The dawn of chatbots

Chatbot technology has arrived in many large banks, using artificial intelligence to engage customers and employees on complex topics. Should community banks follow suit?

By Karen Epper Hoffman

Virtual personal assistants, or chatbots, like Apple’s Siri and Amazon’s Alexa have already introduced consumers to the idea of asking electronic devices for information or even advice, so it’s not surprising that this technology is beginning to make a big splash in digital banking.

Chatbots allow users to ask questions, verbally or by electronic message, and receive near-immediate replies. The voice- or text-activated front end connects to data and artificial intelligence (AI) on the back end, enabling these bots to understand and respond to natural language. They offer conversational responses to questions that may range from “What’s the weather going to be like this afternoon?” to “Where should I invest $10,000?” Two-thirds of consumers in developed markets will be using a virtual personal assistant by the end of this year, estimates research and advisory firm Gartner.


Percentage of banks that currently use chatbots

“A few years ago, chatbots were a fantasy,” says Kiki Del Valle, senior vice president for Mastercard’s Commerce for Every Device unit. While banks and other financial companies may have launched proof-of-concept tests or private channels for employees, Del Valle says there was little or no movement to make the technology commercial. Now, many financial firms (including Mastercard) have launched their own chatbots to offer around-the-clock customer service and support at a much lower cost than paying for live operators in a call center.

Bank of America, JPMorgan Chase, Capital One, USAA and Royal Bank of Canada have all launched consumer-facing chatbots, with more financial institutions following every month, according to Blake Morgan, customer experience futurist and author of More Is More: How the Best Companies Go Farther and Work Harder to Create Knock-Your-Socks-Off Customer Experiences.

“Bank of America’s Erica, taken out of the word ‘America,’ was created to help customers with simple transactions such as paying down debt and checking account status,” Morgan says.

For example, Erica might send a customer a text suggesting a way he or she can reduce debt, Morgan adds. For its part, Mastercard launched its chatbot pilot, Mastercard KAI, on Facebook Messenger, allowing customers to ask questions about their accounts, review purchase history and monitor spending levels. Gartner predicts that by 2019, customer support requests through consumer messaging apps will exceed requests for customer support through traditional social media.

Swift evolution
“The technology has changed dramatically in recent years,” says Wellington Holbrook, chief transformation officer at ATB Financial, which is working with technology developer to create its own virtual assistant. The $50 billion-asset financial institution had pilot tested with “a few hundred customers,” according to Holbrook. It launched its virtual assistant in October. “We know that the newer generation, the new and future customers, just don’t look at banking the same way,” he adds. “For them, this is a way more natural experience. We think it will enable us to change the conversation at contact centers, and advice about transactions as well.”


Percentage of banks with a chatbot project in the works

Jake Tyler, CEO of, believes the entry of chatbots is part of a whole new technology paradigm. “The last decade has been dominated by mobile; the next will be dominated by AI,” he says. “It’s a big deal, and it will change how and where people interact with banks and credit unions.”

In an increasingly competitive digital marketplace for financial services, banks need to work through the chat and voice channels where their customers are headed, Tyler adds.

Chatbots help banks connect more easily and less expensively with their customers—and with their employees. CenterState Bank, based in Winter Haven, Fla., is testing its own internal chatbot to allow staff to more quickly track down fee schedules, regulations and other guidance so that they, in turn, can better help customers and do their jobs more efficiently, says Chris Nichols, the bank’s chief strategy officer. “We would rather have a chatbot take two seconds to return a fee schedule than have the employee take five minutes to go look it up,” he says.

He says testing the technology internally is an effective way of working out the bugs for chatbot problems. “Our own employees are a lot more forgiving than retail customers,” Nichols says, adding that there is “more volatility and variability with questions and requests that come from consumers.”

The $7 billion-asset community bank may trial the technology with commercial customers. Still, Nichols believes that retail banking “holds the most promise overall to deliver value. The chatbot humanizes technology.”

Early adopters
The financial industry would seemingly agree. Fifteen percent of banks say they are already using chatbots, and 31 percent claim to have a chatbot project in the works, according to a survey by Personetics, a financial chatbot developer.

But will chatbots catch on with community banks the way they have with larger financial firms? While the long-term answer is likely “yes,” many industry experts are split on whether the time is now for community banks to get their chat on.
Morgan paints a positive picture. Since community banks specialize in relationship banking and make profit through long-term relationships, “chatbots could be a great complement to these services,” he says.

Also, since community banks are often “resource-limited,” chatbots could make 24/7 customer support much more cost-effective and accessible, says Matt Miller, vice president of product management in Mastercard’s Conversational Commerce. Just as remote deposit capture vastly extended banks’ ability to accept check deposits from customers, so too could chatbots extend their service and advisory capabilities, Miller believes.

While Holbrook does not yet see a strong business case for smaller banks to implement chatbots, he does believe that their growing popularity should encourage more community banks to begin piloting and introducing more services through mobile and social media channels, which use open-source tools. “It does create a more seamless experience for customers,” he says.
While it can be tempting to offer new tech quickly, Morgan advises community banks that are considering a chatbot product to be patient in the development process so that the final product reaps maximum benefits for the bank and its customers. “Beware of releasing the chatbot before it is ready,” he says.

What about security?

In light of security concerns swirling around personal digital technology, especially voice-activated tools, financial chatbot developers emphasize that this channel will enlist the same encryption and protection features as mobile and online banking. In some cases, there may be additional layers of authentication or security, depending on the task.

Wellington Holbrook of ATB Financial puts the onus on training: “The biggest risk is user education to make sure the right person is using it, and they’re not sharing credentials with the wrong people.”

—Karen Epper Hoffman

Karen Epper Hoffman is a writer in Washington state.