AI-CHATBOT UNIT-1, Lecture Notes Prepared By: Ch Tatayya Naidu
Lecture Notes
Introduction: Benefits from Chat bots for a Business, A Customer-Centric Approach in
Financial Services, Chat bots in the Insurance Industry, Conversational Chat bot
[Link] the Sources of Data: Chat bot Conversations, Training Chat bots
for Conversations, Personal Data in Chat bots, Introduction to the General Data
Protection Regulation (GDPR).
Benefits from Chat bots for a Business:
According to the Grand View Research 2018 report,1 the global chatbot market is
expected to reach $1.25 billion by 2025, with a CAGR of 24.3% (average annual growth
rate). The chatbot market will grow significantly across the financial services sectors, as
they are among the largest customer-facing businesses (in our context, the insurance
business).
The immediate value creation for institutions happens by significantly reducing
the operating cost and bringing customer satisfaction.
Technically speaking, chatbots are a combination of technology, artificial intelligence
(AI), and business process designs.
The technology provides the carrier for exchanging messages between chatbots
and customers, and chatbots and internal systems, delivering information in real time
over mobile phone or the Web.
The AI builds the core brain of the chatbot, which understands the natural
language decoded from machine instructions. They also make decisions during
conversations.
The most critical piece is the business process design, which identifies the
standard process to access information, what information can be shared with
whom, and convenient ways to buy/sell/inquire about current products.
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AI-CHATBOT UNIT-1, Lecture Notes Prepared By: Ch Tatayya Naidu
While chat bots offer immense monetary value for the company regarding reducing
the cost of customer service and as a new channel for revenue by sales of products and
services, they also add immense value to the customer’s experience.
• 24x7 availability: Chatbots are available 24x7 through phones or the Web. This
gives the customer options of when to interact with the services.
• Zero human touch experience: Chatbots allow customers to have a zero human
touch experience for their basic requirements. This way of getting the necessary
information without going through the manual route is entirely new.
• Simplicity: Chat bots simplify the process for customers by decoding the process
into clear steps. The information delivered by is also very concise and to the
point, as per the customer query.
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A Customer-Centric Approach in Financial Services:
Customer behavior and interactions have evolved to a personalized approach
over the last two decades. Competition and greater reliance on technology for
delivery of services are keys to this change in customer behavior. The importance of
a customer-centric approach in products and services is far greater than ever
before. The customer-centric approach involves many direct and indirect
interventions through multiple channels
A Customer-Centric Approach in Financial Services
The core element of customer centricity is a focused customer leadership. If
the leadership aligns the strategy to become a customer- centric organization, the
whole outlook and communications become customer-centric. Amazon has proved
this and is now seen as the benchmark for a customer-centric approach.
Understanding the customer and designing experiments to validate the hypothesis
form the next steps in a customer-centric approach. Once we set up a successful
connection with customers, we need to empower the front line, track essential
metrics, and keep the feedback cycle. These are some indicative steps to achieve a
customer-centric approach.
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In financial services, primarily referring to retail products/services, the
interaction points are many, and all touch points are critical to being customer
focused. Banks and insurance companies deal with many individuals customers
daily via multiple channels
Digital interventions are redefining the ways customer engagement happens.
There are some critical trends among customers accessing banking and insurance
services.
More natural interactions: The user experience is of the utmost importance.
The customers are looking for easier access to products, an appealing
experience, and easy action in a few clicks.
More touch points and flexibility: The customer does not want fixed 9 am to
5 pm branch visits or no access on weekends. Customers want to be able to
access and buy products anytime and via multiple channels. It may be a
mobile app or a web app or phone banking, but they want more flexibility in
how they interact.
Responsive service: Customers expect that the bank/ insurer knows about
them and is responsive to their needs. They want individual attention and
appreciate responsive customer service.
Clear product information: With so many players and products, customers
want concise and relevant information to be delivered to them. Additional
details they can seek with follow-ups. The customer does not want a pile of
information or to get confused.
Great value from the products: The product features are numerous and
many times the customer is unaware of how to make the best use of them.
Customers expect the bank/insurer to keep reminding them to draw the best
value out of a product and if possible, offer new products that might be
useful.
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Chat bots in the Insurance Industry:
Gone are the days of waiting for the next available operator or taking the effort to
get the information. The customer-centric approach is one of the critical differentiators for
a company today. Chat bots are helping augment customer engagement and brand
presence, and they are proving to be very useful in most industries including the insurance
industry. The emergence of mobile and social media has not only provided new channels of
communication between people but has also made people feel closer to businesses.
