How Conversational AI is Reducing Costs and Increasing Efficiency in Banking

BY:  Rebecca Herson
October 17, 2023

Table of Contents

Competition is fierce in the banking industry, with banks vying to attract new customers, retain existing ones, and increase profit margins. Customer loyalty is often low. Open banking makes it easy for people to switch their accounts to a different financial institution, while COVID-19 accelerated the relationship gulf between customers and bankers. 

All of this makes it vital for banks to do all they can to cut expenses, improve efficiency, and enhance their reputation in order to remain profitable. Conversational AI in banking offers multiple ways for banks to strengthen their customer base and boost revenue. In this article, we’ll discuss the benefits and challenges of conversational AI for banking. 

Cost-Reduction Benefits of Conversational AI in Banking

Implementing conversational AI can help banks cut their costs, thereby boosting their profit margins and improving their competitive edge. 

Automating routine replies to customer queries

The vast majority of customer queries are routine questions that get asked repeatedly. Although the question might be common, it could still take a new employee many months to become familiar enough with the bank’s processes and policies to be able to provide quick answers. 

However, AI algorithms can quickly learn all the relevant information and deliver responses instantly. What’s more, conversational AI can swiftly answer personal transaction queries, like “has my loan application been approved” or “what are my last 3 transactions?” This increases the bank’s credibility, while also freeing employees for more complex tasks.

Streamlining customer interactions

Banking customers frequently need to carry out simple tasks, like changing their password, locking or unlocking a credit card, and checking their balance. With conversational AI, banks can offer self-service portals that allow customers to complete these transactions independently, without needing human assistance. 

In this way, banks can scale rapidly to add more customers without needing to hire additional staff or increasing the workload on existing employees. It might even be possible to reduce the need for physical branches, which saves expenses for rent and maintenance. 

Minimizing errors in customer service

Conversational AI banking systems can validate customer information and verify documents for identification purposes, all in real time. They also carry out quality control to ensure consistency and accuracy in interactions and help reduce errors in customer service. AI systems continuously learn from past mistakes and customer feedback, improving their accuracy and minimizing errors over time.

AI-powered chatbots and virtual assistants also deliver standardized responses, which cuts the risk of human communication errors and misunderstandings. These systems can also accurately process and retrieve customer data, reducing mistakes in account information and transaction history. At the same time, conversational AI can increase compliance with regulatory guidelines, decreasing the likelihood of costly legal errors.  

Optimizing resources in banker training

You need all your bankers to be fully conversant with all your products and services, as well as skilled at listening and dealing with customer issues. But human trainers can only provide coaching and support for a finite number of banking employees, which could hold you back from scaling as fast as you’d like. Training new hires can also take trainers and managers away from other activities which drive revenue and bring more value to the bank. 

Conversational AI platforms like Second Nature can train and certify an unlimited number of banking sales and support agents, without requiring you to hire more human trainers or take managers away from other tasks. With the help of Second Nature, your existing trainers can flex to support far more bankers without any increase in resources. 

Enhancing Banking Efficiency with Conversational AI

Banks that implement AI platforms and solutions can improve their overall efficiency and effectiveness in a number of ways. 

Streamlining employee onboarding and application processes

Recruitment and onboarding of new employees can be long and convoluted. Banks need to sift through resumes and applications, carry out background checks, and interview candidates. Then they need to begin onboarding. Bringing new hires up to speed with banking products and services, ensuring they are aware of compliance regulations around data privacy and anti-money laundering (AML) laws, and introducing them to corporate culture can take even longer. 

Thankfully, conversational AI tools can slash the time these processes take. For example, Second Nature’s AI platform can carry out a first round of interviews, deliver personalized onboarding, and integrate natively with LMS systems to push the right information about products, services, and procedures to the right employee at the right time, enabling new hires to reach productivity in a shorter space of time. 

24/7 availability

Today’s banking customers expect to be able to check their balance, make transactions, and carry out other banking interactions at any time of the day or night. But it’s difficult for banks to provide that kind of responsiveness without an expanded workforce. 

Conversational AI chatbots, however, make it easy. They’re available round the clock to provide instant answers to customer queries, and guide people through automated workflows that allow them to complete their transactions in less time. This reduces frustration and helps cut wait times, thereby enhancing customer experience. 

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Personalized support

Your bank’s customers expect to be treated like a name, not a number. They want to talk to agents who know their transaction history and financial situation, and can address their specific concerns. This might seem like a tall order, but banking AI makes it possible. Conversational AI chatbots can provide tailored solutions to customers at scale. 

