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While many businesses have been speedy adopters of emerging and disruptive technologies, banking and the financial services industry has been seen to lag behind.
This could be chalked up to a myriad of factors including complex legacy systems or even the fact that a significant portion of high value clients, particularly for wealth management firms and IFAs, are more likely to belong to senior demographics and may have a higher propensity for non-digital communication such as calls or face-to-face meetings.
Because of this, a significant proportion of FS businesses may not have felt the need to invest in digital. This is also potentially exacerbated by the fact that their competitors and cohorts are also lagging in terms of digital. Research by Econsultancy and Adobe shows that 9% of FS businesses claim to be digital-first, compared to 11% across all sectors.
As younger, digitally native clients begin moving into the market for financial services at both a consumer level and professional level, becoming ‘digital first’ is now imperative for the financial services industry.
In addition to the changing workforce and consumer landscape, the FCA also launched the Financial Advice Market Review in late 2015 which aimed to review and explore ways in which financial institutions can take actions to:
- Provide affordable advice to consumers.
- Improve and increase access to advice.
- Address industry concerns relating to future liabilities and redress without watering down levels of consumer protection.
Like some systems that consumers may be familiar with, such as virtual assistants like Siri, Cortana or Amazon’s Echo platform, chatbots are essentially pieces of software that simulate human, natural language conversations and can respond to and act upon queries and commands from users.
The advantage these systems have over a ‘real’ conversation with a human is that they are able to extract and analyse a user’s needs and intent and ultimately return the information a user has requested or perform actions for them faster, at any time of day or night, more accurately and at significantly lower cost than a human counterpart.
This new AI technology has been taken note of by financial institutions on a global scale, with 80% viewing them as an opportunity.
Image Source: The Financial Brand
Bots are viewed as an opportunity by the financial services sector
As with most emerging technologies, smaller, agile fintech startups have been quick to adopt chatbot technology out of both necessity and choice. This mitigates the issue of expensive traditional customer service interactions and ultimately benefits the end users through savings and improved customer experiences.
UK startup Habito built the world’s first AI mortgage advice chatbot which queries applicant’s financial status, asking questions covering an applicant’s salary, personal life and employment.
After this 10-15 minute ‘chat’ the bot then collates all the data given and queries hundreds of products, as opposed to the handful that a human advisor would be able to query, and in a fraction of the time.
In line with the FCA’s ‘financial advice market review’ this results in a far less stressful process for the consumer, free of having to schedule and attend appointments within office hours, paying a premium for advice, or interacting with a potentially biased party.
According to Habito's CEO and founder Daniel Hegarty: "Our digital mortgage adviser is a huge step forward in making mortgage advice accessible for consumers in the way they need it most: unbiased, always available and, most importantly, free.”
Ultimately, this move to fully automated, impartial chatbot-based advice could result in consumers saving thousands of pounds per year.
The benefits of this type of technology are clear with many people choosing to apply and research mortgages online through these types of systems rather than spending the extra time and potentially cash on a human mortgage broker that may not necessarily have the best deals available. These systems could potentially pave the way to a fully automated mortgage approval, further removing the potential for human error and bias from the process.
American bank Capital One also launched a chatbot called ‘Eno’. Eno is able to interpret text-based conversational queries and commands alongside emojis.
This includes the ability to check balances and pay off credit cards, while cash transfers are also in the works. Additionally for customers with Amazon Echo, Capital One has also built out a ‘skill’ that allows for voice commands.
The benefits of this are clear from both sides – consumers get what is equivalent to an ‘always on’ personal assistant at the bank that can perform actions for them without having to interact with cumbersome apps or websites and convoluted log-in processes for basic requests.
Percentage of FI's that believe bots will take over many of today's customer conversations
Image Source: The Financial Brand
At the business side, Capital One stand to make significant savings in terms of time and manpower as users transition from face-to-face and telephone queries to simply asking Eno.
Given the abundance of data available to financial services firms and the often methodical, process-driven nature of consumer financial advice, chatbots seem like an easy decision for most consumer-facing financial services companies.
The fact that mobile is now a huge factor in financial services and particularly banking is also a huge opportunity for chatbots and AI. Chatbots are particularly well suited for mobile given that messaging is arguably one of the most used features on smartphones.
Not to mention that financial service chatbots could easily be integrated into applications that billions of consumers already have and are using daily such as Facebook Messenger and WhatsApp. This removes a significant barrier to entry in that consumers don’t have to download another app or alter their existing mobile behaviour patterns.
With the above in mind, businesses within the financial services industry will only truly realise the advantages of AI and chatbots if it is implemented as part of a well-considered, omnichannel strategy.