Companies are investing heavily in creating and maintaining a robust digital presence and
implementing new solutions so they can have a better customer reach.
Traditionally, the insurance industry has been slow to change. Due to the
complexity of insurance, covering a diverse set of risks, the operating model has been
cumbersome, with a lot of paperwork, background checks, and approvals. With the new
era of digital business and increasing competition, the insurance industry is also addressing
the needs of the always-on, always-connected digital world.
Roughly 70% of calls to a call center of an insurance company are queries that can
be addressed without a human interface, such as customers requesting details on their
claim status, policy renewal, or information on financial advisors. Call costs and Time will
be drastically reduced. Where live agents can handle only two to three conversations at a
time, a chatbot can operate without any such limit and reduce the human resources
required to handle such queries. It can also automate repetitive work.
Virtual agents such as chatbots provide this information in real time, which is
significant use of technology to make the interaction faster and more efficient. The services
can be accessed 24x7 through multiple digital interaction platforms such as mobile apps,
Face book Messenger, Twitter, SMS, Skype, Alexa, and web UI chat, providing omni
channel support to customers.
Figure 1-6 shows the ways in which chatbots are transforming the
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Insurance Industry.
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Conversational Chat bot Landscape:
In this internet era, every time a person requires a service or information, the
person must find an appropriate website.
In the mobile era, native apps took center stage with the same purpose as a website.
Every business nowadays has one website and one mobile app at the bare minimum.
Now, in the AI era, a customer is flooded with information on the website and the mobile
app, and there aren’t as many employees to help the many customers who are seeking the
service or information. Moreover, even if a company finds many employees, the cost is very
high. Conversational bots or chat bots are playing a pivotal role in the AI era by addressing
the critical problem of information deluge at an affordable cost.
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The organization is going through a digital transformational journey where chat
bots are being discussed in roadmaps. The primary objective is to improve customer
experience through simplified touch points and faster service time. This objective often
results in higher conversion for newer products and services and reduced cost of
operations.
A massive growth of bot frameworks (technology) and advancements in the natural
language understanding (AI) has led to the adaption of chat bots in many industries.
Companies are building chat bots across the lifecycle of their customers, namely
• Acquisition
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AI-CHATBOT UNIT-1, Lecture Notes Prepared By: Ch Tatayya Naidu
• Engagement
• Servicing
• Feedback
Acquisition and engagement help companies build a strong top line for the business while
servicing helps in reducing cost and feedback increases customer retention.
Figure 1-7 shows an industry-wide adaption of chatbots and various use-cases.
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Identifying the Sources of Data:
Chat bots are one more channel of providing conversational flows to customers. There are
many types of touch points a bank or insurer provides to customers in the day-to-day
operations, starting from selling a new policy to settling escalations of claims. All these
touchpoints are sources of data for building an AI Assistant, i.e., chatbot
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AI-CHATBOT UNIT-1, Lecture Notes Prepared By: Ch Tatayya Naidu
Chat bot Conversations:
The chat bot tries to mimic the conversation of a real human. In the context of interacting
with a business, the conversations can be of a broad, generic subject or particular to the
product or service.
Based on the scope of conversation, we can divide the conversation into two types:
General conversations and Specific conversations.
The type of conversation decides the scope of questions and knowledge the chat bot or
human assistant needs in order to interact with a customer.
General Conversations
A general conversation is a typical conversation that happens when a customer and
assistant are not confined to a specific topic or concern. The conversations can start from
any point and can transverse to any direction based on the knowledge level of an assistant.
An example of such a conversation is
• A user walks into the bank and wants to talk to the manager. Before the start of the
conversation, we don’t know who this person is and why he is visiting the manager. The
conversation can be about a sponsorship event, a loan account or utility payment, or
something else.
To deal with such conversations, the chatbot needs to be built with many types of contexts
and appropriate replies. The replies for such general conversations are also not heuristic in
nature; they involve human natural intelligence and information/experience that is not
available for the chat bot to build a conversation.
Many advances are happening in AI; we try to mimic complete human behavior by
training with massive datasets and scenarios. However, we are still far away in terms of
having complete general-conversation-based chatbots for industrial use cases.
Specific Conversations
Specific conversations are limited to some predesigned outcomes. These types of
conversations have higher clarity of the scope of the talk and clear Any deviations from the
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set conversations are generally directed to predefined outcomes. All other cases are
redirected to appropriate channels, or the conversations ends.
