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The Expanding Use of AI Chatbots in Business: Opportunities and Risks

Discover how AI chatbots are transforming business by improving customer support, simplifying operations, and raising important security considerations to keep in mind.

Haziqa Sajid
December 19, 2024
December 19, 2024
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As users increasingly rely on Large Language Models (LLMs) to accomplish their daily tasks, their concerns about the potential leakage of private data by these models have surged.

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High-quality customer service is now one of the most important goals for companies, and using AI chatbots in business is a cost-efficient and effective way to achieve this. These tools change how companies communicate with customers and address customer service issues. Gartner has forecasted that approximately 30% of all Fortune 500 companies will use single AI-enabled channels for customer service by 2028. 

Moreover, using AI is no longer limited to customer support. It can now be used in different business areas, such as sales and marketing, generating leads, and providing human resource recruitment services.

But with opportunities come risks, like customer dissatisfaction, security breaches, and data breaches. This is why businesses must follow best practices like implementing proper security measures when adopting AI.

In this article, we will discuss how AI chatbots transform businesses, their evolution, and associated problems.

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The Evolution of Chatbots

Chatbots have come a long way since their early days. The first chatbot, ELIZA, was created in the 1960s. It used simple rules and decision trees to simulate conversations. But these early bots had limitations. They could only respond to specific inputs and often failed to handle anything outside their programmed scripts.

The real change came with large language models (LLMs). These advanced AI systems transformed conversational chatbots. Modern chatbots can understand intent, process complex questions, and respond in a way that feels human. They can even follow the flow of a conversation and build on earlier exchanges. These improvements have made AI chatbots a perfect fit for today’s businesses. 

Here’s a quick example: a chatbot assisting with online shopping can remember a customer’s preferences, like size or color. Based on those selections, it can suggest suitable products.

Chatbot for Business Success Stories

Conversational AI solutions have become valuable for businesses across industries. They help save time and money and improve customer experiences. Let’s look at some real-world success stories to see how companies benefit from the use of chatbots:

1. Sephora’s Chatbot

Sephora was among the first businesses to use chatbot technology. This began with the Kik messaging app and then expanded to Facebook Messenger. The chatbot helps customers book beauty consultations and make product recommendations. This innovation paid off, increasing customer bookings by 11%.

2. LambdaTest with Zoho SalesIQ

LambdaTest used Zoho SalesIQ to create a customer assistance chatbot and improve its support coverage. Their support team became 40% more efficient, and the average response time was reduced to less than sixty seconds. This significantly improved the provision of timely and dependable client service.

3. Erica - Bank of America’s Financial Assistant

Erica is a virtual assistant launched by the Bank of America in 2018. It helps customers manage their finances. It can track subscriptions and notify users about deposits or refunds. By November 2023, Erica had reached 40 million users, and by April 2024, it had handled 2 billion interactions. This shows how chatbots can scale to meet massive customer demand.

Opportunities of AI Chatbots in Business

AI chatbots offer various opportunities to enhance business operations and customer experiences. They make personalized recommendations and improve business efficiency. Below, we’ll go over the opportunities AI chatbots provide businesses. 

Personalized Customer Support

Modern chatbots are capable of understanding users' preferences and purchase patterns. They can analyze past interactions to offer tailored recommendations based on chat and cart history. For example, an e-commerce chatbot might suggest items similar to ones a customer has previously purchased. 

Virtual assistants can also access personal information, like medical history or finances, to provide relevant advice and recommendations. This level of personalization keeps customers engaged longer and increases satisfaction and sales chances.

Improved Efficiency

Unlike human operators, chatbots can handle thousands of user queries simultaneously without needing breaks or shifts. They provide immediate support, so users don’t have to wait for a human to respond. This efficiency is valuable during busy times, such as product launches, where a chatbot can manage a high volume of inquiries.

For example, the Mytime Active AI assistant helped reduce the number of incoming calls to the contact team, increasing overall efficiency and improving customer experience (CX). The contact team was no longer overwhelmed, and customers consistently received a positive experience.

One Place for All Answers

Human support agents typically have limited domain knowledge, which can result in customers having to repeat their questions or be transferred between agents. However, an LLM-based chatbot can learn and retain information across all domains. This helps provide consistent and accurate answers to a wide range of queries without transferring the customer. 

This improves response times and reduces customer frustration by providing immediate, reliable answers in one place.

Multilingual Support

​​LLM-based chatbots are multilingual, allowing businesses to serve a global audience. They can remove language barriers and provide better customer experiences for diverse customers. Several multilingual chatbots are available to support global customer service. 

For instance, chatbots like Intercom and LivePerson offer multilingual features to help businesses engage with customers in their preferred languages.

Cost-Effective and Easy to Setup

Modern chatbots are relatively inexpensive and can be deployed quickly. Many chatbot providers offer per-interaction pricing models, which makes them a cost-effective solution for businesses. 

They can also be set up using no-code tools and integrated with existing systems. This saves time and money compared to hiring new staff or setting up traditional customer service channels.

Multi-channel Support

Chatbots can be implemented on messaging applications like Facebook Messenger or WhatsApp. This makes it easy for customers to start interactions without leaving their preferred app. 

For instance, a customer may engage with a brand’s chatbot on an instant messaging platform such as WhatsApp and then proceed to the company’s website. This enhances usability as it facilitates interaction across various platforms in a simplified and individualized manner.

