We are living in an increasingly digital and connected world, which has had consequences on consumers’ expectations and exchanges with brands.

Consumers today live in the moment, place great importance on customer experience and expect instant gratification.

Thanks to technological advancements such as bots and artificial intelligence, payment companies and banks can now interact with customers in their preferred messaging channels to improve customer experience, reduce friction and drive growth.

Amazon’s Alexa is helping to drive an evolution in vocal interaction that supports voice-driven payments and service, according to Hicham Tahiri. IMAGE: Bloomberg News

The trend is too big to ignore. Conversational finance has taken off partly due to the increasing popularity of messaging platforms such as Whatsapp, which sends an average of 64 billion messages on a daily basis, as well as social media chat provided by the likes of Facebook. The market is expected to continue to boom, with experts predicting that messaging platforms will acquire 1 billion extra users by 2018, bringing the total to a whopping 3.6 billion users.

Furthermore, platforms such as Amazon’s Alexa, Google Assistant, Apple’s Siri, and Microsoft’s Cortana are being increasingly present in consumer lives. Strategy Analytics predicts that 24 million smart speakers will be shipped in 2017 on a global level. This reflects a 300% increase on the previous year.

Recent improvements in natural language understanding and machine learning mean that we can create even more sophisticated conversational bots that make it even easier to communicate with customers in a two way manner across multiple touchpoints.

As a consequence, an increasing number of companies are employing schemes that enable customers to interact with banking assistants in order to get information and make payments using their own voice or via textual chat. More than 10,000 bots exist on Messenger, including large financial corporations such as Mastercard and American Express. In October 2016 Bank of America announced the arrival of Erica, a bot that is designed to help customers make more intelligent decisions. Customers can interact with Erica using voice and text.

Capital One launched its Alexa Skill that enables users to check their account balance in addition to making bill payments on Amazon’s smart speaker. Santander is also piloting a scheme to allow customers to make transfers to existing payees by speaking to their SmartBank app. The German online bank N26, Monzo and Royal Bank of Canada offer voice payments via Siri, and Bank of America and USAA are rolling out conversational interactions for their customers.

Beyond advantages of being available 24/7 and giving instant responses, conversational finance offers a seamless customer experience, enabling customers to interact with their bank in a frictionless manner using their preferred channels and methods of communication. Conversational AI is also making banking easier and more accessible to groups that may have had issues with traditional banking, such as the elderly or illiterate.

There is a common misconception that AI is making services standard and non-personable, when in fact it can make the customer experience even more personable. Issuers can collect more nuanced data thanks to conversational banking, which can be used to create a more tailored service with cross-selling and upselling opportunities. Identifying customer behavioral patterns and flagging anomalies could also help fight fraud. Issuers and financial institutions can additionally connect their bots to customer service to enable humans to intervene when necessary to provide a better integrated and enhanced customer experience.

Conversational banking bots can manage tasks such as customer inquiries, servicing accounts and opening new accounts. Through automating these tasks banks can reduce costs associated with customer support and free up staff to deal with more complex tasks.

AI and machine learning mean issuers and financial institutions can provide personalized and contextual responses. Unfortunately, smart speakers are currently limited as they are not proactive or able to combine several elements of a consumer’s life (calendar, finances, e-commerce, etc.), but it is only a matter of time before voice banking applications will be able to actively notify users when they are in their overdraft or warn them of their balance before they make a purchase. Although the future and limits of conversational banking are not 100% clear, one thing is certain: Banks that are first to move and innovate in this sector will gain a competitive advantage over those that don’t.