It’s often said that a conversation is the best starting point for a fruitful relationship. But is that the best way to work with your bank? Maybe, but not in ways you may think.

Until recently, “conversational banking” may have required talking to a bank employee at a physical branch or on the phone, and possibly getting stuck navigating endless voice menu choices. But increasingly, it can mean interacting with a bank through a chatbot on an instant messenger platform. So, WTF does “conversational banking” really mean?

What is conversational banking?
Conversational banking means interacting with a non-human about your finances, whether it’s checking your balance, finding out how much you spend on groceries or developing a budget.

“Conversational banking is about managing your financial life through voice or text,” says Keith Armstrong, co-founder of Abe, a chatbot that currently works through Slack or SMS messaging to monitor income, expenses or set a budget.

Is this another money management app?
No. While you may need to download apps to let the technology work on your device, conversational banking is about using chatbots to text or speak questions or commands.

“Consumers don’t download apps anymore; phones have become incredibly valuable real estate,” says David Sica, a principal at Nyca Partners, a fintech venture capital firm. “Banks should be able to interact with customers where they’re spending their time, and they’re spending time in chat.”

For instance, Finie, a virtual assistant developed by Ann Arbor, Michigan-based Clinc, is designed to be used on top of people’s existing apps. Clinc CEO Jason Mars says the company’s aim is to roll out the technology with several major U.S. banks by the end of the year.

How does it work?
Many of these bots are instant messenger chatbots that interact with the user’s bank account. Abe, for example, connects to a bank through Yodlee, a financial data provider, using an encrypted token. These bots can tell users how much money is in their account, how much they spent on a particular type of expense and possibly make a budget.

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Is this just a fancy way to say you’re using Siri or Amazon Alexa to manage your banking?
Conversational banking actually goes further than Siri or Amazon Alexa because it lets you communicate with the chatbot as if it were a real person. Advances in artificial intelligence have made financial chatbots able to ask and answer questions in familiar conversational language, according to Armstrong.

OK, fine. But isn’t it easier to just chat with a real person?
App developers say conversational banking can get answers faster than a human could. Here are some questions that Finie was able to answer, in a demonstration on the Clinc website:

  • What are some of the most expensive transactions that I’ve made recently? (Finie responded with a chart of the highest-priced transactions.)
  • Can you show me a breakdown of my spending in the last three months? (Finie provided a dollar figure and a breakdown of expenses by category.)
  • I want to spend a hundred dollars on a fancy dinner tomorrow night. Is that all right? (Finie analyzed the user’s spending habits and visualized them in a chart, and decided that based on the user’s spending habits, it would be OK to spend that much.)

Financial chatbots use predictive analytics to push out real-time, informed responses, says Sica.

For some sticky issues, it may be easier to deal with a chatbot than a real person. For example, when a bank is collecting debts, Sica says talking to a bot is a lot less intrusive than dealing with a collection agency calling you up and hounding you to pay your bill.

“Chatbots can be incredibly powerful,” he says. “If done properly, if you’re in collections and if you want to have a hard conversation, it’s much less embarrassing over text message.”

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