The global chatbot market size was estimated at USD 5,132.8 million in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 23.3% from 2023 to 2030. The rising acceptance of customer service activities among businesses for the reduction in operating costs is anticipated to ascend the market growth. A chatbot is a collaborative application programmed using artificial intelligence technology and specific set of rules. It is intended for the interaction with humans over textual conversation process and is incorporated with various messaging facilities, thus supporting users in various sectors. Various innovations carried out in artificial intelligence, and machine learning technologies are expected to enhance the features of chatbot, which, in turn, would drive demand for the market.
- The chatbot market has shown a significant growth in the last few years. The need to provide 24×7 customer services and reducing the operational cost by signing the jobs to the chatbot, the rise in customer’s demands for self-service operations has led to the increase of the demand. This can be attributed to the growing preference of individuals toward messaging applications over social networking sites.
- Chatbots that are developed for integration with messaging applications are also expected to witness significant market demand in the future. Moreover, chatbot are gaining popularity as the businesses continue to automate their sales and customer services. The use of chatbot enables organizations to deliver timely services at reduced costs.
- Today there is a significant rise in the usage of messaging services, which is expected to surpass the social networking sites in terms of the number of users. There is also a significant development in the Natural language processing field, which made the interactions between computer and human languages more streamlined. The entire ecosystem of the chatbot comprises various cross-linking features that help in optimum usage of the application.
- The users interacting with the customer service interrelate with the chatbot through the chatbot interface. The chatbot interact with users via webpage or mobile applications or through SMS etc. The chatbots are deployed on various channels such as standalone, website, and third-party messenger platforms. In standalone, bots are integrated with the applications and other software of the enterprises. The users interact with the chatbots deployed to raise the requests or the complaints to customer service.
- The chatbot is a messaging service that was developed by using a set of rules and artificial intelligence that can be interacted via a chat interface. There are two types of chatbots, one which is developed by a set of rules and the other which uses artificial intelligence and machine learning algorithms. Some chatbots also include voice recognition in order to offer an enhanced customer service experience. Currently, chatbot developers are including analytics into software application in order to get better insights into customer behavior and buying patterns.
- Open.AI, an American artificial intelligence company, released ChatGPT, an AI chatbot that answers every question. It is the latest series of AI which is referred to as GPT. The chat structure enables the AI to respond to “follow-up questions, admit its errors, contest false assumptions, and decline unsuitable requests.
- With the spread of the coronavirus, various marketing agencies, financial organizations, and grocery outlets have initialized the full fledge implementation of chatbots and conversational AI tools to enhance customer service in the crisis. Amid the pandemic, businesses face challenges in sustaining and are willing to try new technological avenues such as voice-based assistants and chatbots.
- Also, chatbots have assisted the medical and healthcare verticals during the difficult times. Several medical insurance companies and public health institutions worldwide have deployed chatbots to assist users/patients in providing proper COVID-19 advice and suggestions.
- The solutions segment is anticipated to account for a leading share of nearly 62.0% of the global revenue. The leading share is attributable to the large-scale adoption of in-house chatbot technologies. However, the services segment will likely witness a prominent growth rate during the forecast period. The services play a crucial part in the way chatbots operate. Human interactions are often complex for the chatbots owing to the diversification in human languages. Consumers from discrete demographics may prompt the same sentiment /intent differently. Hence, training the chatbots to learn the common intent is necessary.
- Following the COVID-19 outbreak in 2020, various organizations have substantially incorporated chatbots for responding to the consumer queries and related supplementary information. As the majority of the businesses embraced remote working owing to the imposed lockdowns, organizations resulted in heavy dependence on the chatbots for sinking the workload of consumer probes due to the marginal availability of customer service employees.
- With the increasing penetration of technological advancements in AI and NLP, companies are accomplishing the ability to implement intelligent assistants, enhance services, and integrate tasks with several other platforms. For instance, in January 2020, AWS developed Amazon Lex chatbot integration, accessible in Amazon Connect in the Asia Pacific AWS (Sydney). These chatbots help customers with tasks such as changing passwords, scheduling appointments, and bringing up requested account balances, etc.
