Foundation Course

Continuous Assessment-2

Semester-4
Aria Tyagi
22BA053/28
SYBA-A

“Automating Assistance: Understanding

Businesses' Dependence on Artificial Intelligence
for Customer Service Inquiries”

Based on an Associated Press article published by

Business Standard on June 2nd 2023.
Sr. Index Page. No
No
1 Summary of the Article 2
2 Introduction 3
3 How and Why do Business Use AI? 3-4
4 The Advantages to a Consumer 4
5 The Drawbacks for a Consumer 5
6 Risk Mitigation with regards to Consumer 5-6
Rights and Protections
7 Bibliography 6
Word Count: 1633
Article Attached at the End.
 Summary of the Article

The Consumer Financial Protection Bureau (CFPB) has recently published a report
expressing concerns regarding the escalating dependence of banks on chatbots for managing
routine customer service inquiries. This shift prompts the CFPB to scrutinize the potential
repercussions of banks scaling back human customer service personnel in favour of AI-driven
solutions. Moreover, the bureau underscores the risks associated with inadequately designed
chatbots, which could lead to violations of federal laws governing debt collection and
personal data usage.
Rohit Chopra, the Director of the CFPB, emphasizes the possibility of widespread harm to
customers if firms fail to implement these services adequately. Despite the efficiency gains in
handling basic inquiries and transactions, the agency questions the capability of chatbots to
navigate the intricacies of consumer protection laws and furnish accurate information,
especially regarding debts or transaction disputes.
Furthermore, the report identifies potential hurdles faced by elderly customers or individuals
with limited English proficiency, who may encounter difficulties interacting with chatbots
effectively and accessing the necessary assistance. Drawing from his experience at both the
CFPB and the Federal Trade Commission, Chopra consistently stresses the significance of
ensuring compliance with consumer laws in the deployment of AI-driven solutions.
The concerns highlighted by the CFPB point to the necessity for cautious consideration and
regulation as banks and financial institutions increasingly integrate AI technologies into their
customer service operations.
With the growing prevalence of chatbots in the banking sector, there arises a pressing need
for thorough evaluations of their implementation and functionality. While these AI-driven
solutions offer efficiency benefits, they also introduce complexities and risks that must be
carefully addressed.
Chopra's emphasis on the potential for widespread customer harm underscores the gravity of
the situation. Poorly designed chatbots could inadvertently provide inaccurate information or
mishandle sensitive data, leading to legal and financial repercussions for both customers and
financial institutions.
Moreover, the report's recognition of the challenges faced by vulnerable demographics, such
as the elderly or non-English speakers, underscores the importance of inclusive design and
accessibility considerations in AI-driven customer service solutions.
In light of these concerns, regulatory oversight and industry standards must evolve to ensure
that the integration of AI technologies aligns with consumer protection laws and ethical
standards. This requires collaboration between regulatory bodies, financial institutions, and
technology providers to establish guidelines and best practices that safeguard consumer rights
and mitigate risks associated with AI-driven customer service.

2
 Analysis

Introduction
Businesses in an array of industries have been using artificial intelligence (AI) more and
more in recent years to improve and expedite their customer service operations. The
increasing awareness of AI's potential to completely transform consumer interactions through
its efficiency, scalability, and round-the-clock availability is reflected in this trend. The use of
AI for customer service inquiries is growing, ranging from chatbots answering standard
questions to more sophisticated AI-driven solutions supporting tailored suggestions and
transactional support. But this dependency also brings up significant issues and concerns
about regulation compliance, accuracy, and the possible effects on consumer experience. This
study looks at the factors that influence businesses' reliance on artificial intelligence (AI) to
respond to customer service queries. It also looks at the benefits and drawbacks of this
technological change from a consumer’s perspective, highlighting the impact it has on their
rights.

How and Why Do Businesses’ use AI?

The adoption of artificial intelligence (AI) in business has seen a gradual evolution driven by
technological advancements, particularly in machine learning and neural networks. Initially
constrained by high costs and technological limitations, AI has become more accessible due
to innovations in automation and natural language processing. Businesses now benefit from
increased access to vast amounts of digital data, enabling AI systems to analyse and learn
from large datasets. Moreover, the decreasing costs of AI development and implementation,
coupled with the availability of cloud computing services and AI platforms from tech giants
like Google, Amazon, and Microsoft, have made AI more practical and affordable for
businesses of all sizes. These factors have paved the way for businesses to harness AI for
various purposes, from data analysis to customer service automation, driving efficiency and
innovation across industries.
Businesses increasingly rely on artificial intelligence (AI) to answer customer service
inquiries for a number of reasons.
Artificial intelligence (AI)-driven chatbots and virtual assistants can manage a high volume
of queries concurrently, giving clients prompt answers without requiring human involvement.
Businesses are able to decrease response times and streamline their customer service
operations because to this efficiency.
By eliminating the need for a sizable staff of human agents, using AI for customer care can
save firms money. Routine questions can be handled by chatbots, freeing up human agents to
concentrate on more complicated problems. This can boost output and save labour costs.