Engaging and fun training processes

Well-trained bankers are efficient bankers, but employees are often reluctant to interrupt their work day for training. Second Nature’s conversational AI sales training solution offers interactive, personalized training that bankers actually want to complete, with timely feedback and a private practice space that helps quickly improve their customer support capabilities. 

The AI-powered role play partners strengthen bankers’ listening skills, allow them to practice resolving objections, and sharpen their ability to deal with customer issues and concerns. AI training platforms can also push bite-size sessions within the flow of work, so employees can enhance their grasp of products and services or rehearse a conversation about a sensitive financial issue just before they make a call, without disrupting their workflow. 

Friction-free transactions

Banks that use AI are able to offer customers streamlined, efficient transactions that save time and resources while reducing friction for customers. Conversational AI chatbots and portals can automate routine tasks like account balance inquiries, transaction history retrieval, and fund transfers, and handle a wide range of customer inquiries and requests. 

When you use conversational AI to remove obstacles in the customer’s path and make it easier for them to complete the tasks they need, you’ll boost your reputation for efficiency while delivering a better customer experience. 

Potential Challenges of AI in Banking

While AI has a lot of benefits to bring to the banking industry, there are still issues that can create obstacles in the path to AI success. Banks need to overcome a number of challenges to effectively integrate AI into their systems. 

Trust in conversational AI tools

Banking is particularly dependent on trust, but AI technologies are still relatively new. Many people are still reluctant to trust services and systems that use AI. Customers might be wary of relying solely on automated systems for financial advice and transactions, and employees may also be nervous about working alongside AI. As a result, building and maintaining trust in AI-powered banking services is crucial.

Data privacy and security

Banks deal with sensitive customer data, so they need to ensure robust security measures to protect customer information, as well as complying with regulations around data privacy. Banking AI can raise concerns about data breaches, unauthorized access, and privacy violations, and meeting regulatory requirements, such as GDPR and financial industry-specific regulations, when implementing banking AI can be complex and costly.

Bias and transparency 

AI algorithms can inherit biases from training data, leading to discriminatory outcomes in lending, risk assessment, and other areas. Ensuring fairness and transparency in AI decision-making is a challenge, especially in areas like loan approval and fraud detection. Banks need to be able to explain AI-driven decisions to regulators, customers, and stakeholders, but complex AI models can be difficult to interpret.

Resources and integration 

Like organizations in many other industries, banks may face a shortage of talent experienced at working with AI, machine learning, and data science. This skills gap can make it difficult to implement and maintain AI solutions effectively. Banks may also struggle to integrate AI into existing legacy systems, which could require them to invest in IT resources as well as human resources. 

Banks Have Much to Gain from Conversational AI 

Conversational AI solutions offer a slew of advantages for banks, from boosting efficiency to reducing costs and improving customer experience. Although there are difficulties that banks need to overcome when introducing AI, the benefits are clear. In a competitive industry, no bank can afford to be the last to adopt conversational AI.


In what ways can conversational AI enhance the efficiency of banking services?

Conversational AI automates customer interactions, providing instant responses to inquiries and streamlining routine tasks such as account balance checks and transaction history retrieval. It offers 24/7 availability, reducing customer wait times and the need for human agents to work overtime, and delivers personalized support with greater ease. 


How can banks ensure data privacy while using conversational AI tools?

Data privacy is a real challenge for AI in banking, but banks can and do protect customer data by adopting several key measures. These include robust encryption protocols, strict access controls, and regular security audits and vulnerability assessments. Additionally, banks need to anonymize or pseudonymize customer data, comply with data privacy regulations like GDPR or CCPA, and maintain transparency regarding how customer data is used and stored, providing clear opt-out mechanisms for those who wish to limit data collection and processing.


Are there specific banking processes that benefit most from conversational AI?

Yes, conversational AI has a particularly big impact on several banking processes. These include: 

  • Customer support and inquiries, including account balance checks, transaction history inquiries, and general FAQs;
  • Account opening and onboarding, such as assisting customers in filling out forms and verifying their identities;
  • Fraud detection, like monitoring transactions and flagging suspicious activities in real time;
  • Loan origination and approval, including assessing creditworthiness and streamlining document verification.
  • Banker or call center agent training using realistic AI-powered role play partners, engaging and interactive sessions, and timely feedback. 


How does conversational AI influence customer satisfaction in banking?

Conversational AI makes it possible for banks to answer customer queries instantly, provide friction-free self-service banking activities, and speed up and simplify long and complicated processes like loan applications and mortgage revaluations. This has an immediate impact on customer satisfaction, because customers are able to resolve issues more quickly, get answers to their questions without having to wait, and clear up banking-related concerns without frustration. 

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About the author

Rebecca Herson

Rebecca is head of marketing at Second Nature.

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