The use of bots in the financial industry: advantages and challenges

Posted by media on May 4, 2017 at 9:00 AM

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Despite having overcome the crisis that began with the collapse of the Lehman Brothers, the financial industry has since faced a new context characterized by more restrictive regulations - especially in terms of provisions - and a greater distrust from consumers, who demand more personalization and accessibility regarding their financial products and services.

This double factor has led banks to a complex situation: one on hand, their profit margins have decreased; on the other, they have noticed how their customers’ loyalty has wavered. All of this has forced them to combine efforts to increase efficiency and reduce costs, while at the same time offering a better customer service.

Reconciling these two goals, seemingly opposed, is possible thanks to a greater use of technology. Specifically, chatbots are called to play a key role. In this post we want to talk about the role of chatbots in the financial industry, and what challenges this technology will have to overcome to become mainstream.

This post is also available in Spanish.



What can chatbots do for banks and financial entities?

As we have already had the opportunity to comment in this post, a chatbot is a type of bot capable of processing language to interpret and respond to certain voice or text commands.

This technology, which in recent years has attracted investments worth 4 billion dollars worldwide, can greatly help the banking sector.


“With 4 billion dollars invested in chatbots so far, it is only a matter of when, not if, banks will embrace chatbot technologies.”

Source: Y Media Labs Insights - What are chat bots, and why does the financial industry need them (desperately!)



How will bots help banks and financial institutions?

  • Improving customer service

    By using bots that are available 24 hours a day, 7 days a week. Bots do not get overwhelmed at peak times and can offer uniform response rates and times. Or at least, a conversation with a bot can expedite the process with a real operator, gathering the necessary information in order to carry out a specific task.

  • Helping consumers to make better financial decisions

    By using advisory bots that offer an added value, beyond the mere resolution of incidents.

  • Contributing to fraud prevention

    Chatbots can help prevent fraud and increase sales for banking entities. For example, in case of detecting a fraudulent use of a credit or debit card, a chatbot would contact a robot that could cancel it immediately.



Main challenges for the generalization of the use of bots in the banking sector

Despite the agreement among the press about the growing importance of chatbots in the relationship between consumers and banks, and the recent incorporation of this type of robots by entities such as the Bank of America or Mastercard, its generalization still faces multiple challenges.

1. Limitations in natural language processing

The first and most well-known challenge is the limitations of chatbots in the natural language processing and predictive analysis, which led a Bloomberg reporter to coin the phrase saying that chatbots are our newest, dumbest co-wokers. However, this inconvenience is likely to be resolved in the coming years, as these technologies evolve.


“Chatbots Are Your Newest, Dumbest Co-Workers.”

Source: Bloomberg


2. Capability to give advice and the responsibility of chatbots

Another challenge arises from the fact that if every entity has their own chatbot, its ability to advise us financially would be limited, as it will lack information regarding the services, accounts or cards that we have contracted with other banks. This means that it will be necessary to develop transversal chatbots for the entire sector. The problem in this sense is that, in addition to the difficult consensus that its launch would require, it would also have another drawback: who would be responsible in case the advice a chatbot gives is wrong?

3. Will chatbots arrive in time to replace apps?

A third challenge is the widespread use of chatbots as a substitute for apps: a trend that many have been quick to advocate for, but does not yet have an empirical base, in a time when mobile apps continue to be the prefered route for the majority of users to purchase products and contract services.

4. Lack of speed in the necessary regulatory changes

And lastly, we cannot forget that just as in other areas where technology is called to play a disruptive role, the revolution of chatbots in the banking sector must go hand in hand with profound regulatory changes. And we all know that these kinds of changes always lag behind the progress of innovation.


The future of bots in the banking sector

Regarding the future of the use of chatbots in the banking sector, in addition to a greater capacity for predictive analysis and natural language processing, it is expected that:

  • They will become increasingly specialized consultants, going beyond just sharing recommendations to providing greater informed advice on how to achieve larger savings, such as advising on what assets to invest.
  • They will achieve the greater dominance that many predict - including Sundar Pichai, CEO of Google– and replace not only the classic automated emails sent from the customer service department, but the use of apps to conduct banking.


    “Over time, the computer itself — whatever its form factor — will be an intelligent assistant helping you through your day. We will move from mobile first to an AI first world.”

    – Sundar Pichai, CEO, Google

    Fuente: Y Media Labs - Using Chat Bots in the Banking Industry: 12 Opportunities and Challenges for 2017

  • And in the long run, they will completely replace customer service centers and reach more and more customers - including those with low income levels who, nevertheless, have and use banking accounts and cards frequently.

This post is also available in Spanish.

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