An example of such a conversation is
• A customer walks into a store and goes to the refund desk. In this case, the refund desk
has some specific conditions to process a refund and maybe some other particular
functions. The customer cannot expect any other query than a refund to be offered at the
refund desk. If he asks a question regarding discounts, he is directed by the refund desk to
another counter.
Specific conversations are more predictable and can be handled with higher accuracy. The
chat bots designed for specific tasks can communicate with information. The conversations
are outcome-oriented and end once the outcome is achieved.
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AI-CHATBOT UNIT-1, Lecture Notes Prepared By: Ch Tatayya Naidu
Training Chatbots for Conversations
Chatbots need to be taught how to have a conversation. The training of chatbots involves
exposing chatbots to both rules and natural conversations. For general conversation
chatbots, the amount of training data required is enormous, and so far we have not
succeeded in creating an accurate general conversation chatbot. Alexa, Siri, and Google
Home are few examples in this direction.
Creating chatbots also requires a set of rules documented or tacit to proceed with
conversations. For example, if a chatbot asks for a customer’s name, it must expect a first
name and a last name. If the last name is not captured, it must go back and confirm the
name. This is important to make sure the conversation is specific to the correct customer.
Self-Generated Data
Chatbot developers need to start with some data to make the chatbot come alive. Usually,
that data is generated by developers for some necessary flow themselves. This way they get some
high-level flow defined by themselves so that they can keep developing the chatbot with
assumptions.
In many cases, developers create multiple inputs and self-annotate them for training basic
flows; being generated by developers for testing the flows, they are not the complete set for
training. These inputs help developers get the chatbot ready for a beta release and collect data
from real users. Self-generated data is only a way to start development; it’s not for general public
use.
Customer Interactions
Customer interaction is the best source for training the chatbots. These conversations are the best
to mimic for mainly two reasons:
o Typical queries can be captured, and chatbot training can be prioritized for
specific conversations.
o The conversations capture real solutions provided in the past by experienced
customer representatives.
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Customer interactions happen through multiple channels, and these channels produce data for
training chat bots as a new channel for customer interactions. Figure 2-1 shows the six main
types of customer interaction channels for any modern business, applicable to our case of an
insurance and bank as well.
Phone
Phone calls are attended by experienced call center representatives and mostly accessed when the
customer requires an immediate resolution to their queries. In modern days, this mode is
recommended as the last step 24
Phone
Phone calls are attended by experienced call center representatives and mostly accessed when the
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AI-CHATBOT UNIT-1, Lecture Notes Prepared By: Ch Tatayya Naidu
customer requires an immediate resolution to their queries. In modern days, this mode is
recommended as the last step since it is costly for companies to maintain. From the call center,
we can get call transcripts, call recordings, core issues, and their resolutions. Core issues
identified during calls and their resolution can help our chatbot learn to identify issues and
provide solutions.
Emails
Email conversations are usually detailed and have a chronology of events explained and a clear
statement of what the customer wants. These emails can be a good source to capture issues that
need more than one-dimensional data to solve them. Customer email records can be accessed in
plain text format, with original emails and the response trail to developed conversations.
Chat
Many financial institutions use online web chat with customer service representatives to make
sure they can serve multiple clients at the same time and reduce dropout of incoming queries at
the call center. This data set is very close to what a chatbot needs to mimic a conversation. Past
chatlogs can be accessed as plain text files.
Social Media
Social media become popular when social media companies allowed business accounts to be
created on their platforms. The interaction of social media tends to be generic and difficult to
track with the actual customer of the general population.
Some platforms allow business accounts to download their data while some allow extracting data
from API endpoints.
Customer Self-Service
Some necessary troubleshooting processes are created as self-service portals for
customers. They may be as trivial as changing the PIN or offering FAQs for more information.
Successful self-service cases are good for creating processes to train the chatbot to help people
who ignore or can’t use self-service. This data is usually structured as a tree of conversations
leading to the solution of specific problems.
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Mobile
Mobile here is considered the interactions that happen via mobile apps and mobile browsing
history by customers. The data captured from these mobile applications is captured as activity
logs of customers.
Customer Service Experts
Customer service experts play a significant role in identifying typical customer queries and how
they handle them in real situations. Their inputs are also helpful in creating default replies and
designing fall-over options. The years of experience dealing with customers can be used to
train as well as test the initial chatbot release. Experts need to be part of the process of
developing chatbots for quality assessment of the chatbots’ experience and accuracy. since it is
costly for companies to maintain.
