Artificial Intelligence (AI) has advanced to such a stage that it can now be used to write essays, make-up songs, and even converse with people. Many high-tech companies are using this feature to engage AI in customer service.
Recently, Juntos, a fintech startup, has developed AI for customer engagement and product usage. This technology is indeed best suited for socio-economic integration, not to mention financial interconnectedness as well as upliftment. Because they are faster and more affordable for performing data analytics acquired from large chunks of demography leading to resource distribution and outreach.
However, the question arises of how efficient are these AI systems and whether are they likely to replace humans in any form of job in the future? In this article, we will discuss the dimensions of AI’s implications for human beings from the perspective of financial transactions and various interrelated components of it.
Who Would You Prefer Answering Your Financial Concerns – AI or a Human?
In the financial sector, AI is now being used for decision-making in analyzing, managing, investing, and protecting money. But its applications are far wider. AI-powered customer service systems are now entering the financial sector and it has been making waves since their introduction. The way we engage with technology has been completely transformed by artificial intelligence (AI), and virtual assistants are one of its most prominent implementations.
Further, these assistants are becoming increasingly common in financial institutions because of the gamut of benefits they provide viz. better customer service, productivity with greater efficiency, and increased security.
As a result of this, fintech companies are ruling the financial industry, leading to customers mostly completing transactions online. It is essential to make this experience as smooth as possible to keep the customers satisfied. Therefore, many financial institutions are investing significant capital in digital and analytics transformations. The ultimate goal is to provide customers with superior service and experience.
How Does AI Work?
As for this technology and its terminology, AI is a type of advanced machine learning that performs various cognitive functions by mimicking the human brain. Where AI differs from human intelligence is in its capacity to analyze a large dataset within an iota of the time it would take any human to compile such large information. After the preliminary analysis, the AI then makes informed, statistic-based predictions regarding behavioral trends, market trends, or absolutely anything. These predictions are almost always correct and have a huge impact on taking important financial decisions.
Therefore, many banks are switching to “AI first” visionaries where they employ the services of AI in almost all of their departments. In order to be completely AI first, banks need to transform the entire capability stack, including the engagement layer, AI-powered decision-making, core technology and data infrastructure, operating model, etc.
As a virtual assistant, AI uses data and machine learning to learn about customer requirements, queries, and issues. This data is then transformed to provide tailored interaction and individual financial advice. With repeated interactions, AI recognizes points for improvement and the quality of customer service only gets better by reducing response time and providing accurate answers. In its predictive function, AI can also expect any queries the customer might have so it is always prepared and can provide a seamless interaction.
The Need For Successful Customer Engagement
In any industry, customers expect loyalty, commitment, and interest from the companies they are engaging with. When a financial institution emulates these qualities, customers are more likely to stay loyal to the company.
Specifically, poor customer engagement can lead to catastrophic heights. For example, in Nicaragua the “no pago” or “No Payment” movement put pressure on the government to pass the Moratorium law. The outcome of this will be reduced foreign investments in the Nicaraguan economy and increased poverty. The day Ley Moratoria Moratorium Law passes in Nicaragua will be a sad day for some of the honest, punctual money borrowers in the country.
The Success of AI Customer Service in the Banking Sector
BBVA Bancomer, Mexico, and Bancolombia, Colombia are pioneers in innovating customer engagement using AI. Juntos, a fintech startup, entered into a partnership with BBVA Bancomer and Bancolombia to deepen their customer engagement and product usage. This cutting-edge technology was a first of its kind in both countries.
Although the usage and implementation differed according to the needs of the population in Mexico and Colombia, the success of the product was equally visible in both countries. In the following segments, we will discuss how the rolling out of AI customer services impacted the institute-customer relations in these countries.
Juntos helped build long-lasting relationships between clients and their financial institutions through automated, two-way, mobile conversations. These messaging systems helped reduce trust issues and increase self-confidence to help retain more customers. They provide relevant information quickly and efficiently. The financial institutions receive information that helps design products according to customers’ needs.
Juntos and BBVA Bancomer in Mexico
In Mexico, BBVA Bancomer is the first bank to convert to AI for customer Service. They used AI integrated with WhatsApp’s technology to communicate with both customers and non-customers. They provided information on banking services like how to open an account, branch locations, and how to use the bank’s digital services. It has major implications for micro financial services for financial inclusion as through digital financial assistance more customers were integrated into the financial industry.
The partnership with Juntos was developed to convert clients who were only using accounts to receive payroll or government subsidy payments. This customer base did not engage with the financial institute for any other purpose and they usually withdrew their entire income. Now, Juntos is paid for each customer they contact. All messages are received and sent from Junto’s platform.
BBVA and Junto only exchange information regarding customer requirements and opinions. The bank provides information on customer performance following customer confidentiality regulations in exchange for the responses of customers. The information received by Juntos is not owned by them and they share the entire thing with the bank.
