Conversational banking: Everything you need to know

Martina Ivanović

In just about every industry, the move to more personalized customer interactions delivered on mobile devices has been a megatrend of the 2020s. Customers demand it, and companies have been more than willing to embrace it, thanks to innovations in AI and chatbots.

Financial services, while a bit slower to transform than its eCommerce and healthcare counterparts, is gaining rapid ground, thanks in part to the proliferation of fintechs, or digitally native banking apps.

Customers expect conversational experiences in retail, and this carries over to interactions with their financial institutions as well. When looking back at the evolution of the way we bank, we’ll notice that we’ve moved away from brick-and-mortar to a self-service model.

Here we dive into what conversational banking is, its benefits, examples, and how AI chatbots play an integral role in delivering these types of experiences within the financial industry.

What is conversational banking?

Conversational banking, sometimes called chat banking, refers to the use of AI and chat technology to help customers conduct daily banking activities, such as transferring money, checking their account balances, or even paying bills.

The more a customer interacts with their bank through these conversations, the more a bank understands the customer’s preferences, habits, and needs – making it easier to personalize future transactional and promotional messages.

Like conversational commerce, which is essentially a way of using AI to sell products and services over chat apps, conversational banking applies the same principles to deliver a personalized experience to banking customers. Banks can lead customers through their entire financial journey over their favorite channels and create personalized interactions to enhance the conversational experience.

McKinsey estimates that the percentage of revenue by personalization for digitally native companies is 25%, significantly higher than companies with no or limited access to first-party data.

However, a solid foundation for any conversational customer experience today is omnichannel communications, meaning the ability to reach customers where and when they want, on their preferred channels.

So, why use chat apps in addition to mobile banking apps? 

The goal of chat or conversational banking is to save clients time and to provide detailed information in the most convenient way possible. For some, downloading an additional app isn’t an option due to low mobile phone storage space – while for others, additional assistance helps reassure them that they are on the right track to completing big purchases or planning for many of life’s milestones. 

Since chat apps offer instant, contextual, and personalized communication, clients can contact agents or chatbots over one platform where conversation history is saved and can be referred to later. This saves them from tediously scanning through websites and apps, or waiting on hold to speak to a live agent, for an inquiry they’ve looked into previously. 

Chatbot-building solutions enable banks to create and deploy a smart virtual assistant to a marketing channel that brings a new level of automation, speed, and availability to communications. Infobip Answers, specifically, uses a drag-and-drop technology (no coding required!) that makes use of Artificial Intelligence (AI) to instantly provide information on any channel, including WhatsApp Business, Messenger, Apple Messages for Business, Viber, Instagram Messages, Twitter Direct Messages, Telegram, LINE, Live Chat, SMS, RCS Business Messaging, and Google’s Business Messages.

Another important part of conversational banking is to enable a seamless shift to a live agent should the customer have any questions that cannot be answered by the chatbot.

Conversational banking benefits

The benefit of banking using chat apps is based on letting your customers reach you whenever and wherever they may be. This will help build trust that is required for successful long-term client-bank relationships. Conversational banking using AI brings many benefits to banks, fintechs, payment processors, and other financial institutions through:

Increased revenue

Up-sell, cross-sell, and lead-generation efforts can all be personalized through the use of conversational banking. The AI component works to understand what customers are looking for and then direct them to the products that can meet their needs. Even if the transaction will eventually require a sales agent to close the deal, much of the preliminary research a customer does before making a decision to purchase a product can be enabled through chatbot technology.

Accenture research based on experience with global banks found that:

“Conversational banking can accelerate revenue growth by 25 percent.”

Customer lifetime value

Customers who have a positive experience with your brand from the start are more likely to remain loyal. The conversational banking experience should start from the moment a person becomes a customer with your bank or fintech solution.

By using a customer data platform to track and store customer behavior patterns as they start to interact with your brand, you can learn their interests and send targeted communications in a way that is personalized to their needs. Once you understand your customers and their needs, you can send the right messages and improve the chances of completing the sale throughout every stage of their journey. 

Lower costs

Using conversational banking with AI-supported chatbots significantly reduces the time your agents spend on real-time support calls. Customers prefer to seek out their own answers to common queries before calling a customer service number to avoid long wait times, therefore you can support more customers with the same number of agents using chat apps. This reduces the pressure on customer service reps and frees them  up to handle more complex customer transactions.

Accenture research based on experience with global banks found that: “Conversational banking can reduce costs by up to 30 percent.”

