How Can Banking AI Chatbots Improve CX and Customer Retention?

5 min read

As the long-term impact of Covid-19 causes banks to pivot from focusing on customer acquisition to customer retention, Artificial Intelligence (AI) chatbots are one of the most multifunctional and far-reaching solutions a bank can invest in to remain relevant and competitive. The 2020 chatbot market was valued at USD 17.17 billion, and it’s set to reach USD 102.29 billion by 2026, with a projected CAGR of 34.75%, 2021–2026. Impressively, according to a study by Juniper Research, chatbots will save banks up to $7.3 billion worldwide by 2023. A prime example is Bank of America’s chatbot, Erica which, by 2019, had helped over 6 million+ users with personalised and proactive insights and had 35 million customer service requests under its belt.

So, let’s look at the business case for banking AI chatbots, and the main features, capabilities, use cases, and benefits to banks and customers.


Post-pandemic Customer Acquisition Challenges

At the end of 2019 only 4% of mid-sized banks were utilising a chatbot, but this rose to 13% in 2020 as the pandemic snowballed and banks enabled remote customer engagement through self-service channels. In tandem with the pandemic becoming an unparalleled driver for banking digital transformation, an Arizent survey revealed that 68% of executives were seeing an exponential rise in customer acquisition challenges. Today, banking customer acquisition costs (CAC) are at an all-time high of $500. But often, the relationship with a customer brings no profit for banks until year 2. These challenges are exacerbated by the disintermediation of banks by big tech companies providing financial products. This puts increasing pressure on banks to invest in improving the banking customer experience (CX) to boost retention rates.


Refocusing on Customer Retention

Reducing attrition means focusing on faster response and resolution times, banking personalisation, and a consistent experience across all touchpoints. There is also continuous pressure to optimise costs and increase employee productivity and efficiency. To achieve this,  leading banks are transforming their entire capability stack to go “AI first”, with 81% of banking IT executives saying AI will separate the winners and losers.

Paradoxically, nearly 81% of banking CEOs are troubled by the speed, complexity and costs of transformation. Fortunately, at the intersection of the chatbot and AI trends, banking AI chatbots offer enhanced conversational AI capabilities with a greater reach and ROI than traditional chatbots. They’re a cost-effective introduction to AI transformation and can be deployed for quick wins across multiple departments and customer touchpoints.


TAT & Cost Savings with AI Chatbots

AI-powered chatbots consistently outperform traditional chatbots. An AI banking chatbot is capable of text and voice command inputs and outputs, as opposed to text only. The AI bot utilises Natural Language Processing (NLP), Machine Learning (ML), identity management, speech recognition and contextualisation. This enables proper dialogue, unlike the limited chatbot script, which can’t handle out-of-scope situations. AI chatbots remember customer preferences, using historical data to recommend products and services, and providing invaluable support to banking sales teams. They are  deployed for consistent customer engagement and an integrated CX across all touchpoints including websites, smart speakers, call centres, and voice assistants.


How Can Banking AI Chatbots Improve CX and Customer Retention?
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Banking AI chatbot
Conversational AI
Banking CX
Banking personalization
Banking chatbot
Bank customer retention
Bank customer acquisition
Bank customer engagement


AI chatbots mimic human interaction while automating tasks fast, freeing bank employees to work on complex tasks that build loyalty and revenue. For tasks outside its capabilities, the AI bot can escalate a customer to a live chat with a human advisor. The bank’s customers enjoy a turnaround time (TAT) saving of around 4+ minutes, whilst the bank benefits from cost savings of $0.50- $0.70 per interaction. A conversational AI bot is simpler to deploy, with superior integrations, and it updates as the bank’s database and webpages are updated, facilitating fast scalability.


Enhancing the Banking CX with AI Chatbots

Deployed across the banking customer journey, AI chatbots break down silos between marketing, sales, and customer services. They provide customers with intelligent, highly personalised engagement and promote satisfaction and loyalty.


On-boarding & KYC

Of the banking customers who churn, around half do so within 90 days of opening their account.  An AI chatbot integrated into the sign-up phase can ask intuitive questions, give information, enable seamless on-boarding or process new applications, helping to improve retention. For example, DBS Bank’s AI Digibot, processes customer loan applications and can give immediate approval. Financial advisors are released from on-boarding to focus on utilising their expertise to grow revenue.


How Can Banking AI Chatbots Improve CX and Customer Retention?
AI chatbot 
Banking AI chatbot
Conversational AI
Banking CX
Banking personalization
Banking chatbot
Bank customer retention
Bank customer acquisition
Bank customer engagement
Banking chatbot example


Manual Know-Your-Customer (KYC) verification can be a slow, error prone process for customers, and a high-risk bottleneck for compliance and sales teams. AI verification chatbots speed up the process and can reduce false positives by 80%, with 90% model accuracy, mitigating risk, improving regulatory compliance, and freeing up compliance officers to focus on organisational risk.

Automated authentication enables customers to view their transactions and get AI chatbot assistance to make account changes. This further boosts employee productivity by reducing the number of FAQ questions the customer service team fields.


Automated Customer Service

A recent HubSpot survey shows customers’ top 5 customer service pain points. The top two are waiting on hold (33%), and repeating information while being passed around bank departments (33%). Slow response times and failure to resolve queries online are also frustrations. Banking AI chatbots have unlimited capacity, are available 24/7, and learn from every interaction, continuously improving.

AI-powered chatbots with advanced reporting tools can enable data-driven decision-making and process improvement across marketing and sales. They collect information like the duration of bot versus human communications; customer rating score; and number of chatbot sessions resolved or escalated. Sometimes services like mortgage adjustments or investment advice require an in-person meeting. An AI chatbot guides the customer through booking, suggesting dates and times and sending a calendar invitation. In addition to improving the CX, they increase contact centre agents’ job satisfaction as they are relieved of mundane tasks and can upskill to manage complex and interesting queries.


Real-time Notifications

Banking AI chatbots can send customers a range of real-time alerts from flagging potentially fraudulent activity with follow-up instructions, to notifications about reaching predefined spending limits. AI chatbots also learn preferences and send personalised loyalty and reward promotions, upsells and cross-sells to enhance CX and revenue.


Personalisation

72% of banking customers rate personalisation as highly important. AI chatbots personalise CX by identifying customer actions like opening an account and automatically sending information on upgrades, transactions, cards, and services. This cuts out paperwork, lengthy wait times and customer service calls.


How Can Banking AI Chatbots Improve CX and Customer Retention?
AI chatbot 
Banking AI chatbot
Conversational AI
Banking CX
Banking personalization
Banking chatbot
Bank customer retention
Bank customer acquisition
Bank customer engagement


It’s clear that banking AI chatbots are a competitive differentiator that can enhance customer engagement and satisfaction for a better NPS, genuine brand loyalty, improved retention rates and increased Customer Lifetime Value (CLTV). These AI bots are transforming traditional banking employee roles, enabling operational jobs to evolve into more insight-driven roles, single skilled agents to develop into highly trained multi-skilled employees, and generalists to become specialists. As Accenture’s banking industry report shows, this can translate to a 34% revenue increase and boost bank employment by 14%, creating a win-win for banks and their customers alike.

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