Juntos and Bancolombia in Colombia
The first international pilot was introduced in Colombia through the partnership of Juntos and Bancolombia. They targeted customers with inactive accounts and customers with recently opened accounts. It was such a success that active new accounts increased by 30% and the account balances also increased by 50%. Following this partnership, new economically beneficial channels opened up for both the bank and the customers.
The response rate for Bancolombia’s two-way, automated SMS conversations was much higher compared to earlier email marketing tools. The messaging system became so popular among the customers that even non-responsive clients continued with the messaging system when given the choice. Text messages sent over mobile phones bundling mHealth info and microinsurance to improve health outcomes in Kenya, for instance, have been a success.
The success of the partnership was visible as engagement with accounts increased and more new accounts were opened. It was also observed that the behavior of a group of nonresponding customers changed to be more participatory.
Benefits of Using AI Customer Engagement
Successful customer engagement makes the job a lot easier for both the financial institutions and the clients as it takes into account the opinions and suggestions of both parties. The partnership between fintech giant Juntos and BBVA Bancomer and Bancolombia highlights how important customer engagement is in the running of a successful financial institution.
In a study conducted by the Institute of International Finance (IIF) and the Center for Financial Inclusion (CFI), over 30 individuals from the industry including financial experts and customers, were interviewed and the results were analyzed. The study, titled “How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines,” sheds light on how successful AI customer engagement can impact the workings of financial institutions.
Customer-Client Engagement Results in Happier Customers
As regards demographic financial integration and inclusion, a large portion of the population in Mexico and Colombia is unbanked (that is, who do not have any bank accounts) and a lot of efforts have been made to include them financially. It is not just enough to have financial products and services available; the population should be aware of the products and educated on how to use them.
For many people, trust issues arise partly because the banks are not transparent about their services and partly because they lack the know-how about the products and services.
With the help of tailored text messages, Juntos ensured that the clients are well informed and they help in answering any queries almost instantaneously.
Similarly, the Juntos platform also acts as a reminder for customers to engage with their banks- encouraging them to save more. This helps in developing a relationship between the financial institutions and the clients based on trust. With improved trust comes loyalty, satisfaction, and retention. Happier customers are more likely to continue their business with the financial institution.
The Union of Bank and Fintech Companies Brings Out the Best of Both Worlds
Banks and fintech companies have their individual strengths. Banks or other financial institutions offer financial services and products to their customers, while fintech companies are more skilled at building strong customer relationships and affinity with bank partners. Combined, the two can provide financial services with stellar customer relationships. The work of financial institutions is supported and complemented by the work of fintechs.
Consequently, the AI customer engagement system designed by fintech companies can focus on relevant client information which is passed on to financial institutions, who can then design customer-specific products. Africa’s 2015 smartphone record-breaking sales data is one example of the results of a successful partnership. This was the outcome of partnerships between mobile network operators and handset manufacturers, both of them playing their strengths to deliver smartphones designed specifically for the African market.
Partnering is Economical in Terms of Time and Resources
The partnership between financial institutions and fintechs is beneficial for both parties as they can work on their strengths to give results using less time. It is also economical as they can allot their resources more efficiently. As fintechs handle customer relations, the banking sector can work on developing new financial products to assist and attract more customers. Both sectors can easily acquire more clients with the support they receive from each other.
In point of fact, the efficient utilization of resources saves time, which is used by banks to design products for the low-income sections of society. Thus, this helps in improving the condition of microfinance industries. According to the top picks of the microfinance blogosphere, the state of microfinance of a country is key in determining the strength of its economy. Therefore, the short-term benefits received from this partnership can only improve over time and the advantages are enjoyed by financial institutions, fintech companies, and clients alike.
Integrating New Technologies to Improve Engagement
Fintechs can only help if financial institutes also incorporate certain strategies into their daily operations. A successful AI-first bank needs to develop the following five capabilities to effectively design and implement its engagement layer.
Adopting a Statistic-Based, Comprehensive Approach to Understanding the Needs of the Customers
The bank needs to develop and implement a real-time, institute-wide data infrastructure that is capable enough to hold data about each and every customer. The data points include a customer’s relationship with every department in the bank and the opinions of every customer based on their channels, journeys, and products.
Afterward, this data needs to be consolidated in a centralized place for easy access and effective usage. The AI-first banks need to aggregate the data from multiple sources, whether internal or external, into a central customer platform.
Engage a Team of Technically Advanced Individuals
Integrating new technologies into the system will be worthless if the people working with it cannot use them proficiently. Ideally, a mixed team of next-generation talent and traditional employees will work together to give desired outputs. For example, a manager should be knowledgeable enough about various topics such as advanced analytics, customer experience, business strategy, leadership, and capability development.