AI Chatbots Use Cases

AI chatbots have found multiple applications across various industries. Some use cases of AI chatbots in business include: 

  • Banking: Chatbots improve both customer service and financial management. They help customers handle routine tasks like checking balances or resolving transaction issues. Advanced AI agents can also assist with investment advice by analyzing market trends and a customer’s portfolio. They can recommend and make changes based on real-time data, such as rebalancing investments.
  • Healthcare: Chatbots make appointment booking quick and hassle-free. They coordinate schedules by matching a patient’s availability with a doctor’s calendar and confirming the appointment instantly. Beyond scheduling, chatbots guide patients through symptom checks. They ask simple questions to assess conditions and suggest next steps, like booking a consultation or seeking urgent care. 
  • Legal services: Chatbots streamline legal processes by saving time on repetitive tasks. They can answer basic legal questions, guide consumer rights, and direct clients to relevant resources. Moreover, chatbots can scan contracts or agreements for document review to identify key clauses and flag potential risks.
  • Retail: Businesses use chatbots to provide more personalized purchasing experiences. They can assist customers in finding products and make suggestions based on their browsing behavior. For example, an AI agent might recommend alternative items when a product is out of stock or assist with placing orders. Chatbots also support customer service by managing returns or answering questions about delivery timelines. 

The Risks of an Automated Support System

As businesses increasingly adopt AI-powered chatbots and agentic AI for business process automation, they gain efficiency but also face notable risks. From data breaches to misinformation, the potential downsides can harm a company’s reputation and operations if not carefully managed. 

Here are the risks of chatbot implementation and the broader use of AI agents in business process automation:

1. Security and Data Breaches

AI systems often have access to sensitive customer and business data. This makes them prime targets for hackers. Attackers may exploit vulnerabilities to access confidential information. They use jail-breaking techniques to force the bot to leak sensitive information. This could include sensitive customer details or internal business data. Customers, too, may hesitate to trust these systems, fearing their data isn’t secure.

Recently, a data breach attack on an AI call center platform exposed over 10 million conversations, revealing interactions between operators, customers, and AI agents.

2. Customer Dissatisfaction

Automated systems can lead to customer frustration when poorly designed or insufficiently trained. Chatbots may fail to understand complex queries, leaving customers feeling ignored. Moreover, miscommunication caused by AI agents can erode trust and drive customers away.

For instance, a bot in a logistics company promising unrealistic timelines could result in delayed shipments and upset customers.

3. Hallucinations and Misinformation

One significant risk of AI systems is their tendency to hallucinate or generate misinformation.  Misinformation can be costly for businesses as it misguides customers. For instance, hallucinations in healthcare support systems can lead to incorrect advice, potentially harming patients.

In financial services, misinformation could cost businesses heavily if customers make poor decisions based on inaccurate data. An e-commerce company may also risk losing revenue if a chatbot promises a discounted price due to incorrect programming.

4. AI Biases

AI systems rely on training data, which can sometimes contain biases. AI agents used in hiring or customer support may unintentionally discriminate based on gender, ethnicity, or other factors. 

For example, biased training data could cause a chatbot in an HR application to sift resumes unjustly. This could affect a company’s reputation and isolate certain groups.

Future Trends and Outlook

Companies are competing to push the boundaries by adding better and more distinctive features to their chatbots. Gone are the days of frustrating, robotic answers that felt distant and impersonal. Instead, the focus is now on creating personalized experiences that genuinely improve customer interactions.

And this is just the beginning. As chatbots continue to advance and refine their communication skills, we see more meaningful and positive customer interactions.

Here’s a closer look at current trends: 

  • NLP advancements: Improvements in language understanding and generation are helping chatbots make context-aware responses. This makes conversations feel more natural and human-like, allowing chatbots to respond more effectively to complex questions. As a result, they can provide smoother interactions, making it easier for users to get the help they need.
  • Integration with other technologies: Chatbots are now combined with other technologies like voice assistants and virtual reality. This makes them more versatile, allowing for more immersive and accessible experiences. Chatbots can also become part of larger AI systems, offering various functionalities and applications across different sectors.
  • Rise of voice bots: Voice technology is growing rapidly, with more than 27% of the global online population using voice search on mobile. Chatbots with voice recognition are becoming popular because they improve user engagement. They provide real-time data to companies to enable personalized experiences, making customer interactions smoother and more helpful. 

Key Takeaways

AI chatbots in business are helping automate consumer interactions and increasing productivity. However, businesses adopting AI chatbots must remain mindful of potential security risks and strike the proper balance between maximizing the benefits and ensuring chatbot security.

Here’s a quick recap of what we've learned:

  • AI chatbots are intelligent systems that interact with users to streamline customer service and business processes.
  • They provide personalized assistance to handle inquiries and guide users efficiently across different platforms.
  • The journey of chatbots began with early systems like ELIZA, progressing to solutions like Sephora’s chatbot and Bank of America’s Erica. Modern chatbots use NLP to enable more human-like interactions.
  • AI chatbots offer significant opportunities for businesses, including personalized customer support and improved efficiency. 
  • Integrating chatbots into business processes can introduce risks like security vulnerabilities, hallucinations, and AI bias.

Need help enhancing your AI chatbot’s security? Lakera can help.

With Lakera’s advanced threat detection and real-time response capabilities, you can ensure your AI chatbots operate securely and as expected. Lakera’s platform offers:

  • Visibility into GenAI behavior across all your applications.
  • Real-time threat detection and response to mitigate risks.
  • Guardrails to prevent inappropriate content and data leakage.
  • Policy management that allows you to control AI interactions without needing to alter your code.

Book a demo today to see how Lakera can protect your business-critical GenAI initiatives.

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