Chatbots in the Banking Sector
As technology continues to advance on what seems to be a daily basis, companies have no choice but to advance with it or be left behind. In MicroSmallCap’s article, Artificial Intelligence Hits Banking Sector: Who’s in the Lead, Herman Cheng writes about the innovations in technology in the banking sector and why these innovations are being implemented.
“There are several reasons to use chatbots in banking. First of all, they can deliver on cost savings, being much less expensive than their human counterparts. Juniper Research recently released a study claiming that cost savings for banks from chatbots should reach $7.3 billion by 2023. Second, they enhance operational efficiencies while boosting engagement rates with customers and prospects” (Cheng, 2019).
Bank of America is currently ahead of the race in technology within the banking sector. With a mobile app that can hands-down accomplish so much more than their competitors, Bank of America was the first bank to implement their own AI, Erica, to assist their clients with their banking needs. By simply opening up the mobile app, users can effortlessly ask Erica to perform a wide variety of transactions by the sound of their voice. By implementing artificial intelligence within their mobile platform, Bank of America has not only made it easier for clients to take care of their banking needs, but they have also made it more convenient for them as well, as they would rarely need to do a transaction within a physical branch that they can’t accomplish on their mobile devices.
Cheng mentioned in his article that estimates show cost savings should reach over $7 billion for by banks through the use of chatbots by 2023. However, looking at basic statistics from The Financial Brand’s article, The Rise of the Digital-Only Banking Customer, by Jim Marous, it would not be surprising if cost savings reached a higher mark within that timeframe.
“On average, branches cost banks $4.00 per transaction, according to PwC. On the other hand, online (PC) and mobile banking cost $0.09 and $0.19 per transaction, respectively” (Marous, 2018).
The difference in cost for transactions done in person than online or mobile is tremendous. Online transactions cost 44 times less than in person while mobile transactions cost 21 times less according to Marous’ data. For the bigger banks such as Bank of America, JP Morgan, and Wells Fargo, It should not surprise anyone to see their cost savings surpass $7 billion by 2023, should they continue to improve their online and mobile banking platforms.
By no reason do I expect this to happen, but if these banks, or any banks for that matter decide not to continue to innovate through technology, they won’t succeed. According to Marous, “consumers in the 18- to 24-year-old bracket are the heaviest users of mobile banking, with 82% of smartphone owners in this demographic segment using mobile banking… only 29% of smartphone owners in the 65+ age group reported that they use mobile banking” (Marous, 2018).
I don’t think this statistic comes as a surprise to anyone, but it’s clear that the younger generations that grew up with technology will be reliant on that for the rest of their lives. This is crucial because businesses build for the future and these generations are the future, hence the importance of technology advancements.
As a society, we’ve allowed ourselves to go places with technology so incredibly fast that most people would have never thought possible. In these articles I talked strictly about banking, but advancements in technology can be found all around us. Focusing on the subject at hand, it makes sense why the banks are focusing so much on technology. Not only does it save them billions-of-dollars, but it makes banking easier and more convenient for their clients, who can now bank from anywhere in the world at any time rather than getting in a line to see a teller between 9-5 Mondays thru Fridays.
Cheng, Herman. “Artificial Intelligence Hits Banking Sector | Who’s in the Lead?”
MicroSmallCap, 5 Mar. 2019, microsmallcap.com/banking-artificial-intelligence/.
Marous, Jim “The Rise of the Digital-Only Banking Customer.” The Financial Brand, 2 Jan.