Artificial Intelligence (AI) chatbots are revolutionizing customer service across industries. They keep the businesses connected to their customers across timelines and beyond time constraints. Thus chatbots are being increasingly adopted by businesses to improve customer experience and increase brand loyalty. AI chatbots play a pivotal role in various other business operations such as diverting human resources to core tasks, enabling smart messaging to add value to customer experience, assisting customers to make the right choice, upselling and recouping carts, and increasing personalization.
AI chatbots also enable an effective reach to the millennial customer segment as they prefer to chat as against telephonic conversation. The use of chatbots allows for interactive marketing and also offers better services on mobile devices. They also simplify day-to-day tasks such as hiring a cab, ordering food online, checking the weather, managing inventory and purchase orders, and more. Thus, the technology is anticipated to have a bright future.
Owing to diverse applications, the AI chatbot market is projected to grow significantly, at an average CAGR of 23.9%. The market growth is primarily driven by the rising usage of generative models in chatbots. These models leverage deep learning techniques that generate new content based on the patterns in new datasets. The use of chatbots is also driven by the increasing number of messaging applications.
AI chatbots have wide-scale applications in the E-Commerce and BFSI Industries. This is explained by the increase in cross-selling activity and decreased customer service costs, for the BFSI sector. Similarly, chatbots are augmenting customer experience in the e-commerce sector by offering brand-specific real-time price updates while shopping. The use of chatbots also reduces operating costs resulting in increased ROI.
The penetration of payment services to the chatbots is providing new opportunities for market growth. The developers of chatbots can directly integrate payment gateways with an assistant, allowing them to use messaging platforms to provide payment services. Chatbots can also be used to collect commissions from nominal fees.
Thus, various market players are striving to accumulate funding for R&D investments, to leverage market capabilities. For instance, in February 2024, NLX Inc., raised $12.0 million in Series A funding to grow and develop its AI platform for managing chat, voice, and multimodal conversational applications. The company will use the funding to expand the capabilities of its platform, aimed at revolutionizing the customer service for brands.
In January 2024, Kore.ai secured $150.0 million in funding. This infusion is pivotal not just for Kore.ai, but for the entire field of AI. The company offers various virtual assistants, across popular channels like Chat, Voice, and Web. It serves a variety of sectors including banks, search bots, the food industry, the retail industry, and the health industry. The company also offers solutions to optimize operational functions such as HR, IT, agents, and more.
The major consideration of the funding was the significant contribution by the computing giant Nvidia. The strategic alignment of the two firms has the potential to significantly accelerate Kore.ai’s product development and innovation. Thus, groundbreaking advancements in AI applications for enterprises, are expected from the integration of Nvidia’s expertise in AI hardware and software with Kore.ai’s conversational AI platform.
Another addition to the funding list is Quora Poe. It has secured funding worth $75.0 million from Andreessen Horowitz, in January 2024, aimed at the expansion of the AI chat platform. The business is currently focusing on creator monetization and is thus, integrating leading AI models like ChatGPT and DALL-E 3. The market players are largely focusing on AI chatbots, as the same is emerging as a viable alternative for content creators to generate income, which is comparable to the revenue generated from YouTube ad streams.
The other businesses on the list of funding acquisitions that aim to contribute significantly to the conversational AI wave include Inflection AI.Inc. ($1.5 billion), Uniphore Technologies Inc. ($620.9 million), Hugging Face ($395.2 million), Dixa ($157.9 million), Character.AI ($150.0 million), and more.
The growth of the AI chatbot market will be at its peak in the North American region, shortly. This would be supported by the increasing adoption of emerging technologies in the region such as Natural Language Processing (NLP), Machine Learning (ML), voice recognition, and more. Additionally, various industries including IT, ITeS, telecom, healthcare, media and entertainment, retail, BFSI, and more are increasingly adopting AI chatbots across the region to elevate the customer experience.
Encapsulating, the coming years will witness major changes in chatbot technologies attributing to the integration of AI capabilities to the existing infrastructure. Market players are actively seeking opportunities in the arena and are adopting various strategic endeavors to stay competitive in the market which is contributing considerably to the industry growth. However, the success of the technology can be ascertained only by ensuring the availability of exhaustive high-quality data, in the absence of which, the chatbot might fail to understand the customer’s intent and demonstrate an inability to solve the posed query. Additionally, the market players need to effectively address the complex and time-consuming setup and maintenance requirements, to ensure high Return on Investment (ROI).