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This is an excerpt from The Message, Smooch’s biweekly newsletter about the messaging industry, chatbots and conversational commerce. Subscribe to get the next edition delivered straight to your inbox.

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Why are financial chatbots still so dumb?

Banks weren’t always early adopters but the rise of fintech is pressuring legacy institutions to raise their tech game.

Over the past week a handful of consumer banks began rolling out chatbots that help customers check their balances, apply for loans and remember to pay their bills.

But what these bots can’t — or won’t — do is more interesting.

Treading carefully ⚠️

Bank of Montreal launched a new AI-powered chatbot on Facebook and Twitter last week. Then it was Bank of America’s turn to unveil Erica, an in-app chatbot that’s currently available in Rhode Island, the country’s smallest state.

For now, both bots are focused on answering questions rather than enabling transactions, like paying bills or transferring money.

They join Germany’s DKB, which announced a chatbot called Herbie earlier this month, and Nigeria’s Diamond Bank, whose bot Ada is available on Facebook Messenger, among the growing list of banks experimenting with conversational tech, albeit cautiously.

BMO’s chief digital officer, Brad Pitts, explained their approach:

“We’re not starting in a place where people are entering personal information, or making payments or balances or any of those type of things… We have to be very thoughtful about those elements before we are comfortable rolling out the next generation of features.”

Insecure

While a global chat app like Facebook Messenger is great for discovery and acquisition, banks realize it’s still Facebook’s Messenger (and WhatsApp and Instagram, for that matter). So they’re understandably anxious about trusting it for sensitive conversations and transactions, especially in light of Facebook’s current crisis.

If banks want to provide true omnichannel customer experiences with chatbots and messaging apps, they will need to authenticate users and transfer them from public channels like Facebook and Twitter to their own secure web and mobile properties.

Luckily, I know some smart people who can help with that. 🔌

Feeling the heat 🔥

As banks navigate these complex waters, a growing number of Fintech startups are gunning for their customers.

Less than a month after launching in the U.S., London-based chatbot Cleo is signing up 1,000 users per day, according to TechCrunch.

Cleo allows users to send money to Facebook Messenger contacts, donate to charity and find better deals on credit cards and other financial products. And they’re not shy about their intention to disrupt:

“Nobody needs to be a bank to replace your banking app”
- Barney Hussey-Yeo, Cofounder, Cleo

Meanwhile, in an interview with Forbes, Craig McLaughlin, whose company Extractable helps financial institutions build their digital strategies, explains what banks are up against:

“Some are challenged with growth, some with scaling, but they are all dealing with infrastructure that is dated and vendor systems that have locked them in. They deal with a spaghetti of technology, vendors and internal IT groups where, in many cases, they are encumbered with 75% of their annual budget going to maintain existing code bases and patches, not new stuff.”

Time for everyone to put their money where their mouth is. 🤑

The GIF Economy

One of the strangest byproducts of messaging’s rise is the resurgence of a once-obsolete image format dating to the late ‘80s.

57% of people have responded to a message with a GIF, according to Facebook Messenger, and we’re not just talking about millenials: 53% of folks over the age of 55 use GIFs to communicate with friends and family.

So it was only a matter of time until someone found a way to monetize.