommendations, and build customer relationships. As well as implementations for front-office operations. Banks and fintech companies are leveraging AI to launch voice-powered solutions, reducing costs and serving increasingly tech-savvy consumers. Leading analytical and consulting companies agree that having their own conversational AI strategy is an essential feature of banks’ digital strategy, that allows staying ahead of changes and competitors.
Customer habits and preferences shift towards digital channels
Expectations for service level, speed, flexibility, and personalization increase
People get accustomed to voice interfaces
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Innovations in voice technology are driving new expectations among consumers. If financial services institutions want to stay ahead of the curve, it’s imperative that they closely monitor how trends in voice technology are driving awareness and demand of this type of functionality. As consumers become more familiar with voice-driven technology, their expectations for the voice experience will change. Banks and fintech companies must invest in improving speech recognition and other functionality to meet these new expectations.
Digital banks are taking market share away from traditional banks through superior customer experience and highly focused USP (unique selling point). Besides, digital banks are adopting new trends and innovations faster than traditional banks. These are the AI-first banks that feature smart, AI-powered personalized offerings, smart customer service, fast, simple, and intuitive interactions, and seamless embedding within partner ecosystems.
In order to remain competitive in the new environment, banks need to reform their approach to service delivery, which would entail a rethinking of the operating model, technology, infrastructure, customer interaction, and process automation. As well as the transition to digitalization and AI-first approach.
The ones who fail in building digital strategy today most probably will not catch up with their competitors for they will move ahead too
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Methodology
The report has been filed in May 2021. The report represents an overview of banking industry trends affecting conversational interfaces and trends in the conversational AI market worldwide. The report is based on researches and analytical forecasts of the world’s leading analytical agencies (McKinsey, Deloitte, Accenture, Boston Consulting Group (BCG), Business Insider Intelligence, Juniper Research, The Economist), analytical forecasting of an international vendor of conversational AI tools and technologies (Just AI).
just-ai.com
About Just AI
Just AI is an international vendor specializing in Conversational AI tech, ML, and NLU. We have developed an award-winning NLU technology and since 2011 we build high-quality products for developers of any skill level. Our customers rely on Just AI tools for complex Conversational AI projects in banks, insurance, retail, telecom, FMCG, transportation, CX centers, etc. The variety of implemented IT solutions expands our professional expertise and we are keen to share it with a global community.
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Consumer Behavior in Banking is Changing
The key factors include:
1. Customer habits and preferences shift towards digital channels. The intensive development of IT and the proliferation of mobile devices have changed the habits and needs of customers greatly:
• The role of digital channels has increased noticeably, while the presence of bank branches is no longer a key factor of choice. Large banks highlight the development of RB (remote banking services) as one of the key priorities, while a number of fully digital players have emerged.
• With the rise in the availability of mobile devices, remote banking users switch to mobile apps. Some major banks extend functionality wider and do it better than Internet banks, and that indicates a greater demand for personalization of services.
2. Expectations for service level, speed, flexibility, and personalization increase. Growth in the expected standards of service and customer experience is driven by Internet companies. Customers today expect financial institutions to bring the same level of personalization and convenience as they get from Netflix.
3. People get accustomed to voice interfaces. With millennials and Gen Zers quickly becoming banks’ largest addressable consumer group in the US, FIs are being pushed to increase their IT and AI budgets to meet higher digital standards. These younger consumers prefer digital banking channels, with a massive 78% of millennials never going to a branch if they can help it.
Just over the last few years, the global banking industry has undergone significant changes.
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Customers Demand Customer Service on Their Terms
Banking is all about trust, therefore customer experience is a competitive differentiator. Providing customers with all the attention they want seems like an impossible task, but advances in technology can help ensure that customers are happy with the majority of interactions. New, non-traditional players emerge — neobanks / digital banks (N26, Revolut, Sparkling, etc.), fintech companies, and large tech companies that provide access to financial products through their ecosystems (Wechat, Google, Amazon, etc.).
According to Juniper research, digital banks are taking market share away from traditional banks through superior customer experience and highly focused USP (unique selling point). Analysts recommend that traditional banks personalize customer experiences in banking applications and use AI-powered personal finance management tools.
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McKinsey, in its research report “Reimagining customer engagement for the AI bank of the future,” also notes that “excellent customer experience is not only a solid foundation for growth but also “a crucial means of countering threats from new attackers”. Banks of the future are the AI-first banks that feature smart (AI-powered) personalized offerings, smart customer service, fast, simple, and intuitive interactions, and seamless embedding within partner ecosystems. According to McKinsey, The US retail banks with the highest degree of reported customer satisfaction grew deposits 84% faster than at the banks with the lowest satisfaction ratings. Analysts also point out that the stronger the experience and the more satisfied the customer, the more likely it is that the bank will generate higher revenue. A more satisfied customer typically accounts for approximately 2.4 times more revenue than a neutral customer.
