DIGITAL TRANSFORMATION – CHATBOT ERA
Dr. Krunoslav Ris, PMP®, PBA®
Senior Digital Transformation Consultant | Web3 Expert | Empowering Businesses with AI, Blockchain & Innovation | 25+ Years in Banking, E-commerce, Retail & More | Helping Companies Scale & Thrive in the Digital Era
1. Introduction
A chatbot(BOT- shorty) is a program designed to mimic (fake) conversation with human users on the internet. Using Artificial Intelligence (AI), a chatbot can assist customers without the need for a customer (human) service agent on the other end. Chatbots can range from simple goal oriented bot to highly natural language intelligent depending on how they are programmed. Good example of very good NLP chatbot is Apple Siri, Microsoft Cortana, Amazon Alexa. A goal-rules-based chatbot can only handle very specific commands, while a chatbot that uses machine learning will in time get smarter with each interaction with real human.
Chatbots in banking are being used by major brands such as Bank of America and American Express, Visa, Master Card, Unicredit, Sber Bank etc... These financial Organization are utilising chatbots in social-networks apps to provide customer service through conversational banking.
2. The Evolution of Chatbots in Banking Industry
To understand chatbots, people have to look back to World War II and Alan Turing, the father of modern computer science. He constructed what is known as The Turing Test, also known as The Imitation Game for gauging how human-like a machine is in a text-based interaction. It's been a critical part of the development of AI and to this day, it's used as a standard for testing the value of new technology like Google Duplex, an AI system that conducts natural language conversations over the phone to execute on real-world tasks such as booking appointments, personal assistents, maintaining daily routines etc... Chatbots start to work with Customers in banking in the early 2000s through SMS text messaging.
Back in those days bots could do simple tasks like show an account balance when given a specific command over text messaging menu. Today, AI manufacturers are making chatbot interactions about busines as natural as chatting with a friend on your mobile phone in applications like WhatsApp, Viber, WeChat and Facebook Messenger.
3. Use Cases for Chatbots in Banking
Messaging apps are now the preferred method of interaction on mobile devices. There are more than 1 million bots on Facebook Messenger and just as many on Chinese WeChat platform across various industries. The banking industry is changing the customer interaction by utilising social-network platforms and AI-powered chatbots.
Banks Using Chatbots Bank of America's virtual assistant chatbot Erica can take commands via type and voice command and perform functions such as scheduling a payment and exploring recent transactions within their app. That Chatbot is having predictive skills as well in order to lead customers to better financial health.
Capital One has a similar text-based chatbot that allows customers to manage their money via text message, including actions like viewing payment history and pay a credit card bill.
Mastercard utilizes a bot on Facebook Messenger, which does many of the above-mentioned functions, but also provides updates on cardholder benefits and notifies users about offers. Direct personalised marketing.
4. The Future of Chatbots in Banking
As chatbots continue to become everyday more advanced, customers will see a shift in focus from mobile banking to conversational user interface (CUI) in banking. CUI technology mimics a human conversation.
Biggest tech giants such as Amazon and Apple have laid the groundwork for familiarising consumers with these conversational interfaces. To be on the cutting edge technologies, banks need to have a conversational banking strategy as well. A conversational banking strategy should include investing in the right human talent with skills in artificial intelligence development and natural language processing experts, who can keep up with technological advancements and actively integrate them into existing tools.
Today, banks will need to put bigger focus on security to protect sensitive information. One of the directive is GDPR which is implemented in all banks in European Union. This could include investments in biometric to verify that the customer is talking to the bot and not a stranger who has their phone.
Picture 1: Four pillars of banking in 2025. (Digital transformation), picture is taken from: shorturl.at/abjL7
Recently, one Fintech company launched AI Fincheck, an award-winning AI based FinApp designed to guide consumers to the path of financial wellness. This revolutionary financial assistant measures and monitors consumers' financial health while delivering personalised insights and recommendations to help people reach their financial goals.
Theri solution, solves several commonplace data problems for consumers by combining intelligent data with machine learning and analytics to offer holistic, personalised insights for advisors, bankers and their clients.
This is a new tool the gives financial advisors, managers and bankers answers to real-time questions via Analytics on PC, mobile and voice-enabled personal assistants such as Apple Siri or Amazon's Alexa.
Daily updates provide quick insights on customers data (for example recent proposals and cash opportunities).
5. Influence on the Fin-tech Industry
FinTech AI is the best innovation that will go a long way in creating a better working ground for the industry. This is an invention that is responsible for reducing errors in work activities. It is a perfect answer where millennials profoundly value transparency and convenience.
In Gartners research, in two years, a quater of customers in developed nations will have taken advantage of AI in their daily tasks.
Features of AI Basically, Artificial Intelligence works to;
- automating processes
- Faking the human brain learn by interacting with the environment using a neural network.
- learn using (researched) synthesised data in the absence of real historic data
- account for uncertainty (Bayesian approaches) using deep-learning models
- using virtual assistants as receptionists of companies
- performing tasks that somehow seemed vigorous for human employees.