From the call center, we can get call transcripts, call recordings, core issues, and their
resolutions. Core issues identified during calls and their resolution can help our chatbot learn to
identify issues and provide solutions.
Open Source Data
Open source data is instrumental when you want to create general conversation chatbots and
want to include some general flavor for specific talk. There are plenty of data sources available
for training chatbots in natural language conversations.
A few of the open data sources are listed below; you can have more datasets as per your
need.
Yahoo Language Data, created from Yahoo Answers ([Link]/~ark/QA-data/)
WikiQA corpus, created from bing queries that redirect to wiki pages with a solution
([Link]
aspx?p=4495da01-db8c-4041-a7f6-7984a4f6a905)
Ubuntu Dialogue corpus, created from Ubuntu technical support
([Link]/rtatman/ubuntu-dialogue- corpus)
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Twitter data on Kaggle, created from customer support
at Twitter ([Link]/thoughtvector/customer-support- on-twitter)
Crowd sourcing
The most critical training data comes from REAL people interacting with your chatbot in
real time. This not only helps in building the corpus for training but also help developers see
darker zones where the chatbots [Link] best practice cases, all chatbots released at beta
version are exposed to real conversations with selected customers and internal employees.
The data is collected, and NLP models are retrained for each real instance.
Another outcome of crowdsourcing is laying down the guidelines and scope of the chatbot.
Customer service experts also use the crowdsourcing inputs to build response
languages and intensity for different conversations. If you are building a chatbot in a regional
language, you need to rely on crowdsourcing of training data. Some companies can provide
you access to people who will interact with your chatbot to build the training corpus.
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Personal Data in Chatbots:
When we try to emulate human-like conversations with chatbots, we allow the humans to reveal
information about themselves to the chatbot machine. This information then becomes risk for
unauthorized access and may violate privacy laws and terms. This concern is of the utmost
importance when you deal with customer queries that connect them to internal databases and
required customer-specific information to process requests. The customer can reveal the personal
data both intentionally and unintentionally:
• Intentionally: To get an account balance, you need to provide an account number and PIN.
• Unintentionally: To know the claim process, you may end up revealing your policy number.
In both cases, the data is being captured by the chatbot, and the chatbot engine tries to
process that data. Even if the chatbot can’t process the data, it still creates a copy of a
conversation that contains private and personal data of customers.
Another area where we expose personal data to our chatbots is at the time of training the
chatbot. Internal data of customers might have personal, financial, and demographic information
without the developer’s full knowledge. For example, an email conversation regarding a claim
settlement will contain a lot more details than just the customer-agnostic settlement process.
In deployment and training, personal data is captured and isvulnerable for law infringement and
hacking, but this data is importantfor developing custom-centric chatbots. If we do not capture
the data,we will not be able to design a chatbot that can take actions and provide information
from internal databases.
We require more information than a normal conversation to be ableto develop a chatbot
that can access customer data and provide real-time information, securely and privately. The
personal information helps in developing
• Authentication and access
• Compliance to company policies
• A customer information retrieval system
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• A third-party API retrieval system
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There are other related services and databases that require personal information to allow
access to customer information in the private data zone.
As we just explained, we need personal data and other private datafrom customers to
make the 24x7 AI assistant function with relevant data.
This requires us to be very sure of both the customer agreements andlocal/international
data regulations. Complying with regulations becomesof the utmost importance for banks and
insurance companies to buildspecific conversation chatbots.
This is a challenge for companies because it limits the companies from using well
developed, third-party chatbot services like Alexa, Dialogflow,and Watson. These services
require the data to be sent to their server and stored for chatbot conversations. The limitations
have created a vacuum to be filled by frameworks that can develop state-of-art chatbots internal
to the companies.
It is essential to get awareness about what data privacy regulations require of companies
when dealing with customer data. The General Data Protection Regulation (GDPR) is the leading
regulation from the EU region and it’s also relevant to other parts of the world. In the next
section, we give a high-level overview of its requirements, which are essential to consider
when developing a chatbot.
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Introduction to the General Data Protection Regulation (GDPR)
The GDPR is the successor to the 1995 Data Protection Directive, which was a regulation, not a
directive. While the directive was left to member states to be transposed into national laws by
legislation, the GDPR regulation is immediately enforceable as law in all member states
simultaneously. It is a regulation on data protection for European Union citizens. It also applies
to the transfer of personal data outside of the EU area. The GDPR gives users control over their
personal information and whether they want to share or keep their data private.