Implementing a Formal Top-Down System to Enhance Coordination Between Traditional and New-Edge Channels
When it comes to the implementation of the system and coordination, the alignment of traditional working teams with customer-focused groups often takes a long time, if ever, to yield results. The practiced method of banks to answer the needs of different sections of society with their products and channel silos is mostly product-centric and extremely complex. This makes it very difficult for the customers.
In the event of that, the top-down approach will be more effective in converting traditional systems into truly customer-centric organizations. This approach helps empower cross-department senior management teams. With the appropriate resources and budgets, they can prioritize the customer’s needs and utilize high-impact cross-cutting initiatives to address the situation.
Developing New Partnerships With Non-Financial, Heterogenous Companies
The partnership between financial and non-financial institutions to acquire more customers and create a meaningful customer experience is a ‘win-win’ situation for all involved parties. But the partnership needs to be implemented properly to reap the benefits from it.
- Partnerships should be based on a clear strategic rationale.
- There should be dedicated teams to oversee the establishment of partnerships.
- The available technology should be partnership friendly.
Holistic Integration of AI-Enabled Decision Layer With Traditional Functioning of the Financial Institutions
An AI-first bank has four layers of capability stack: engagement, AI-powered decision, core technology and data infrastructure, and operating model. The proper coordination and smooth functioning of all layers make the AI-first model successful. Development in all layers should be uniform to deliver acceptable enterprise goals.
Artificial Intelligence as Virtual Assistants
Undoubtedly, the result of financial institutions and fintech partnerships is virtual assistants. Many financial organizations have started using virtual assistants to enhance their client service. Virtual assistants may comprehend and interpret consumer requests using NLP or Natural Language Processing and Machine Learning algorithms, provide pertinent information in response, and assist customers in completing transactions swiftly and easily.
Thus, this not only gives clients more time but also frees up customer support agents to concentrate on more complicated problems that call for human interaction. Virtual assistants are now being employed in financial companies to increase productivity. Virtual assistants can assist in lightening the strain on human employees by automating repetitive procedures like balance inquiries, money transfers, and bill payments, freeing them up to work on more crucial projects.
Furthermore, this not only boosts productivity but also lowers the chance of mistakes that can happen with manual methods. One of the greatest advantages of incorporating AI into the system as a virtual assistant—as mentioned above— is that it can ameliorate the security levels of financial institutions.
Eventually, this ensures an amplification of performance and productivity as well as customer experience which any company strives for. The AI can efficiently detect any type of security threat and swiftly notify the concerned authority. The pertinent authority will be able to monitor user behavior by using AI algorithms. Therefore, confidential client information remains safe and secure from all types of security threats. Although virtual assistants are most frequently connected to financial institutions, other businesses are also using them.
In fact, one interesting application of artificial intelligence in the financial industry is microfinance, which is being used as a mobile game for teens. Nowadays, microfinance as mobile games for teens is in vogue. By allowing players to simulate numerous financial scenarios and make decisions based on real-world financial principles, these games teach youngsters about money management.
Since they are made to be interesting and entertaining, microfinance games are good tools for teaching young people about financial management. The game can offer individualized feedback and coaching by employing AI algorithms to track user behavior, enabling youngsters to learn from their mistakes and make better financial decisions in the future.
Most importantly, virtual assistants with AI capabilities are revolutionizing the financial sector by enhancing security, efficiency, and client experience. In financial institutions, these assistants are becoming more and more common. They are employed to automate repetitive tasks, lighten the workload of human personnel, and identify potential security issues.
In reference to the dissemination of technological innovation, teenagers are being taught financial literacy through microfinance games, which make use of AI to offer individualized feedback and direction. Further, we may predict about seeing even more state-of-the-art technology-based and cutting-edge uses of AI in the finance industry and elsewhere as this technology advances further.
Q1. How AI can increase customer engagement?
Through the use of Artificial Intelligence, the guesswork in customer engagement is eliminated. AI can analyze the market efficiently to determine behavioral trends and help increase customer engagement by helping businesses decide market strategy and budget decisions for the future. AI also provides data-based, customized service for every guest to make their experience more meaningful.
Q2. How can AI help retain customers through better customer engagement?
AI assistants can learn through repeated interactions and can improve their methodologies in future customer engagements. Satisfied customers are more likely to continue with the services. The information gathered from customer interactions is also used to provide personalized guest services. It makes every customer interaction efficient and smooth.
Q3. Will AI replace humans in customer engagement?
It is unlikely that AI will replace humans in customer engagement as AI cannot offer the emotional connection that humans do. The rapport or communication on an emotional level which is most important in building customer-client trust is completely absent in AI customer engagement.
To avoid being left behind, financial institutions should adopt an AI-first business model. This system has a lot to offer yet the planning and execution should be done carefully so as to ensure the safety of all involved parties. As technology advanced over the years, the lives of people became easier with the incorporation of products offered by technological innovation. Prioritizing the safety and security of consumers, these technologies, such as AI, will certainly make people more financially inclusive.
- Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.
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