5.1 Applications of AI in FinTech
Fin-tech AI applications give better functionalities, and will work in the future to change it. It can be integrated with FinTech in the following ways;
Minimising processing times
Processing of invoices and other documents is undoubtedly the most boring and time-consuming task for every financial institutions.
AI can be used to reduce the time used in half and will also cut the resources used in the entire process.
Increasing automation levels
AI will work fast and reliable, competent and accurate generation of all reports.
Changing insights
Insights will help banks to predict customer spending habits. Example, AI that analyses a client's past spending behavior and advise on their creditrisk in case of loans.
Motivating SME
Motivating SME SME (small-to-medium enterprise) is a term for segmenting firms and other organisation that are somewhere between the "small office-home office" ( SOHO ) size and the larger enterprise .
Advising clients
AI will work for the benefit of clients. Special financial applications use the technology to help individuals balance their budgets to their earnings and spending habits.
Lowering the cost on human errors
Business such as accounting are usually eligible to human error. AI reduce such errors that may cause a bif financial loss.
Chatbots in offering financial services
Chatbots can be made to be like human and with the ability to answer client questions intelligently. This would reduce the amount of workload for the consumer services department.
Visual identification and verification of clients
Banks and Financial Institutions have a long way to go in smoothening functions like account creation, loan and insurance origination and documentation. Incorporating AI will allow authentication of documents to avoid mistakes and additional paperwork.
Claims management
Insurance companies can take advantage of AI and use it to manage and investigate incidences of risk insured against.
This can reduce their losses and help them move towards profit. Tools can also be used in making insurance offers by calculating probabilities of events and pricing of bonuses.
SME (small-to-medium enterprise) is a convenient term for segmenting businesses and other organisations that are somewhere between the "small office-home office" ( SOHO ) size and the larger enterprise .
With this last imitation, "The Imitation Game" alludes to the Turing Test, in which a user having a conversation through a computer—something akin to a computer chat—tries to determine whether the correspondent on the other end is a person or a program
8. CHATBOT ARHITECTURE
Today we have two major types of chatbots: for entertainment and for work.
Engineers have been making chatbots for entertainment for decades since famous chatbot-psychotherapist ELIZA was introduced in 1966. Makers of these chatbots usually try to make a bot that can look like a human, pass the Turing test A Turing Test is a way of inquiry in AI for deciding whether or not a computer is capable of thinking like a human being.
All of the chatbots which participate in Loebner's prize and similar competitions are in this group. Microsoft's bots Xiaoice and Tay have the same behavior. The most newest example is "Spock" Chatbot in Microsoft Skype: "Chat with Spock, second in command of the USS Enterprise, to learn Vulcan logic!"
One way to make an entertainment chatbot is to compare the chatbot with a human (Turing test).Other metrics are an average length of conversation between the chatbot and end-users or average time spent by a user per day/week/month. If communications are short, then the chatbot is not entertaining enough.
Chatbots for business are often transactional, and all of them have a specific purpose.
Conversation is typically focused on user's needs. Customer Support or Travel chatbot is providing an information about flights, excursions, hotels, and tours. Also helps to find the best package according to the given criteria. Apple or Amazon Assistant readily provides information requested by the user. Uber bot takes a ride request.
Chats are typically short, less than 10 minutes. Each conversation has a goal, and the quality of the bot can be assessed by how many users get to the target. Has the user found the information she was looking for? Has the user successfully booked a flight, rent a car including a hotel? Has the user bought products that help to solve the problem?
Usually, these metrics are not so hard to track. Some chatbots don't fit into this classification, but it be good enough to work for the majority of bots that are in production now.
Another classification is based on a type of conversation: one-to-one or one-to-many, if the chatbot is added into a group chat.
Picture 2: Application in Fintech industry | uploaded by Ahmed Taha Al Ajlouni from Financial Technology in Banking Industry: Challenges and Opportunities Article
9. MODELS
Britz Danny wrote in "Deep learning for chatbots", the bots can give responses from scratch based on machine learning models or use heuristic to select an answer from a dana base of predefined responses (User Scenarios).
Generative models are very complicated to build. It requires a couple of millions of examples to train a deep learning model to get quality of talking, and still you can't be sure what answer the model will generate.
Generative models
Picture 3: Generative Model
Generative models are the future of bots, they make chatbot software smarter.
Retrieval-based models
Picture 4: Retrive-Based Model
Retrieval-based models are much more easier to build. They provide more predictable results.
Retrieval-based models are practical at the very moment, many algorithms and APIs are readily available for developers.
Bots uses the message and context of conversation toward selecting the best response from a predefined list of messages trained by scenario.
The context include position in the dialog tree, all previous messages in the conversation, previously saved variables (e.g. username). If the chatbot does not use context then it is stateless. It will only replay to the last user message, ignoring all the history of the conversation.