It was adopted by all EU states and came into force on May 25, 2018.
The regulation enforces hefty fines against non-compliant organizations (fees up to 4% of annual
revenues or 20M € , whichever is greater).
Data Protected Under the GDPR
The GDPR in its definition of data is very broad and covers a multiverse of data
generated and captured by companies. As per the GDPR, the protected data includes Necessary
identity information (name and surname; date of birth; phone number; a home address; an email
address; ID card number and Social Security number etс.); web data (location, IP address, cookie
data);
health and genetic data; biometric data (data that identifies a person); racial and ethnic origin;
religious beliefs; political opinions.
This includes data that chatbots deal with in the course of conversations. Data Protection
Stakeholders. As per the regulation, any company that collects and processes EU citizens’
personal information or that stores personal data of EU residents must comply with the GDPR,
regardless of whether the company is present in EU territory or not. This scope means that most
global businesses need to be GDPR-compliant.
The regulation defines three stakeholders to the GDPR:
Data subject: A person whose data is being processed by a controller or processor.
Data controller: An individual or company that determines the purpose and conditions of
collecting and processing personal data from users.
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Data processor: An individual or company that processes personal data for data controllers.
The definition of stakeholders directly impacts how we design our chatbots and ensure the
rights of our customers who interact with chatbots. For example, a customer interacting with a
chatbot is a data subject, and the bank or insurer or company becomes the data controller.
The CRM or database system authorized personal also becomes the data controller. If
your chatbot uses Dialogflow for processing the data, then it becomes the data processor.
The details of the law can be read from the source here:
[Link]
Customer Rights Under the GDPR
It is essential for the chatbot developer team and leadership to understand what rights are
enshrined in the GDPR for the customers. The chatbot functionality must abide by them.
# Right Data Controller Responsibilities
1 Right to be Informed
Be transparent in how much you collect and process personal information and the purpose you
intend to use it for. Inform your customer of their rights and how to carry them out.
2 Right of Access your customers have the right to access their data. You need to enable this either
through the business process or technical process.
3 Right to Rectification
your customer has the right to correct information that they believe is inaccurate.
4 Right to Erasure you must provide your customer with the right to be
forgotten, provided that your legitimate interest to hold such information does not override theirs.
5 Right to Restriction of Processing our customer has the right to request that you stop processing
their data.
6 Right to Data Portability you need to enable the machine and human readable export of your
customers’ personal information.
7 Right to Object your customer has the right to object to you using their data.
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8 Right Regarding Automated Decision Making you customer has the right not to be subject to a
decision based solely on automated processing, including profiling.
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The rights under GDPR are stated below for your reference:
Chatbot Compliance to GDPR
In the above sections, we discussed that the chatbots are no longer the subject of business
communication only; chatbot makers must consider them in a data controlling and processing
manner. This requires the chatbots to face the strict scrutiny of the GDPR.
Some of the generic and minimum steps that the chatbots makers need to take to be ready for
GDPR compliance are listed below. The list is not comprehensive; it is just an indicative list for
internal assessment.
Please consider a full audit of a chatbot before making it public for general use.
• The chatbots, before starting a conversion, must clearly state what data will be collected in the
conversation and must be able to access what data is being collected.
• The chatbot user must be allowed to access, review,download, and erase the data collected by
the chatbot.
• The chatbot logs must be securely stored and made accessible to users. Also, you must have the
explicit permission of the user before processing the log to train your chatbots.
• A clearly stated privacy policy and contact information for a Data Officer for any concerns.
• The option of talking to a real operator rather than a machine chatbot.
These items are an indicative list of the steps that the chatbot owner needs to take. A full
audit may reflect more areas to make sure the chatbot is fully compliant.
*****
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Assignment Questions
1. Outline the Benefits from Chat bots for a Business? ( Apply)
2. Illustrate a Customer-Centric Approach in Financial Services using Chat
bots?(Apply)
3. Identify the need for Chat bots in the Insurance Industry?(Apply)
4. Illustrate the Conversational Chat bot Landscape? (Apply)
5. Identify various Sources of Data for Chat bots? (Apply)
6. Illustrate about the Chat bot Conversations? (Apply)
7. Outline the Training of Chat bots for Conversations? (Apply)
8. Identify the need for privacy of Personal Data in Chat bots? (Apply)
9. What is the General Data Protection Regulation (GDPR)? Explain Chatbot
Compliance to GDPR? (Apply).
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