Banking chatbots are on the rise… but where’s the competitive advantage?

As more banks use chatbots, how do these brands stand out from the crowd? They need a competitive advantage aligned with CX.

July 8, 2021
Banking chatbots are on the rise… but where’s the competitive advantage?

More banks are using chatbots. But where does that leave them in terms of CX and competitive advantage? With a simple upgrade, banking chatbots can do so much more.


Chatbots are all the rage, if the latest stats are anything to go by. Boards and exec teams up and down the country have banking chatbots on their agendas. Some 30% of them, in fact, have discussed launching a banking chatbot in 2021 – a figure that rises to 44% among credit unions.

Looking more broadly, there was a 67% rise in the number of decision-makers who said their organizations used chatbots between 2018 and 2020, according to Salesforce. COVID-19 was undoubtedly an accelerant of this increased adoption.

But there was already ample evidence prior to the pandemic that more and more organizations were turning to chatbots to lower their operating costs.

And this upward trend shows no signs of abating. Adroit Market Research predicts the conversational AI platform market – of which chatbots are a part – will be worth $17 billion in the next four years.

That’s a compound annual growth rate of around 30%.

Financial services is an industry that has significantly ramped up its investment in chatbots recently. But will this investment just allow them to “keep up” with their competitors, or will it offer a competitive advantage of its own?

Will chatbots be another channel banks can tick off their to-do lists, or will the investment actually lead to an increase in customer experience, satisfaction and loyalty?

Are banks getting the most out of conversational AI? And if not, what can they do to further optimize their use of chatbots in banking?

There are a lot of questions for innovation and marketing teams within the financial services sector; so let’s try and find some answers.

How many banks are using chatbots?

We mentioned that financial services firms are upping their investment in chatbots. Let’s drill down into the figures. Recent Cornerstone Advisors research showed just 4% of mid-size banks and credit unions were using chatbots heading into 2020.

Within just 12 months, this figure had more than tripled to 13%.

That’s impressive growth, particularly as a further 16% said they intended to invest in chatbots in 2021. If this turns out to be true, the proportion of providers with chatbots will go from less than one in 20 in 2019 to nearly one in three by the end of this year.

However, chatbots are still less common in banking than other industries. While 40% of retail customers claimed they had interacted with a chatbot in 2019, only half as many financial services customers said the same.

It’s not just chatbots. The Cornerstone Advisors survey revealed that 45% of banks didn’t have a digital transformation strategy prior to 2021. Remarkably, 10% still have no plans to develop one in the future.

With agile FinTechs revolutionizing how traditional financial services are delivered, some banks risk getting left behind.

Indeed, Gartner has predicted that 80% of ‘heritage’ banks will be out of business or unable to compete by 2030 due to digital disruption. But with chatbot adoption on the rise, it looks like financial services firms are sitting up and taking note – at least when it comes to conversational AI.

Now, we think chatbots are a great start for businesses embarking on a digitalization journey. However, as we’ll discuss in more detail later, we don’t believe they should be considered the final destination for exceptional customer experiences.

What are some use cases for chatbots in banking?

We’ve established that chatbots are on the rise in banking. But how are they being used? Here are some of the most common reasons for deployment.

Customer support

When most people think about chatbots, they think about customer support. You visit a company’s site or their social media page and a chat box pops up in the corner of your screen asking if you need assistance. Sound familiar?

That’s because chatbots are becoming the go-to first point of contact for many industries – and financial services is no exception. Whether it’s making payments, reporting lost cards, reviewing account information or even seeking wealth management advice, chatbots can provide quick, simple self-service solutions.

Fraud prevention

Fraud affects many industries, but perhaps none more so than financial services. Banks and other providers must handle customer data safely and securely, while also identifying fraud quickly and without negatively impacting genuine customers’ experiences. It’s a lot of plates to keep spinning – and customers increasingly put the onus directly onto banks to help prevent fraud as much as possible.

To keep this porcelain pirouetting, chatbots have been used to detect and report on fraud, often being better at spotting suspicious activity than humans.

The benefit is that the conversational AI is directly plumbed into the bank’s backend systems. So, unlike a human, they can spot suspicious patterns in real time, and improve the rates of fraud prevention.

