Conversational banking: The status quo and relevant trends

Mobile banking plays a key role today. Generation Zers and Millennials do not like to be limited to predefined channels and resolution paths and expect a hybrid customer experience. Digital channels like apps (30 %) and digital banking (23 %) are becoming increasingly popular (Just AI, 2021).

This scenario invites the question of how banks should best communicate with their target groups. One method is conversational banking, which is dialog-based communication in real time. It comprises solutions such as live chats, chatbots and voicebots, where hyper-personalization and AI integration play a critical role.

Key points

• Younger customer groups demand a first-class mobile banking experience;
• Banks get to know their target groups better with omnichannel communication;
• Self-service is an essential element of a first-class customer experience (CX);
• AI systems can conduct simple consultations independently;
• The gain from first-class digital services exceeds the cost many times over;
• Communication via chat is the starting point for Banking 4.0 to be successful.

What are conversational banking and Banking 4.0?

Banks compete for customers in a sector where the products are similar. At the same time, FinTechs, internet banks and online retailers are driving the digitization of the industry at a breathtaking pace.

First-class service and a high degree of personalization are the most important factors for successful diversification (McKinsey, 2020). A highly customer-oriented approach requires a comprehensive database and sophisticated metrics. In other words, banks need to get to know their customers better than ever before. Understanding this is at the core of conversational banking.

The time is right to attract and retain customers with a top-notch conversational banking strategy. According to a recent study, around half of the consumers surveyed reported poor customer service experiences (Yext, 2021). Consequently, banks could very effectively distinguish themselves with top-notch service quality by getting close to their customers and offering them exactly the solutions and service options they would like to have.

These options range from transferring rent payments and checking one’s account transactions while on the subway to the option of opening a new account or getting investment and loan advice through a mobile banking app.

“We already know from other studies that customers want to complete their banking transactions, some of which are annoying, as quickly as possible. If a chat channel makes this possible, customers will use and appreciate it, too.”
Prof. Dr. Nils Hafner, Head of the CAS Digital Banking program at the Institute of Financial Services in Zug, Switzerland (IFZ) and co-author of the study titled “Conversational Banking” (2021) published by IFZ.

The challenges of conversational banking

It is critical to find out which customer groups would like dialog-based communication via live chat, chatbot or voicebot and in what situations – and when they prefer traditional communication paths such as e-mail or a visit to the brick-and-mortar bank branch. The conversational platform for financial services by Unblu, an experienced expert in conversational banking, is one solution that achieves a successful interplay between automated services and personal consultation by bank employees and customer service employees.

In addition to preserving a balance between automated and human services, there are some other challenges banks need to address strategically. The cost is substantial, but the gain is even greater. According to one study, 44% of customers surveyed are willing to spend more money with the same business or regularly purchase from it if they are satisfied with its customer service (Skopos, 2020).

Mobile banking first

Since Banking 4.0 is in use anywhere and anytime, the focus must be on a mobile strategy. At the same time, the experience customers have at the bank branch and on the bank’s other online sites, such as its website and social media profiles, must complement its mobile banking app.

Implementing the omnichannel approach correctly

A key challenge is to align the customer experience with brand representation, content and communication processes across multiple channels to ensure you always connect with your customers as they like and expect it.

“When using chat, banks should […] initially focus on their internal channels and create compelling communication there instead of contacting customers over private messaging channels.”
Sophie Hundertmark, chatbot expert and co-author of the study titled “Conversational Banking (2021),” published by the Institute of Financial Services Zug (IFZ).

Standard requests or inquiries in self-service

The main service expectation is the quick and easy resolution of customer requests or inquiries without any problems, whereby self-service is a critical component for low-risk topics arising with high frequency. As a result, customers don’t have to wait for a person, are in full control and have solutions to their concerns in easy reach 24/7.

Conversational technology applications play a leading role here because they allow bank customers within limits to ask flexible follow-up questions beyond rigidly defined paths such as FAQs and customer accounts. This is what chatbots with conversational AI do, which you can integrate into apps, websites and even messaging services and social media.

Trust in service and consulting options

A particularly important factor is trust in mobile, digital options. According to a Bitkom study, two of three respondents do not use mobile banking for data protection reasons, and the fear of cybercrime plays an important role for 61% (Bitkom, 2021). Only with the highest transparency regarding security and data protection will banks bring about the necessary acceptance among their customers.

Authentication

Authentication is a key aspect of digitization in security-relevant areas such as mobile banking, and providers need secure, easy-to-understand and easy-to-use solutions. Important principles are two-factor authentication or alternatives such as voice-based authentication.

A technology foundation and central data platform

All these challenges require the use of specific technology solutions that communicate seamlessly with each other. Companies must unite human communication and human-machine interactions consistently and clearly across all channels. Data and information should converge in a central customer data platform (CDP) to prevent data silos.

The chat option – the starting point for successful conversational banking

An essential component of Banking 4.0 is the resolution of customer issues via chat. A recent study conducted by the Institute for Financial Services Zug (IFZ) of the Lucerne University of Applied Sciences offers the following recommendations for chat implementation as a central strategy for Banking 4.0 (IFZ, 2021):

1. If you don’t have it yet, offer a chat option as a communication channel.
2. For data protection reasons, limit chat options initially to your bank’s internal channels such as e-banking, mobile banking or your bank’s website.
3. Gradually expand the customer inquiries or requests that are resolvable via chat, including, for example, document and card requests, account balance inquiries, money transfer orders and informing the bank of changes.
4. Introduce chatbots for simple and recurring issues in the medium term.
5. Think about the long-term implementation of an additional voice channel for maximum user-friendliness and special use cases, such as for customers while they are driving.

Conclusion: Even in the digital age, service quality makes a difference

Customers demand first-class service experiences from their banks, which is the basic prerequisite for success in today’s competitive banking environment. To get there, mobile banking, a chat option, self-service options and hyper-personalized customer engagement are essential. In addition to gaining strong customer loyalty, businesses that master these challenges also benefit from access to valuable data and their customers’ acceptance of higher prices.