The commoditization of basic banking products, the transition to digital interaction, and regulatory coordination lead to the fact that barriers associated with changing banks continue to lower
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The Covid-19 pandemic has also contributed. According to BCG experts in the study “Global Retail Banking 2021: The Front-to-Back Digital Retail Bank”, the pandemic has accelerated the digitalization of retail banks by 3-4 years, stimulating an active transition of customers from traditional banking channels to digital ones. Online banking grew by 23% and mobile banking by 30%. On average, 13% of respondents noted that they started using online banking for the first time (12% - mobile banking). BCG experts expect that trend to continue - the use of mobile banking will grow by another 19%, and the number of calls to bank branches will decrease by 26% by the end of the pandemic.
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The above trends send a potent message to the entire industry. In a world where the client does not want to go to a local branch, the winner is the one who can effectively interact with him in a completely remote and digital format. According to BCG, banks should accelerate the pace of digitalization of services in order to improve the quality of customer service and optimize costs. An integrated approach to redesigning value streams will reduce costs by 15-25%, increase revenues by 10-20%, and the consumer loyalty index (NPS) – by 20-40%.
Analysts at BCG and McKinsey agree that in order to remain competitive in the new environment, banks need to reform their approach to service delivery, which would entail a rethinking of the operating model, technology, infrastructure, customer interaction, and process automation. As well as the transition to digitalization and AI-first approach.
15-25%
reduced costs
increased revenues
improved customer loyalty index
10-20% 20-40%
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Conversational AI Trends for 2021 and Beyond
According to Meticulous Research, the voice and speech recognition market is expected to grow at a 17.2% compound annualized rate to reach $26.8 billion by 2025. That means voice UX became a real pragmatic innovation. Today assistants are expected to become proactive and distinguish users in order to bring personalized content.
Voice assistant in a mobile app
Voice, as a natural interface is about to become obsolete and even displace swiping and typing. Voice-powered apps increase functionality, saving users from complicated navigation, form-filling, overlaid menus, support, etc. They make it far easier for an end-user to submit their request — even if they don’t know the exact name of the item they’re looking for or where to find it in the app’s menu. Pretty soon, users won’t just appreciate the greater functionality and friendliness of a voice-powered mobile app, they will anticipate it.
Outbound calls and smart IVR powered with an NLU
Outbound calls and smart IVR have nothing to do with cold calls. These are effective, performant, and easy-to-customize smart solutions that will replace agents in call centers pretty soon. More and more companies offer such services and it seems like a reasonable guess that this is where the calling sales are moving.
Voice cloning / Voice replication technology
Machine learning tech and GPU power development commoditize custom voice creation and make the speech more emotional, which makes this computer-generated voice indistinguishable from the real one. Voice cloning becomes an indispensable tool for advertisers, filmmakers, game developers, and other content creators. This might be a promising technology for banking too.
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Voice assistants in smart TVs
Smart TV is an obvious placement for a voice assistant — users don’t really want to look for that clicker and spend some more time clicking when they can use your voice to navigate. With a smart assistant on the TV, users can easily browse the channels, search for the content, launch apps, change the sound mode, look for the information, and, importantly, pay for the services.
Personalization
Personalized communication is created through the value generated from big data analytics. Voice assistants understand customer behavior, current mood, and preferences, they provide personalized services basing on interactions with customers. This makes voice assistants a great marketing tool for delivering personalized services and recommendations. For instance, they might suggest credit cards with a monthly spending limit set based on the user’s purchase history. Likewise, basing on previous investments, voice assistants can suggest stocks that people are most likely to invest in.
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Multimodal approach
More and more developers come to the conclusion that a device ecosystem and multimodal approach are much needed. A voice assistant may simultaneously live on your mobile phone, smartwatches, smart home, and smart TV. Obviously, ‘1 assistant, few devices’ is the right approach here.
Voice for business
More solutions to improve business processes emerge — voice in meetings and voice for business intelligence. Voice assistants will be highly customized to business challenges, integrated with internal systems like CRM, ERP, and business processes.
Games and content
More games, learning, and entertaining content are expected since tech companies like Amazon, Google, and other voice-first tools’ developers push their builders to the market. Advertising via smart speakers and displays is a great chance to promote a product. So, communications and entertainment market majors like Disney Plus or Netflix partner up with new tech platforms to become a first-mover.
