The rise of conversational banking: Customer engagement trends for 2024

Get ahead of the curve with the latest customer engagement trends in banking from McKinsey and see how conversational AI will be a game changer this year.

Content Manager

Razan Saleh

Content Manager

The Banking and Financial Services Industry (BFSI) is no stranger to new technology and changing communication trends. In recent years, banks have embraced digitalization to streamline processes and enhance customer experience.

As we look ahead to 2024, several banking communication trends are expected to make a significant impact. These trends will shape the way banks interact with customers and transform the industry as a whole. 

During our first-ever Global Partner Days event held in November of 2023, McKinsey shared their latest insights about BFSI communication trends and how 2024 will bring significant changes to customer engagement and digital banking.

Read on to explore these important trends that are impacting customer engagement in banking and find out how adopting conversational AI can help you stay ahead.

Challenges facing the banking industry:

The banking industry has encountered steady growth in recent years, with revenues reaching 6.5 trillion USD, primarily due to margin improvement and volume increase.

60%

of this growth can be attributed to the improvement in margins due to higher interest rates.

Source: McKinsey

40%

came from volume expansion.

Source: McKinsey

Interestingly, this growth has remained consistent across the retail and corporate banking segments, while capital markets and investment banking have experienced a decline, influenced by the prevailing macro environment.

However, the sector faces three major challenges that are reshaping its landscape, let’s take a look:

1. Competitive landscape: The rise of fintech unicorns

Fintech companies and digital attackers have emerged as strong competitors by leveraging big data, artificial intelligence, and advanced analytics to address unmet customer needs.

Today, 45% of total payments and 25% of global assets are handled by fintech and major technology firms, McKinsey highlighted. This growing market share poses a significant threat to traditional banks.

2. Shifting scale dynamics: redefining banking operations

To maintain a competitive edge, banks are required to prioritize innovation by making sacrifices, often reducing their offline presence.

Over the past five years alone, 30% of bank branches have closed, and more than 70% of banking interactions have become fully digital, according to McKinsey. Banks must navigate the challenges of adapting to a more virtual model while still meeting customer expectations.

3. Digital customer expectations: The need for a personalized experience

Customers increasingly demand digital platforms that offer a seamless and personalized customer experience. They desire end-to-end journeys and the convenience of conducting complex financial transactions, such as mortgages, savings, and investments, online.

A post-COVID survey revealed that 50% of customers expressed willingness to engage in these intricate digital channels, emphasizing the industry’s need for evolution.

The disruption within the banking sector is evident, as seen by the remarkable growth of fintech unicorns, which have multiplied sevenfold over the past five years. Traditional banks must now recognize and address these challenges to remain relevant and competitive.

How? By embracing digital transformation effectively and adopting innovative strategies and new technologies to position themselves to thrive in these challenging times.

Let’s deep dive into the customer engagement trends discussed during the session.

Customer engagement trends to look out for in 2024

The emergence of mobile technology played a significant role in reshaping the banking industry. In the last few years, banks have emphasized accelerating online activities through omnichannel integration and utilizing big data with Artificial Intelligence (AI) and Machine Learning (ML) models. This approach has enabled them to gain valuable insights and offer personalized services to customers.

Top six customer engagement trends for banks

1. Hyper-personalization

In 2024, banks will strive to build stronger relationships with their customers through personalized communication. With the help of advanced analytics and artificial intelligence, banks will tailor their messages and offers to meet the specific needs and preferences of each individual customer.

Personalized communication will not only improve customer satisfaction but also promote loyalty and retention.

Just imagine walking into a branch and being greeted by a virtual assistant who suggests new services and loan offers based on your previous behavior and browsing history.

2. Chatbots and virtual assistants

The use of chatbots and virtual assistants in banking is expected to skyrocket in the coming years. These intelligent automation tools will handle routine customer queries, offer product recommendations, and provide round-the-clock assistance.

By utilizing chatbots and virtual assistants, banks can enhance their customer service capabilities while reducing costs and improving efficiency.

3. Omnichannel communication

Customers expect a seamless and consistent communication experience across multiple channels. In 2024, banks will need to adopt an omnichannel approach, ensuring that customers can interact with them through various communication channels such as mobile apps, websites, social media, and even voice assistants.

A robust omnichannel strategy will enable banks to reach customers wherever they are and provide a unified and personalized experience.