Accelerating innovative experiences

Let’s face it. The banking industry hasn’t seen too much innovation since the introduction of the ATM machine. AI innovations for ATMs alone may include predictive maintenance, cybersecurity, facial recognition for security, and forecasting ATM cash demand. 

In addition, as a supplier of payment processing, fintechs have the advantage of partnering with a chatbot vendor to enable them to accept and process payments through their API, bringing further innovation to the customer experience, as they can actually complete financial transactions through a chat app. 

The role of conversational AI in banking

Thanks to Artificial Intelligence (AI), chatbots are not only able to understand customer voice or text communications, but they are also actually able to reply, simulating actual conversations. AI uses Natural Language Processing (NLP) to allow chatbots to actually determine meaning from language through common data elements. This article in Global Banking Finance Review explains how AI is evolving the banking industry beyond the ATM:

With conversational AI, banks can bring chat back into the banking relationship and really understand what their customers want. Rather than second-guessing them, they can allow the customer to quickly find what they are looking for themselves, or bring them through a series of pre-configured menus or forms.”

AI in banking use cases and examples

There are several ways banks and fintechs are using conversational banking to improve the customer experience and drive revenue. Here are a few:

  • Opening a new account
  • Checking balances
  • Transferring money
  • Making a payment (may require a third-party integration)
  • Account administration (change password, add an account user, etc.)
  • Tracking data to identify upsell and cross-sell opportunities
  • Sending personalized offers and messages
  • Researching credit card options
  • Requesting a loan

Remember, the option to switch to a live operator at all times is essential to a successful conversational banking experience!

Automating international money transfers

One example of how to successfully use AI in banking is to follow the way our client Mukuru did it. As a a leading Next Gen Financial Services Platform, Mukuru wanted to provide its customers with an additional channel to complete transactions and receive support. 

The company chose to deploy a WhatsApp chatbot to automate account creation, money transfers, and payments in 10 different languages. The chatbot was connected to Mukuru’s contact center to enable customers to chat with an agent when necessary. 

As a result, 42% of Mukuru customers now use WhatsApp for money transfers and the company has seen a 15% increase in customer satisfaction. 

Transforming customer service

Edenred UAE, a fast-growing payroll service provider, is another example of how an AI chatbot on WhatsApp can transform customer service. With a goal to scale customer service without compromising on user experience and increasing costs, Edenred decided to create a multilingual chatbot that can resolve common queries using rich media – 24/7. As a result, 69% of the company’s chats are self-serviced through WhatsApp, and Edenred’s average wait time has decreased by 96%. 

Streamlining the support experience

Flamingo wanted to transform the support experience for its financial services customers. The retailer knew WhatsApp was its customers’ preferred channel when looking to connect with a brand, so they deployed a chatbot on the channel and connected it to its cloud contact center. 

Now, the chatbot provides instant responses related to financial services and payment arrangements, and agents can take over conversations with access to customer profiles and conversation history for a seamless experience. 

Moving to a conversational banking model led to a 13% higher conversion rate, 39% higher NPS score, and 5-star ratings from customers for Flamingo.

Tips for a successful conversational banking experience

Conversational banking can support customers throughout their entire journey with your bank or fintech solution. Here are three ways to create satisfying relationships based on personalization that lead to long-term customer value.

Understand customers’ wants and needs

Customers today expect brands will connect with them in a personalized way, and this is true for their banking experiences as well. A report by Merkle on the Customer Experience Impact found that consumers expect brands to offer personalized and seamless experiences. To achieve this, brands must develop experiences that place customers squarely at the center. This begins with a comprehensive understanding of the entire customer journey, which allows marketers to learn and respond to the interests and needs of their customers. This ultimately results in more valuable, lasting relationships that lead to competitive advantage.

Orchestrate meaningful customer journeys

Banks, financial institutions, and fintechs have a unique opportunity to meet customers where they are throughout the life journey. From opening a first bank account or credit card to paying off student loans to securing a mortgage to saving for retirement, each stage requires a different conversation, and a different set of products and solutions to meet them where they are. Conversational banking can be used to orchestrate meaningful customer journeys that keep them coming back to your brand because you’ve established trust. 

Use AI to power customer support and engagement

Thanks to new strides in AI, chatbots have become an effective form of interacting with customers at every stage of their life journey. Support needs that historically could only be handled by a live service rep can now be handled digitally. Younger generations have grown up on these kinds of experiences and will seek out answers digitally before they contact a customer service rep. Delivering answers that are quick, convenient, and contextual will ensure engagement and return visits. 

May 3rd, 2023
8 min read

Martina Ivanović