This is the first of three articles exploring how chatbots and AI are allowing Fintech companies to meet customer requirements, while reducing the friction they may experience in currently available channels.

Article one looks at how chatbots are reducing friction for customers in a range of markets.

Summary

Phone banking systems can be frustrating and time consuming to use. Chatbots present an opportunity to reduce friction for users

Introduction

It has been no surprise to bank customers in recent years to find themselves making less and less visits to bank branches to conduct their business. Through a combination of push factors (restrictive opening hours and ever decreasing staff numbers) and pull factors (increased availability of online services, apps and call centres), we have all become accustomed to the notion that banking can be achieved with just a couple of branch visits per year.

This trend away from branches is accelerating. Banks such as Ireland’s Bank of Ireland have recently signalled their intention to direct customers away from their call centre agents when handling simple queries such as balance and transaction enquiries. With the bank handling 830,000 services calls a month, it makes economic sense that they would seek to encourage customers to use self-service options available by phone, website or mobile application rather than making expensive calls to support agents.

The challenge for banks seeking to promote such self-service is to provide customers with intuitive channels that minimise hassle while meeting high security standards. Without these facilities, banks risk losing business to new challengers offering cutting edge service without being burdened with legacy systems that present barriers to change.

Overcoming Friction

With telephone IVR (Interactive Voice Response) systems frequently returning the lowest levels of customer satisfaction when compared to mobile and online banking services, it’s not surprising that bank customers may use them with gritted teeth.

IVR systems can be monitored and optimised with a view to maximising ‘containment’ (queries dealt with without speaking to a customer service agent) but they can still leave users, particularly infrequent callers, feeling frustrated with difficult-to-navigate menus and trouble finding answers to their queries.

Our informal analysis of several Irish banks has found that it typically takes between 45 and 70 seconds – for frequent callers* – to use a bank IVR to address the simplest of questions: “What is my account balance”.

*Infrequent users who may need to listen to a bank’s full IVR menu offerings before making their selection can take significantly longer to arrive at the information they require.

Using the same bank’s mobile app or website, we see that the time to access this information can be greatly reduced – to as little as two seconds with Ulster Bank’s thumbprint-login enabled app, or eight seconds with AIB’s ‘Quick Balance’ feature.

Time needed to address the question: "What is my account balance?"

Time needed to address the question: “What is my account balance?”

Clearly, mobile apps and internet banking offer users an attractive alternative to dialling a bank’s phone service, however there are still frictional barriers in place here – the user must download yet another app, or login to the bank’s internet banking site which may or may not be mobile optimised. [Customers may also need to retain multiple account numbers, user identification numbers, passwords and pins in their memory.]

Use chatbots to reduce friction?

Can we speed up the time it takes users to get to the information they require? The ability to gain nearly instant access to the Ulster Bank mobile app suggests that the short answer here is “no,” however users still need to have the app on their device in the first place, and the mental burden of pin and account number retention may remain.

What if users could access their financial information without having to download the bank’s app?

This is where chatbots come into play.

While chatbots were widely hailed as the next-big-thing during 2016 with 34,000 of them being built out on the Facebook Messenger platform,  in truth it will likely be during 2017 and ‘18 that truly useful ‘bots starting becoming part of our lives.

Best practices for chatbots are still being bedded down, but we can begin to see useful examples from the likes of Domino’s pizza, Allset, and KLM airlines, all offered within the context of Facebook Messenger – an app that enjoys close to 1 billion active users per month.

Chatbots

These brands are enabling customers to engage with their services on terms that suit the user, the ‘app’ is essentially invisible and the friction involved in the transaction is minimal.

Meanwhile, in the Fintech space, we see UK startup companies like Ernest, Plum, Chip and Cleo providing AI-powered chatbots via apps or Facebook Messenger to help users understand and manage their finances. All presented in a friendly voice with well judged use of emojis, animated gifs and graphics that frequently appeal to younger users.

In this fast moving space, we see that in recent days TransferWise launching their currency transfer bot on Facebook messenger, with widespread media coverage.

Of course there is a tension between convenience and the need for robust security. The use of existing platforms such as FB Messenger can provide a very basic layer of authentication, which must be backed up by further security measures, such as the provision by the user of an account number and the return of an SMS PIN; the use of thumb-prints, facial recognition and voice authentication.

These authentication methods can further remove friction from the user experience by reducing the mental burden of having to remember numerous account, user ID and pin numbers, replacing them instead with effortless biometric input.

Would a chatbot suit your business?

Bots are more suitable to some businesses and tasks than others. Frequently, users will engage with a bot to select from a narrow range of options, so that the bot can ensure that the user provides all of the information necessary to complete a request.

So, ordering a shipment of coffee pods could be handled by a chatbot. Organising a weekly grocery shop, while choosing between the 40,000 items in a typical supermarket… maybe there’s a better way to deliver this experience.

In Part 2, we’ll look at some major changes due to take place in the European banking industry, where Payment Service Directive II (PSD2) is compelling incumbent banks to open up APIs to allow customers share their account data with 3rd parties, with industry-transforming implications.