Streamline back-office operations

Speaking of a bank’s backend, not all chatbot use cases are customer-facing. Banking chatbots can be used to manage internal documentation processes, provide training to new staff and generally offer automated support for tedious, time-consuming tasks. This frees employees up to do more strategic, growth-oriented activities, making back-offices run with more speed, efficiency and productivity.

Sales, marketing and promotion

Banks provide a range of financial services, from mortgages and current accounts to business loans, home insurance and pension planning. Customers may only be using one or two of these, not realising there are other ways their main bank could be providing assistance.

Chatbots can get these conversations started. For example, if a customer is using a banking app to regularly switch money from their current account to a savings pot, a chatbot can offer a friendly conversational prompt: “Saving for something special?” They can then guide the user to a service relevant to their answer, such as home loans, pension pages or travel insurance for an upcoming holiday.

Nice benefits, but where’s the competitive advantage?

Chatbots can no-doubt improve the convenience, efficiency and cost of banking customer journeys (while also tidying up some back-end operations). But as more and more financial services firms board the chatbot train, how can they differentiate themselves?

Won’t most chatbot experiences end up being very similar?

That’s why banks must start thinking about how they can take their chatbots to the next level. Our research revealed that many businesses are already exploring the best ways to do this, and survey respondents believe creating chatbots that provide a more ‘human’ feel is the key to unlocking better consumer experiences.

This is hardly surprising. When it comes to financial matters, a personal connection is important. Banks are there to support people when they reach some of life’s most emotionally charged milestones, such as buying a first home, setting up a business or preparing for a comfortable retirement.

So 42% of businesses say making chatbots more human is their main priority, while 32% want chatbots to be capable of more in-depth conversations. As banks strive to connect on a deeper digital level with consumers, basic chatbots are only going to become less competitively advantageous as time goes on.

In a world of banking chatbots, what can one chatbot experience offer above another? A nicer chat interface or text font? Would that keep your customers coming back over the competition?

This is where digital humans can make a difference. They can deliver the empathy and engagement of human staff, while bringing the scalability and lower costs of digital solutions like chatbots.

Enter the era of CX and brand embodiment in banking

For a long time, what draws customers to a certain bank is the products, the competitive interest rates, the service – yes. But also the people, the brand and the customer experience (CX).

Kantar found how financial institutions that lead in CX have a recommendation rate almost twice as high as their competitors, and their customers are twice as likely to upsell to new products and services, too.

No wonder, then, that improving CX is the biggest priority for banks and credit unions over the coming year. Although – say it quietly – big CX investment doesn’t always mean big CX improvements.

To this end, digital humans have entered the world of banking to put more brand-aligned, human conversational AI at the front of the customer experience.

They don’t just give a more human ‘feel’ to customer interactions, they can embody your brand in a way that standard chatbots (and most technologies in general) can’t.

Can you imagine the Geico Gecko as a chatbot? Or Flo from Progressive? They are the heart and soul of their brands; the ambassadors that have underpinned their respective companies’ personalities for many years.

The way they look, how they speak and what they say are all crucial to how consumers view the brand. So much is lost by trying to package that in a chatbot experience. Digital humans can emulate it with incredible accuracy, bringing brands to life, much like how your real customer-facing employees do every day.

Bridging the gap between technology and human connection is where we believe the next battle for competitive advantage will be fought. And firms that embrace a digital workforce and conversational AI are more likely to be on the winning side.

How to upgrade your chatbot investment for a CX advantage

Of course, all this comes with the caveat that CX has to be affordable and offer ROI. Financial services brands, more than anyone, know how important this is.

After what could reasonably be called “a difficult year” in 2020, it’s understandable that many banks and credit unions want to focus on getting more value from their tech investments, rather than undertaking new ones.

That’s why our digital humans plug into any chatbot or conversational AI platform. If you have already invested in the words your chatbot says, it takes a matter of minutes to create a digital human who will then speak these to your customers, and allow your customers to speak back, too.

We have a range of guides to help you add emotion to your interactions, better embody your brand through conversation, and use our platform to add dynamic content to the experience.

To see for yourself how to create a customer experience that goes beyond chatbots and back into a more human realm, check out UneeQ Creator – our platform for designing, developing and deploying your own digital human employee.

You can even start a free trial, and experiment with your concepts before spending a cent or doling out a dollar. Just click below to get started, or reach out and our AI experts will help you get started.