3
Regardless of time zones or business hours, AI-powered customer care systems may offer
assistance to clients 24/7. This guarantees that clients may get help anytime they need it,
increasing client loyalty and general pleasure.
Customer care systems powered by AI are simply scalable, requiring no extra staff to meet
demand variations. Businesses may manage peak times efficiently because to its scalability
without sacrificing service quality.
Artificial intelligence (AI) systems can provide tailored recommendations and responses by
analysing client data and preferences. Businesses may increase customer satisfaction and
loyalty by offering a more personalized and engaging customer service experience by getting
to know each client's requirements and preferences.
AI-powered customer support systems are able to extract useful information from consumer
interactions, including sentiment analysis, trends, and frequently asked questions. Utilizing
this data, companies can enhance their offerings in terms of goods and services as well as
client engagement tactics, resulting in an increase in total profitability.
Businesses who adopt and use AI for customer service can have a competitive edge in the
market as AI technologies proliferate. Businesses may stand out from rivals and draw in and
keep consumers by offering exceptional customer experiences and cutting-edge solutions.

The Advantages of this Advent to a Consumer

AI-powered customer service offers a host of benefits to consumers. Firstly, it ensures round-
the-clock availability, empowering consumers to seek assistance and resolve issues at any
time, without being constrained by traditional business hours. Additionally, AI enables faster
response times, providing immediate solutions to inquiries, thus eliminating the need for
lengthy queues or delays associated with traditional channels. Furthermore, AI technology
allows for personalized assistance by analyzing customer data and preferences, delivering
tailored recommendations that enhance the overall customer experience. Consistent service
quality is also ensured through AI-powered solutions, as standardized responses are provided
regardless of inquiry volume or time of day. Moreover, the convenience and accessibility of
AI-driven channels, accessible through various digital platforms, make it easier for
consumers to seek assistance whenever and wherever they need it. Efficiency and resolution
are improved as AI systems handle routine inquiries accurately and quickly, reducing the time
and effort required for issue resolution. Lastly, AI enables businesses to deploy innovative
solutions such as voice recognition and predictive analytics, anticipating consumer needs and
enhancing the customer experience proactively. Overall, AI-driven customer service
revolutionizes the way consumers interact with businesses, offering unparalleled
convenience, efficiency, and personalized support.

4
 The Drawbacks of AI Usage
While AI-powered customer service offers numerous benefits, there are also drawbacks that
businesses and consumers should be aware of. Firstly, despite the convenience of round-the-
clock availability, AI systems may lack the human touch and empathy that customers often
seek in resolving complex issues. Additionally, faster response times can sometimes result in
superficial or incomplete solutions, as AI may struggle to fully understand nuanced inquiries
or address unique situations. Personalized assistance, while possible with AI, may raise
concerns about data privacy and security, as customer data is often collected and analyzed for
this purpose. Furthermore, the consistency of AI-driven responses can sometimes lead to
frustration, as customers may prefer varied or more flexible interactions with human agents.
The convenience and accessibility of AI-driven channels may also come at the cost of
reduced human interaction, which can be particularly challenging for customers who prefer
person-to-person communication. Moreover, the efficiency of AI systems in handling routine
inquiries may lead to job displacement for human customer service agents, raising ethical and
social implications. Finally, while AI enables innovative solutions, such as voice recognition
and predictive analytics, there is also a risk of bias or errors in algorithmic decision-making,
potentially leading to unfair treatment or discrimination against certain customers. Overall,
while AI offers significant potential to improve customer service, it is essential for businesses
to carefully consider these drawbacks and address them to ensure a positive and ethical
customer experience.

How can one mitigate the risks AI poses to Consumer Rights and
Protections?
In navigating the integration of AI into customer service, adopting hybrid models emerges as
a prudent strategy. This approach strikes a balance by leveraging AI for routine inquiries
while preserving the human touch for more complex or sensitive issues, thus ensuring a
personalized and empathetic customer experience.
Robust data security protocols are essential, ensuring encryption and compliance with data
protection regulations to safeguard customer information against potential breaches or
misuse.
Continuous training and oversight are imperative to keep AI systems effective and relevant,
with regular assessments and updates driven by customer feedback ensuring continuous
improvement and adaptation to evolving needs.
Bias detection and correction mechanisms are crucial for fostering fairness and impartiality in
customer interactions, mitigating the risk of algorithmic biases that could lead to
discriminatory outcomes.
Disaster recovery and fail-safes provide contingency plans for AI-related failures, ensuring
seamless service continuity and minimizing disruptions to customer experience.
Transparent communication builds trust and confidence by openly informing customers about
AI usage and data practices, fostering transparency and accountability.

5
Finally, feedback loops enable ongoing improvement, with customer input guiding the
refinement of AI systems to better meet evolving needs and expectations, thus ensuring that
businesses continue to deliver high-quality and responsive customer service in an AI-driven
landscape.

Bibliography
Jackson, C., Ip, S., & Versteegh, L. (2023, November 10). Consumer protection
considerations in the era of artificial intelligence.
Ebers, M., & Navas, S. (2020, September 10). Artificial Intelligence and Consumer
Protection. Cambridge: Cambridge University Press.

Original Article

6
7
8