Conversational AI and Chatbots in Neobanking

Neobanking, a.k.a. challenger banks, emerged from the mounting demand for easy and round-the-clock access to efficient banking processes. With no physical offices & branches, the level of precision, efficiency, and ability to handle load is a deal-breaker. These make Conversational AI and chatbots natural choices for creating the perfect Neo-Banking experience. They successfully enable Neo-Banks to run low-cost, easy-to-use, and digitally accessible services. Think of Neo-Banking and conversational AI like two peas in a pod.

Challenges of Neobanking

As with life, no business is without its fair share of problems. Neobanking also faces unique challenges, albeit solvable hurdles. These challenges will only pave the way for further innovation as the industry matures.

So, what are some of the challenges that Neobanks are facing today?

Attrition of Differentiators

Neobanking is arguably the next significant innovation that challenges the traditional banking system. However, their success depends on how well they sustain the stack of differentiators that created their space in the first place. Factors such as digital distrust, limited services, security, and dependence on other financial institutions are watering down their key differentiators.

Regulation

The disparity in financial regulations across countries doesn’t make it any easier for Neo-Banks to make their mark. It obstructs them from entering and growing within specific markets. Neo-Banks need a robust regulatory framework and sound-proof digital banking license systems to deliver value for existing customers and expand.

Big Banks owning Neobanks

Although there is an appetite for Neobanking, legacy financial institutions continue to dominate the market. Incumbent banks have responded to the competition by initiating an acquisition onslaught. For example, the acquisitions of Anytime Digital Bank by Orange bank and 86 400 by National Australia Bank have helped these financial juggernauts subdue competition and increase their customer base. Two birds, one stone. Large banking institutions pose an existential challenge to Neo-Banks because a) they have more resources and b) can bypass regulatory restrictions in many countries.

Impact of Covid-19

Neobanks began their bullish run well before the onset of the COVID-19 pandemic, but the pandemic certainly helped accelerate it. However, this does not guarantee customer loyalty. Customers still trust brands they know or are familiar with when it concerns financial matters. Neobank accounts were mostly an emergency option for many, which caused a surge in the market. As things slowly got back to normal, traditional banking continued to be the preferred mode. Furthermore, the limited services offered by Neobanks didn’t help either.

Convincing Customers to Switch from Traditional Banking

From a global standpoint, users have been slow to adopt Neobanking. Some reports say that even among their most lucrative customers, i.e. millennials, only 3% have used Neobanking in the last 8 to 10 years. The presence, reach, and legacy of traditional institutions is significant. The journey of transitioning a customer towards Neobanking isn’t easy since the services offered are minimal as compared to legacy banks.

How can Conversational AI solve Neobanking Challenges?

Relevance is in the very DNA of Conversational AI. It syncs easily with new technologies such as Neobanking. The shared objectives of increasing efficiency and convenience make conversational AI a natural choice to create the perfect customer experience. It enables Neobanks to run low-cost, easy-to-use, and digitally accessible services.

A few key advantages are:

Credit Decisions

The old saying ‘Cash is King’ is dead. Credit is the new overlord in town! Over time, the use of plastic money became more dominant than cash. There are many reasons why credit is preferred over cash. For example, a good credit score helps individuals raise money for critical necessities without affecting liquidity. Conversational AI enables smarter assessments in the credit decision-making process. In other words, it helps facilitate responsible lending. Today, credit unions are open to accepting insights from Conversational AI to boost customer satisfaction (CSAT) and improve banking experiences.

Risk Management

As an emerging banking solution, Neobanking must be extra cautious in risk management. It needs an improved mechanism to understand, predict, and protect against predictable or unpredictable risks. Conversational AI can forecast events, detect fraud, and analyze patterns to suggest contingency plans in the case of a threat.

Personalized Banking & Advice

Bill Gates once said that “Banking is necessary, banks are not.”

Neobanks emerged amidst the digital era when customers began to prefer personalization services and trusted advice. Several studies showed that over time, customers began to feel more comfortable interacting with chatbots and voice bots during the banking process.

This has allowed them to map human behaviour more accurately and provide customers with personalized financial insights.

Portfolio Management in Trading

Traders are constantly dealing with volatile markets, and conversational AI can help in providing technical analytics along with predictions to assist in assessing transaction costs. It can also break down big-sized trades into parts for better pricing options. Being available 24×7 and data load management are key advantages in this sector.

Speeds up the Process

The speed of following up, creating touch points within the customer journey, solving customer issues, and the overall response rate decide how a Neobank can leverage opportunities. Conversational AI helps by collecting feedback at every stage and formulating responses without relying on human intervention. At-risk customers are engaged in real-time, and relationships are salvaged without delays or bottlenecks.

Collects Data

Data aggregation forms the backbone of any insight-driven exercise within an organisation. By analysing and studying data patterns, crucial insights about customer journeys and Neobanking processes can be understood and improved. Voice Bots and chatbots can analyse heaps of customer conversation data to gain knowledge about these operational pillars and deliver actionable insights.

Personalizes the Experience

It is important for businesses to think beyond just personalized messages. Today’s consumers are spoiled for choice with tailor-made services and products. Conversational AI can help with custom-made services and also create opportunities for personalization. They are designed to speak different languages and dialects, so catering to different demographics becomes a cakewalk.

The future of Neobanking

As Neobanks continue to work out various glitches in their service offerings and improve the quality of products, it’s clear that Conversational AI will play a crucial role.

By deploying AI-powered Voice Bot and chatbots across channels and platforms, Neobanks can ensure that customer satisfaction remains at the core. Doing so can inadvertently boost customer loyalty and increase their market share over time.

If you’re a Neobanking service provider who is looking to up their game, book a demo with to see how Gnani.ai’s solutions can help create better experiences for your customers.