Pattern-based heuristics
Heuristics for selecting a response is engineered in many different ways, from if-else conditional logic to machine learning classifiers. The simplest is using a set of rules with patterns as conditions for the rules.
This type is trendy for entertainment chatbots. AIML is a very common used language for writing patterns and response templates. Developers and designers write code in AIML language, computer code can include multiple units like this:
<category> <pattern> What is your name?</pattern> <template> My name is Krunoslav Ris</template> </category>
When the bot get a message, it goes through all the patterns until finds a pattern which matches user message (scenario based pattern).
When the match is found, bot uses the template to generate a response. Script is a implementation of this idea. It is an open source engine which allows defining a bot in a rule-based. Every rule contains a pattern and an output:
s:(because[someday"one day"])That will not be soon.
Script has a powerful NLP pipeline and a rich language. Using Script you can do much more than with AIML. It will parse message, tag parts of speech, find synonyms and concepts, and find which rule matches the input.
In addition to NLP abilities, Script keep track of a dialog, so that you can make a long scripts which cover various of topics
Machine learning for intent classification
The inherent problem of pattern-based heuristics is that patterns should be developed manually, and it is not a peace-of-cake task, especially if the bot has to correctly distinguish a couple of hundreds of intents. Imagine that you are making a customer service bot and the bot should respond to a refund request.
Users can chat it in hundreds of different ways: "I want refund", "Refund me", "I want my money ".
At the same time, the Chatbot should respond differently if the words are used in another context: "Can I have a refund if I don't likethe service?", "What is refund policy?". People are not very good at writing patterns and rules for nlp understanding, computers are much better for this.
Machine learning get us train a classification algorithm. You need a training set of a couple of thousands of templates, and it will pick up patterns in the data.
Response generation
Patterns or machine learning classification algorithms help to understand what customer message means. When the chatbot gets the intent of the message, it shall make a response. How can the chatbot do it? The simplest way is just to respond with a static response, one for each intent.
Or, get a scenario based on intent and put in variables. It is what ChatScript based bots and most of other chatbots are doing. How can chatbots do better? There is no simple answer. Response mechanism must depend on the task at hand. A medical chatbot will probably use a statistical model of symptoms and conditions to decide which questions to ask to clarify or improve a diagnosis. A question-answering bot will dig into a knowledge graph, generate potential answers and then use other algorithms to score these answers, see how IBM Watson is doing it. A weather bot will just access an API to get a weather forecast for a given location.
Architecture with response selection
The chatbot can express the same message using different words. A weather bot can say "It's rainy", or "Probability of rain is 80%" or "Please carry an umbrella today". Which one will work the best for the user? Different users prefer different styles of response.
The bot can analyse previous chats and associated metrics (length of the conversation, probability of sale, rating of customer satisfaction, etc.) to tailor responses for the user. The chatbot can have separate response generation and response selection modules, as shown in the diagram below.
Picture 5: Response selection
Message processing begins at the very moment when understanding what the user is talking about. Intent classification module identifies the intent of customer message. Typically it is selection of one out of a number of predefined scenarios, but more sophisticated bots can identify multiple intents from one single message by analysing contex.
Intent classification can use information, such as previous messages, customer profile, and preferences. Recognition module extracts structured bits of information from the message.
The weather bot can take date and location from other services (GPS, Telecommunication towers, triangulation, A-GPS etc). The candidate response generator is doing all the domain-specific calculations to process the customer request. It can use different kind of algorithms, call a external APIs, or ask a service desk agent to help with response generation. The result of calculations is a list of response candidates.
All these responses should be correct according to domain-specific logic, it can't be just a lot of random responses. The response generator have to use the context of the conversation as well as intent and entities extracted from the last user message. Contrarily, it can't support multi-message conversations. The response selector scores all the response candidate and selects a response which should work better for the customer.
10. CONCLUSION
From my perspective, bots or intelligent assistants with artificial intelligence are dramatically changing industries. There is a wide range of chatbot API SDKs that are available for various enterprises, such as healthcare, retail, banking, sport, travel, e-commerce, telecommunications... Bots can reach out to a large audience on messaging apps which are available 24/7/365 and be more effective than humans. They will evolve into a capable information-gathering tool in the near future.
AI tools are not there to replace the human as a workforce, instead, they will help to supplement them. Moreover, AI can't completely substitute the input of any human, and that is the reason why it needs supervision of man to work more better.
More over, it will be a one in a ten million revolution that will instead help employees in their daily duties. It will reduce the pain of checking documents. Automation will reduce time which is taken and minimize possibility for errors.
Future advancements in AI automation will let managers and executive an easy time running business operations. Employees, will spend less working time on repetitive tasks and instead focus on the creative part of production. Finance and money is a sensitive subjective in any business organisation, and for this reason that companies seek better ways of managing office finance. Furthermore, competition is tight, and companies are trying to stay ahead in getting new technology innovations. AI adoption in Banking sector has proven to be the edge between successful industries and others.
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