Lauri Giesen
Lauri Giesen Jan 4, 2017

Betting on the bot: How chatbots will change the face of banking in 2017

By now, it’s a growing staple of movies and TV episodes: folks who fall in love with the sexy voice and chill attitude of their mobile phone chatbot.

Now some banks want to spark a new virtual love affair of sorts, hoping customers will embrace the chatbots they will soon offer. Mind you, it’s strictly platonic and electronic: for customers, a chance to enjoy the convenience and ease of getting financial information through advanced voice communication on a mobile phone.

It’s already happening overseas. In Singapore, India and Indonesia, banks continue to roll out chatbot services that let customers ask, “What’s my balance?” or, “Was my electric bill paid?”—and get a verbal answer.

Nor are U.S. banks far behind. In late 2016, Bank of America announced the expected debut of its chatbot offering. MasterCard employees are piloting a credit and debit card app available through banks next year. And while not revealing its internal plans, Wells Fargo has invested in Kasisto, a technology company that has developed KAI, a conversational platform for bank applications.

Chatbot supporters point to the widespread use of the technology by consumers in their everyday lives. And that’s causing banks to look long and hard at how they can harness the potential of bots.

“Use of social messaging is growing rapidly and the ability to use bots for banking is just an extension of that,” says Stessa Cohen, research director for Gartner Group’s banking and investment services.

But one kink in the chain still troubles some industry observers: Is the technology strong enough to protect a customer’s information in the event their phone is lost or stolen?

“The biggest issue overall for banks is security,” says Rick Oglesby, president of AZ Payments Group LLC.  “Some people are looking at biometrics technology on phones to enroll fingerprints—but fingerprint enrollment can be tainted.

Oglesby notes that banks can require customers to enter personal identification numbers or passwords to access protected information. But that also limits the ease of use that chatbots promise. “If a customer is going to enter a lot of codes to identify themselves, they might as well just log on to online banking,” Oglesby says.

Chatbot supporters, however, argue that the technology is just as secure as the voice response systems customers use today. “When the bank bot lives within the bank application, it’s just as secure as the bank’s Web site and servers,” says Dror Oren, Kasisto’s vice president of product.

Chatbots, he adds, “mirror the same security settings that banks already offer today,” At the very least, it is hoped that if security problems arise, early pilot programs will identify them—and let banks and tech companies find remedies before a rollout.

“We’re hoping our pilot will give us a clear idea of what authentication is needed so we can offer a seamless experience that also takes security and privacy into consideration,” says Kiki Del Valle, senior vice president of commerce for MasterCard. “Security and privacy still remain concerns to us.”

Security aside, just what financial applications best lend themselves to chatbots?

Ben Knieff, senior analyst with AITE Group, believes initial applications will fill simple roles—such as telling users where to find the nearest ATM or answering whether the nearest branch is open.

“The use case where I could see chatbots working fairly well is in helping customers or prospects find the right pages for content,” Knieff says. “Most financial institutions have substantial volumes of content and it can be difficult to get the right information.”

Oren believes customers will want to do more than that.

Finding the nearest ATM or branch (which some virtual assistants such as Siri can already do) “is not the most useful use” of chatbots, Oren says. “You can get the same experience by using Google Maps. People want to get information that requires more of a conversation.”

And that would involve dimensions such as “understanding their spending patterns and where their money is going,” he contends. For example, some customers will use these tools to ask how much they’ve spent in a month on restaurants compared to their budgeted amount.

“Banks have a lot of information customers want and this is a way to organize it,” Cohen says. “Customers can also use it to send money overseas or get help in depositing checks from phones.”

But while the preferred suite of chatbot uses remains hazy, banks seem to be forging ahead with bot plans. Bank of America executives decline to comment on exactly what they have in development. But during a keynote session at 2016’s Money2020 conference, Thong Nguyen, president of retail banking, gave some glimpses of “Erica,” a system expected to debut next year.

Erica combines artificial intelligence and predictive analysis, and Nguyen shared a comment from Erica that not only answered a customer’s balance request, but also told the customer’s that their monthly spending was higher than usual and could lead to a low balance or overdraft.

Elsewhere, MasterCard began a beta pilot in November with 1,000 MasterCard employees who have credit and debit card accounts with multiple banks nationally.  When the pilot concludes in early 2017, MasterCard expects to make the service available to banks worldwide.

“We wanted to gain a deep knowledge of all the components before we look to partner with issuers,” Del Valle says; MasterCard is using Kasisto’s KAI for its offering.

The MasterCard service will allow customers to ask the bot about their accounts, retrieve purchase history information, monitor spending and receive contextual offers.

Knieff thinks that besides finding out what services customers want, and how secure the application is, the early rollouts should give banks a good feel for the economics: “Banks would need to do a lot of testing to ensure what seems like a good way to reduce customer service costs doesn’t lead to more or more difficult customer service calls.”

Meanwhile, banks might want to let customers have some say in how the service looks and works. For example, many chatbots use women’s names and voices, suggesting that tellers are always women, Cohen says. She suggests banks allow customers to select the service name and, as with Siri, the voice. Offerings could also be adjusted to appeal to various ethnic groups.

Some banks are also looking to tie botchats to Facebook or other social media channels.

“Most banks are already on social media by having pages where customers can message them,” Oren says. “This takes it to another level in that customers can easily ask questions about their finances when they are on social media,”

If you become so smitten that you want to start a Facebook fan page for your bot, so much the better. But as for writing a love letter, think twice: A banking chatbot can only save you from breaking the bank, not a broken heart.  

Lauri Giesen has spent more than 25 years writing about banking technology and payments for numerous business and financial publications. In the 1990s, she founded and edited Financial Service Online, a magazine covering Internet-based forays into banking and investment services.

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