4. Enhanced security measures

With the rise in cyber threats, banks will continue to invest in advanced security measures to protect customer data and ensure secure communication channels. This includes incorporating two-factor authentication, implementing strict data encryption protocols, and leveraging blockchain technology for secure transactions.

As a result, customers will have peace of mind knowing that their personal information and messaging is secure and well-protected.

5. Emphasis on digital self-service

In 2024, more customers will embrace digital self-service options, empowering them to manage their finances independently. Banks will offer intuitive and user-friendly self-service portals and mobile apps, allowing customers to perform various transactions, access account information, and resolve issues without the need for human assistance.

This shift towards digital self-service will enhance convenience for customers and streamline banking operations.

6. Integrating AI in communication

AI will play a crucial role in banking communication this year. Along with chatbots and virtual assistants, AI-powered algorithms will analyze customer data and communication patterns to provide personalized recommendations, identify potential fraud, and deliver targeted marketing messages.

AI will enable banks to deliver highly relevant and timely communications, ultimately enhancing the overall customer experience.

These are the top six communication trends. However, the key challenge that banks will face is how to respond effectively to changing customer behavior.  And the technology that stands out as a potential game-changer for traditional banks is conversational AI.

It is not just a big bet, but a key success factor for maintaining meaningful customer engagement. Banks understand that intelligent and personalized digital communication is essential for providing seamless and personalized customer experiences.

Let’s find out what it’s all about.

What is conversational AI?

Conversational AI is a type of artificial intelligence (AI) that can simulate human conversation, for example chatbots for online customer support.

Benefits of conversational AI

One major benefit of conversational AI is that it has become much more accessible due to advances in machine learning (ML). In terms of customer service applications, conversational AI can automate certain repetitive tasks like:

  • responding to basic inquiries
  • freeing up valuable agent time for handling more complex queries
  • improving customer relations

Additionally, this type of automation accelerates response times so customers don’t have to wait long for a response from agents about the issue at hand. Some researchers have predicted that the use of such technology could reduce minimum response times from hours down to mere minutes.

At the end of the day, the more customers interact with a bank through conversations, the more the bank can understand their preferences, habits, and needs. This knowledge enables banks to effectively personalize future transactional and promotional messages, creating a more tailored experience for the customer.

Conversational AI use cases in 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.

There are many banking use cases of AI and Gen AI that can benefit various aspects of the banking industry. Here are five examples:

  1. Reduce costs: By increasing digital interactions, banks can reduce the number of physical branches, resulting in cost savings. Additionally, streamlining and standardizing complaint-handling processes can help reduce costs associated with handling customer complaints.
  2. Cross-sell and up-sell: Conversational AI can be used to streamline and digitize processes related to lead generation and converting leads into sales. This can be particularly useful for promoting savings and more complicated credit products.
  3. Improve customer satisfaction: AI-powered 24/7 customer support can provide personalized responses to customer requests, making customers feel valued and satisfied. AI can also suggest the next best action or product to buy, enhancing the overall customer experience.
  4. Streamline operations: AI enables banks to build detailed customer profiles through digital conversations, This enables them to deliver tailored and personalized interactions and digitizing processes from end to end, resulting in streamlined operational efficiency and productivity.
  5. Increase agent productivity: By automating repetitive tasks, conversational AI allows employees to focus on more value-adding activities, leading to increased agent productivity and job satisfaction.

Build conversational banking experiences with the right platform

This year, the banking industry will continue to adapt to changing communication trends driven by advancements in technology. Personalized engagement, AI chatbots, omnichannel communication strategies, enhanced security measures, digital self-service, and conversational AI integration are just a few trends that will shape the way banks interact with their customers.

Partnering with the right communication technology provider is key in helping you embrace these trends to stay ahead of the curve and meet the growing needs of your tech-savvy customers.

Our platform allows you to scale as you grow and expand your digital services with multiple banking use cases – from customer support, sales, and marketing, to improve engagement, increase retention, and upsell products throughout the entire customer journey.

With our SaaS solutions and CX consulting, banks can maximize their use of messaging channels by:

Our CX consultants are here to help you reach your full digital potential on popular messaging channels and chat apps. Banks and financial institutions that offered their services via messaging apps with Infobip were able to increase efficiency, reduce costs, and continue to improve customer satisfaction – all through a single conversational AI platform.     

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Jan 31st, 2024
8 min read
Content Manager

Razan Saleh

Content Manager