Regulatory Backlash Against Chatbots Comes as Banks Find Value in Their Use

For banks, the chatbot is a tool that’s being retooled, a work in progress.

The progress is being hastened by artificial intelligence (AI), where the digital customer assistants are used, and have long been used, to help consumers access a variety of data and transaction level-detail in text-based interactions or through integrated voice response (IVR) setups.

Now comes the crackdown: The Consumer Financial Protection Bureau (CFPB) will regulate chatbots, and the complex functions they enable, as banks continue to embrace digital channels and AI. The fear is that the CFPB will be heavy-handed enough to drive chatbots right out of their usefulness.

In the CFPB’s Crosshairs

Earlier this week, the White House announced a set of initiatives designed to “crack down on everyday headaches and hassles” and noted that the CFPB would be targeting “time-wasting chatbots used by banks and other financial institutions in lieu of customer service. The CFPB will identify when the use of automated chatbots or automated artificial intelligence voice recordings is unlawful, including in situations in which customers believe they are speaking with a human being.”

There’s a backhanded compliment in the mix, and included in the release: “While chatbots can be useful for answering basic questions, they often have limited ability to solve more complex problems and disputes. Instead, chatbots frequently provide inaccurate information and give the run-around to customers seeking a real person.”

What We Chat About When We Chat About Chatbots

The simple take on the chatbots is one where a consumer is stuck, endlessly pressing zero, trying to get to a live call center agent. And at times, the spoken prompts are missed, mistaken, leading down a long road of repeating birth dates or account numbers. And there are, as always is the case, questions and refinements tied to data collection and use.

But we note that the AI-driven chatbots, though not perfect, are evolving. As detailed in bank earnings reports and elsewhere, the features have been improving internal, back-office functions and consumer-facing events. We reported last year in one tracker that the top 14 global investment banks could supercharge their front-office productivity by 25% by using generative AI and bots.

Bank of America stands out here and noted in its most recent filings and earnings presentations that Erica, its virtual financial assistant and chatbot, underpinned by AI — and available through the mobile app — logged 19.6 million users in the second quarter, up from 12.4 million in the second quarter of 2021. Interactions with Erica were 167 million, up from 94.2 million three years ago. Beyond basic account information, Erica also helps users manage/replace cards and manage Zelle payments.

Wells Fargo, for its part, has noted that, as of the second quarter, a year after launching Fargo, the company’s AI-powered virtual assistant, “We have had nearly 15 million users and over 117 million interactions,” as CEO Charlie Scharf said on the call, adding, “We expect this momentum to continue as we make further enhancements to offer our customers additional self-service features and value-added insights including balance trends and subscription spending.”

The regulatory push might, through the efforts of the CFPB, push too hard, curtailing or eliminating entire parts of the consumer-facing continuum from the purview of chatbots, rather than letting consumers help banks fine-tune their efforts. And that, we’d add, would stifle at least some of the banks’ innovative efforts.