Chatbots have been percolating for a while as the next big channel for commerce and P-to-P payments, and the technology hit a fever pitch last week with a slew of high-profile merchant announcements that suggest the technology has reached a turning point.

"We're excited to see where the technology takes us in the future," said Donald Evans, chief marketing officer of The Cheesecake Factory Inc., which operates the restaurant chain of the same name. The Cheesecake Factory is one of the first merchants to use a Facebook Messenger chatbot with Masterpass, along with FreshDirect and Subway.

The restaurant chain and Mastercard were not alone. Western Union and MoneyGram also launched Messenger bots last week, and Wells Fargo and American Express announced new chatbot initiatives during Facebook's developer conference, F8, last week in San Jose.

A Cheesecake Factory patron
The Cheesecake Factory was one of several merchants to launch a chatbot last week to sell to patrons on Facebook Messenger Bloomberg News

In some cases, the companies are early adopters of new payment technology in general. American Express has made digital engagement and delivery a substantial part of its attempt to recover from the loss of the Costco cobranded relationship, while FreshDirect more recently embedded its service in Samsung's new web connected refrigerator.

Amex updated an existing bot for Messenger by identifying frequently asked questions such as "What is my balance?" or "I have a question about a pending charge." And Wells Fargo's chatbot will use artificial intelligence to answer questions about balances and ATM locations.

The Cheesecake Factory has also aggressively deployed mobile technology. It has its own Cake Pay app, which is integrated with Masterpass and the Messenger bot. The chain has also participated in Masterpass' ad campaign and is an avid user of social media such as Facebook and Pinterest. Cake Pay additionally integrates with Apple Pay and PayPal, and Evans said the chain is considering extending its use of chatbots and machine learning to other venues.

The Cheesecake Factory will also use the Masterpass bot to tailor and deliver gift cards, which is part of the restaurant's branding strategy as a "celebratory" venue.

"The Masterpass bot will allow us to have a new channel of conversation with our guests," Evans said. "Convenience is a big factor, and just as communication has evolved through technology, so have gift cards."

The announcements last week came as Facebook finished a set of upgrades to its Messenger program, which are designed to make it easier to access for developers and enhance user's ability to spot bots, both improvements which build upon the social network's earlier work to make it possible to embed transaction capabilities into Messenger when the bot feature debuted about a year ago.

Messenger will have a new discovery tab that shows featured bots, trending bots, a search bot and a QR reader to allow users to add bots by scanning a code. And developers will be able to build features that automate responses to questions about when a store is open or other general questions about the store's business.

Bot technology is advancing elsewhere in financial services. Transferwise introduced a Messenger Bot in February and Capital One in March introduced a bot called Eno that answers questions about transactions and balances.

While mobile wallets are not yet mainstream, pairing mobile wallets with chatbots can broaden adoption among people most likely to use new channels, according to Thad Peterson, a senior analyst at Aite Group.

"I think it's premature to consider mobile wallets established. Penetration and usage is certainly growing but relative size of the user base is still infinitesimal when compared with other alternatives," Peterson said. "More likely, pairing bots with wallets allows providers to expose them to a user who is definitionally open to new offerings and better ways of doing things."

Bots also conform to the social networking ecosystem and may be more favorably received by millennials, the primary demographic for mobile wallets.

"Put another way, if I’m on Instagram/Snap[chat] all day, a bot is less intrusive and more accepted than if I’m not, and millennials and mobile wallet users generally fit that category," Peterson said.

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