Smart displays
The demand for smart displays remains high because these devices have shown a huge improvement over the last year as more customers preferred them over regular smart speakers. In the third quarter of 2020, the sales of smart displays hit 9.5 million units. In other words, it grew by 21% year-on-year. As a result, the market share of this product category rose to 26% from 22% last year. Smart displays, like the Russian Sber portal (Sberbank) or a Chinese smart screen Xiaodu, are already equipped with a suite of upgraded AI-powered functions, including far-field voice interaction, facial recognition, hand gesture control, and eye gesture detection.
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In the US, one in three Americans have voice speakers, and nearly half of them have smart home devices. About 27% of American adults interact with voice interfaces at least once a month, and voice assistants on voice speakers are actively used monthly by 28% (according to Voicebot.ai)
Voice Assistant Usage is on the Rise
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The most popular voice assistants in the world are Siri (Apple), Google Assistant, Alexa (Amazon), Samsung Bixby. According to Just AI and Canalys, there will be 400 million smart speakers and screens in the world by the end of 2020. The share of owners of smart speaker users in the United States, according to eMarketer forecasts, will grow to 83 million by the end of 2020, and in 2021 the growth will only slightly slow down.
According to Voicebot.ai, over 45% of consumers said they would “very much” or that “it would be nice” to have voice assistant features within their favorite mobile apps.
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Bank of America (Erica), Capital One (Eno), ICICI Bank (iPal), US Bank, and others have built their own voice assistants. So far, besides text-based bots, there are scores of banking voice-powered assistants worldwide. Most of them empower the US, Russian, and Indian banks and fintech companies. These assistants solve the most common banking tasks: simplifying communications, answering FAQ questions, powering up security systems with voice biometrics, navigating within mobile banking apps, reducing the burden placed on call-center representatives. As AI platforms continue to process larger amounts of information such as user profile, their preferences, financial condition, and spending behavior, it is expected that users would get a fully personalized customer experience in the measurable future.
According to The Economist’s research “The Road Ahead: Artificial Intelligence And The Future Of Financial Services,” financial companies are actively expanding their use of AI and ML to generate added value from new digital channels. 61% of surveyed retail banks, 58% of investment banks, and 50% of insurance companies use virtual assistants (including chatbots). NLP is used by 52% of retail banks, the same number - by investment and only 33% - by insurance companies.
Conversational Banking in Use
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Digital banks are adopting new trends and innovations faster than traditional banks. According to Deloitte’s “Digital Banking Maturity 2020” research, 15% of digital banks started using chatbots for complex information use cases (vs 4% among traditional ones), 12% - chatbots that allow managing transactions (vs 2%), 5% - chatbots that provide contextualized recommendations (vs 1%)
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According to the study “Autonomous Next” from Business Insider Intelligence, the total potential savings of banks from AI are estimated at $447B by 2023, while $199B will come from implementations for front-office operations, where the main case for using AI will be conversational banking, which aims to facilitate customer identification and authentication, replace a human agent, provide personalized recommendations, and build customer relationships.
Juniper estimates that chatbot communication in mobile banking apps will become the most common way to communicate with customers by 2023. The share of such interactions will amount to 79% of all successful conversations.
Conversational Banking Shows Great Promise
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A systematic approach to building conversational banking will help banks get a significant effect. According to Accenture’s experience in the global banking industry, conversational banking can help increase revenue growth by 25% and reduce costs by up to 30%.
In its analytical report “Ready For Conversational Banking,” Accenture makes the following recommendations:
Design a device and form-independent conversational banking strategy
Most banks think narrowly about conversational banking. They restrict the concept of adopting channel-specific technology rather than conceiving use cases. For example, the same service request across email, chat, phone, and web are configured and handled independently and the knowledge base is fragmented. This siloed approach deprives banks of synergy and speed.
Banks need to start with identifying the appropriate use cases and choose areas of maximum impact in terms of customer value as well as the rate of return for the bank.
This transformation journey should be device and form independent allowing banks to quickly scale to different channels like Web, phone, and WhatsApp. Conversational interfaces must be designed in the context of their use and follow familiar sequences and cues that encourage interactions and further engagement.
Design a framework and roadmap
A clearly defined framework will help banks shift systematically toward effective use of AI for building conversational banking capabilities. In the absence of such a framework, banks will not be able to commit investments or implement changes in the operating model resulting in slow speed to market and patchy implementation with poor customer experience.
The roadmap would allow use cases to be prioritized along with the knowledge and content repositories and training for enabling intelligent bots.
Best practices for Implementing Conversational Interfaces in Banking
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Re-imagine the operating model and internal culture
The operating model will need to evolve to one in which CUIs will be powered both by teams combining humans and bots. This will call for a massive change in the internal culture of banks.
