Conversational AI has huge potential for improving customer service and overall customer experience in the retail banking sector.

Customer experience remains an area where traditional banks lag behind their challenger rivals. It’s these newer banks that continue to dominate customer service rankings (as we can see in Ipsos’ latest service quality report).

Their dominance is due, in part, to their technological agility. As digital natives, these banks have already adopted automation and artificial intelligence to enhance their customer’s experience. Monzo, for example, already uses machine learning to help its customer service agents respond to customer queries.

Machine learning (and the more common chatbots used by businesses) are a step in the right direction, but they aren’t conversational AI.

What is conversational AI?

As customers, we’re getting used to interacting with chatbots and using voice commands to operate the smart devices we have around the home, but in most cases, it’s still impossible to have a flowing conversation (or even a somewhat fluid one) with automated devices or chat functions.

Conversational AI aims to change this. Its aim is to make technology understand how humans communicate and do what it can to mimic this communication – providing a more realistic conversational experience. It tries to read intent and use data to analyse tone and predict possible conversation pathways.

How can banks use it to improve customer service?

 1. Conversational AI can lead to faster resolution times

Conversational AI makes interacting with apps and devices easier because the technology is better able to understand human input – people don’t have to waste their time typing in the right combination of words to be understood and get the help they need.

In August 2020, This is Money found that - in some cases – it took three hours for customers to get through to a human when contacting their bank. Of course, this was in the middle of a global pandemic, so you can excuse a certain amount of disruption to services, but this is where conversational AI is a boon.

Conversational AI gives customers a new way to communicate with their banks. Unlike a more simplistic chatbot, conversational AI can deal with more complicated conversations – finding solutions to queries more quickly than a traditional bot would. (And taking the pressure off human customer service teams, which also helps speed up the bank’s overall response time.)

2. Using conversational AI can result in a better resolution for the customer

Conversational AI uses natural language processing to analyse customer input and come up with the best response possible.

It’s more anticipatory than a standard chatbot – it can predict what the customer will need based on previous interactions - and it finds it easier to follow switches in context as the conversation continues. This means the customer can ask different questions mid-conversation, get answers to those questions, then have the AI bring the conversation back to the original enquiry.

Being able to keep up with quick changes in the conversation is a real benefit to finding the right solution quickly. It reduces frustration and helps customers think through the different areas they may need assistance with.

It also provides a smoother and more realistic conversation experience, reducing the likelihood of customers asking to be put through to a human operator because of their frustrations with technology.

3. Conversational AI can help generate personalised recommendations

Conversational AI feeds into and uses data across the organisation, giving it a full knowledge of the customer’s journey. With the addition of sentiment analysis, conversational AI has the data and the capability to personalise responses and predict what the customer may want next.

For banks, this could mean that cross-promoting products and services is more successful with conversational AI as it can target customers with hyper-relevant recommendations.

Conversational AI can also help banks ensure a consistent customer experience across all their platforms and touchpoints. Any AI, of course, depends on the quality of the data that feeds and improves its knowledge.

Retail banks sit on a vast quantity of rich customer data. By starting to explore conversational AI now, banks – whether traditional or challenger – can use it to overcome the challenges of improving customer experience, retention and cross-selling.