Chat banking: 6 benefits & 2 challenges

Customers expect quick financial services from their banks as conveniently as possible. A recent Deloitte research points out this trend as banks try to distinguish themselves from their competitors by offering better customer service and enhancing customer experience. 

Leveraging fintech solutions and digital transformation, many traditional financial organizations are increasingly adopting chat banking, one of the recent addition to the banking industry glossary. It involves delivering fast, secure and personalized banking and financial service-related information directly to customers.

Many widely-popular instant messaging platforms, such as WhatsApp, Viber, WeChat, and SMS, are utilized in chat banking. 

This article explores the concept of chat banking, its benefits, and some of its challenges.

What is chat banking?

In simple terms, chat banking is a unique way of offering banking services. It enables financial institutions to let their customers perform transactions, buy products/services, report problems, check balances, pay bills, find relevant information, and more, efficiently.

Chat banking software employs automated chatbots to answer customers' frequently asked questions (FAQs). Moreover, chatbots can handle online conversations via text or text-to-speech without intervention from live human agents.

This helps provide quick resolutions to the customers for queries that do not require a banking official to intervene, cutting down costs while improving customer engagement significantly.

As per a Juniper Research study, it is estimated that banks can save up to $7.3BN by 2023 by integrating chatbots into their day-to-day business. The role of financial institutions includes conducting critical groundwork, like incorporating Artificial Intelligence(AI)-driven financial operations.

Since most customers are already familiar with instant messaging platforms, it becomes easier for financial institutions to offer their services to a broader audience, even unbanked clients in remote areas.

6 ways chat banking improves customer service

Listed below are a few ways in which chat banking improves customer service:

1. Improved customer outreach

Nowadays, people rely on chat apps to connect with friends, family, and online businesses. With proper optimization measures and strategy, they can effectively serve the purpose of a customer support channel.

For this reason, many banks offer chat banking to support customers, eliminating their frustration of being put on hold on the call or visiting the bank. According to Gallup, fully engaged customers with their banks generate 37% more revenue.

It is important to note that every customer may not necessarily use the same application. Therefore, a bank must provide omnichannel customer support. Open-source customer service platforms like Rocket.Chat allows customers to connect with you through instant messaging, in-app chat, and popular messaging platforms.

2. Self-service capabilities

Customers prefer not to wait on call to resolve their queries; most of them want to be able to help themselves. Chat banking allows banks to move from a brick-and-mortar prototype to a self-service model.

This enables the customer to solve their primary and straightforward queries by themselves with the help of AI chatbots.

3. Push for personalization 

According to a study, 34% of retail customers want more personalized human-to-human interaction with banks and credit unions. Financial institutions have introduced a video conferencing process to curb the demand for a customer service representative for advanced customer inquiries.

With the development of financial technology, the functionality of chatbots has gone beyond automated responses. Today, AI has become more refined and complex. It can detect the customer's tone and attitude and provide personalized answers to various queries.

4. Around-the-clock information access

With banks introducing chat banking, customers don’t have to wait for business hours to resolve their questions. Instead, they have 24/7 access to information, leading to a better customer experience. It also eliminates the need to call customer service and wait in the queue. 

Furthermore, from the perspective of the financial organization, chat banking provides opportunities to cut down customer relationship budgets and service personnel.

5. Automation

Approximately half of the customer queries received daily are regular, which means they can be automated, leaving more time for support staff to work on crucial resolutions.

Chatbots can help you automate tasks such as replying to messages or guiding clients to find relevant information, and this reduces strain on the support team so they can focus on complex cases.

6. Improved data privacy and security

Data privacy and security are major concerns for digital consumers in 2023 and onwards. Customers want to know their data is protected at all times.

Chatbots powered by advanced AI can instantly alert customers regarding any suspicious activity in their accounts. They can also confirm a customer's identity through two-factor authentication and authorization. Messages on chat apps are end-to-end encrypted, which maintains the confidentiality of information.

A step-up authentication approach is used to avoid data theft in case the customer's phone is stolen. A person can only access sensitive information if they know the account holder's username & password/PIN and have access to OTP.

Challenges of implementing chat banking tools

Although there are numerous benefits to banks deploying chat banking, implementing this technology has a few challenges. Here are some challenges of implementing chat banking:

1. Lack of human touch

Chat Banking can sometimes be perceived as impersonal. According to Global Banking Consumer Study, almost 50% of banking customers have started interacting with their banks through a digital medium after the pandemic. However, a huge customer segment trusts the traditional banking system more.

Leaders of the banking industry must remember that most consumers had no choice but to adapt to digital banking due to the pandemic. Hence, it is crucial to bring the warmth of the human touch into the digital channels, mainly if you use a chatbot. For example, you can personalize the automated responses according to different client groups based on the products and services they use.

2. Data security

Data security is a rising concern for many industries. According to ZDNet, a 238% increase has been detected in cyber attacks against financial institutions in 2020.

The rules and regulations for financial institutions are becoming increasingly stringent, and financial services and banks operate under increased scrutiny due to constantly evolving data privacy regulations.

As challenging as it is to comply with data privacy regulations and employ cybersecurity best practices, banks don't have much of a choice if they want to keep their customers and attract new ones.

In conclusion: chat banking has major benefits, but adoption needs to be executed carefully.

You may spend a lot on developing processes that align with data security compliances to keep the customer data secure, and deploying a secure communication platform can help.

Rocket.Chat is an open-source platform to build trust between financial institutions and clients by making communication more secure. Its features include end-to-end encryption, chatbot automation, conversation history, omnichannel communication, and more. Financial institutions can connect with their clients and improve in-house team collaboration all under one space. Using Rocket.Chat can also increase your teams’ productivity by automating repetitive tasks and enabling secure communication with external vendors.

Here are more resources you can learn from:

➡️ Enabling team collaboration in FinServ and FinTech with Rocket.Chat

➡️ How banks and financial institutions can improve customer retention and engagement

➡️ Enabling digital customer engagement and team collaboration in Financial Services

‍Click here to learn more about how Rocket.Chat can help you improve customer satisfaction.