Processes for human and bot interactions and collaboration will need to be defined, and governance frameworks set. Banks will need completely new skills around managing AI – skills to train, explain and sustain AI. Further, Banks will need to invest in training employees to develop skills to leverage the power of AI-skills to amplify, interact and embody.
Build AI capabilities
According to Accenture recommendations, banks need to build their core data management platform that brings together their organization’s structured and unstructured data and provides enough compute for exploration and machine learning Algorithms.
Second, banks need to set up an AI workbench that brings together the core AI technologies across Natural Language Processing, speech recognition, virtual agents and text-to-speech
for chatbots, robotic process automation for email bots, computer vision, OCR, and deep learning.
Third, they need to build products for specific use cases.
Focus on the missing enablers
Building a bot is one challenge and ensuring it has the accuracy and fulfillment rate is another. While multiple banks have experimented with limited AI plays like chatbots, they are yet to see these bots provide substantial benefits or manage a massive set of queries. This is large because these are typically thought of as technology implementation and the investment in enablers required around training data, content, and algorithms is rarely made. These enablers require new methods and diverse skills sets. Acquiring skills for these roles will be a challenge as things are still being done for the first time and most industries are looking for the same talent. As AI-enabled bots make autonomous decisions, banks will also need to work out how to deal with new legal, compliance, and risk issues.
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Voice assistant adoption in banking has passed the early phase among both consumers and providers. Furthermore, there are obvious signs that banks and fintech companies are among the leaders in voice assistant and chatbot development. It is safe to say that conversational banking is poised to grow steadily in the coming years.
The global market of Voice Assistants and AI-powered smart devices characterized by extremely high competition and dynamics. Apart from leading general-purpose assistants, there’s also an increasing number of customized assistants and voice-powered solutions. Soon, we can expect the platform to be able to process more information about individual users, their preferences, cash situation, and spending trends, providing a fully personalized banking experience. Truly personalized banking has become a reality on a massive scale with conversational AI.
Financial institutions looking to expand their customer base need to adapt, implement and update AI conversational platforms to open up new service models.
Learn more
Conclusion
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BCG “Global Retail Banking 2021: The Front-to-Back Digital Retail Bank”, January 2021
Deloitte “Digital Banking Maturity 2020”, October 2020
McKinsey “Reimagining customer engagement for the AI bank of the future”, October 2020 “AI in banking: Can banks meet the challenge?”, September 2020
Juniper Research “Ai & Automation In Banking: Adoption, Vendor Positioning & Market Forecasts 2020-2025”, October 2020 “Digital Banking: Banking-as-a-service, Open Banking & Digital Transformation 2020-2024“, March 2020
Accenture “Ready For Conversational Banking”, 2019
Meticulous Research “Voice and Speech Recognition Market Worth $26.8 Billion by 2025 at a CAGR of 17.2% from 2019”, February 2020
Business Insider Intelligence Artificial Intelligence in Banking 2021: How Banks Use AI, January 2021 Digital Banking in 2021: Disruptive Bank Technology Trends, January 2021 AI in Finance 2021: Applications & Benefits in Financial Services, September 2020 Mobile Banking Market Trends & Statistics for 2020, August 2019
The Economist’s Intelligence Unit The Road Ahead: Artificial Intelligence and the Future of Financial Services, October 2020
eMarketer Forecasts for Amazon, Google Smart Speakers Q4 2019
Voicebot.ai The Decade of Voice Assistant Revolution, December 2019 Smart Home Ownership Nearing 50% of US Adults with Voice Assistant Control Becoming More Popular, January 2021 Voice Assistant Use on Smartphones Rise, Siri Maintains Top Spot for Total Users in the US, January 2021
Report sources
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Founded in 2011, Just AI is an international vendor of professional conversational AI tools and technologies. Just AI’s full stack of customizable tools caters to the needs of all kinds of audiences interested in voice tech and conversational interfaces – from game developers and voice assistant skills developers to SMBs and enterprises.
Nearly 100 enterprise clients rely on Just AI products for complex Conversational AI projects in banks, insurance, retail, telecom, FMCG, transportation, CX centers, etc. Over 50,000 customers use Aimylogic, a drag-and-drop smart chatbot builder platform. Just AI also leverages its NLU/NLP and AI expertise to build immersive voice-powered games for Google Assistant and Yandex’s voice assistant, Alice.
Today Just AI is the market leader in conversational AI solutions in Russia, and the company as well grows one’s business in other countries. Just AI has offices in London (UK), St. Petersburg, Moscow (Russia), Limassol (Cypris), Shenzhen, and Shanghai (China). Currently, the company employs over 150 people – experts in the field of computational linguistics, machine learning, voice UX design, and software development.
About Just AI
just-ai.com