- Based on the type, standalone segment anticipated to lead the market with a share of 57.64% in 2022. The standalone segment is expected to hold the largest market share during the forecast period. Nowadays, consumers are using visual assistants’ applications such as Google Assistant, Amazon’s Alexa, and Apple’s Siri to use in standalone messaging platform. This is expected to create a great upsurge in standalone chatbots demand.
- Many enterprises prefer chatbots for messaging platforms and customer service bots for the web-based services in an attempt to increase customer interactions. Chatbots enable enterprises to directly interact with customers and provide data pertaining to customer preferences, which can later be used in digital marketing activities. Furthermore, the enterprises majorly in retail, digital marketing, healthcare, and other domains are using chatbots for the improvement of consumer services.
- Based on the medium, the mobile application segment was expected to hold dominant market share of 42.57% in 2022. The social media segment is growing rapidly and is expected to register a CAGR of 23.8% during the forecast period. Implementing social media chatbots benefits the business and saves consumers time. The social media chatbot’s primary aid is to instantly assist customers at any time of day – regardless of business operating hours.
- Social media Chatbots use artificial intelligence (AI) to process language and interact with humans. Many chatbots are installed for the messenger applications like Facebook, Skype, Slack, and other social media networking sites. The chatbot developers can integrate the payment gateways directly with the assistant and use these messaging platforms for the payment service. Nominal fees can be charged as commission, which is one of the significant opportunities in the chatbot market. Chatbots offer direct customer interaction; hence they are extensively used in digital marketing to update existing customers about the products and services. Thus, the social media segment is expected to result in substantial growth during the forecast period.
Business Function Insights
- Based on the business function, the sales and marketing segment dominates the market, with a revenue share of more than 39.5% in 2022. The chatbot can personalize customer conversations based on their preferences, purchase history, and other data, increasing customer engagement, building trust, and improving sales conversion rates. Chatbots can be available 24/7 to answer customer questions and provide support, even outside of business hours, increasing customer satisfaction and loyalty.
- The chatbots offer numerous other benefits for the sales and marketing department, including increased efficiency, improved customer engagement, and better data insights. As a result, it is expected to see continued growth and innovation in this segment of the chatbot market.
- The finance segment is expected to expand with the fastest CAGR of 24.0% from 2023 to 2030, owing to the increasing use of chatbots by the finance department to cut the company’s operating costs. Chatbots can reduce customer support and service costs, as they can handle a large volume of inquiries without requiring additional staff.
- Moreover, Chatbots can also automate routine tasks such as account inquiries, bill payments, and transaction processing, freeing human staff to focus on more complex tasks. Chatbots enable financial institutions to make better-informed decisions and provide more personalized services by gathering and analyzing customer data with the help of artificial intelligence.
- In terms of application, customer services segment dominated the market with a share of 31.2% in 2022. With the service and process automation, many businesses are opting to automate their routine and mundane tasks in order to save costs. Sales and customer services are the primary sectors on which businesses are concentrating to automate, which substantially reduces costs by using chatbots. Chatbots with artificial intelligence are particularly gaining significant prominence.
- The use of Chatbots in businesses will drastically cut labor costs, which will automate a portion of customer services & sales and result in considerable savings for the businesses. Customers prefer to get quick responses from customer service instead of waiting days for a reply. The chance of losing a customer can be reduced radically by replying through a chatbot. Chatbots can be used by e-commerce Companies for returns and exchanges. Deploying chatbots may enable automation of around 35.0% of the individual tasks, which will substantially result in huge annual savings in the overall costs.
- The payment processing segment is estimated to expand with substantial growth rate during the forecast period. The chatbots have brought a substantial transformation by the payment automation. Various types of financial transactions can be programmed using chatbot technology, including banking activities, account management and making payments for the goods and services. In addition, can pay faster with increased convenience and also have access to 24/7 customer support. The technology is lucrative for the global organizations that require proficient payment systems and offers an enhanced customer experience as well.
- In terms of vertical, retail & e-commerce segment dominated the market with a share of 30.34% in 2022. Chatbots find applications in a wide range of industries, such as healthcare, retail, BFSI, media & entertainment, travel & tourism, e-commerce, and others. The BFSI segment accounted for the largest market share in 2022 and generated the highest revenue.
- Chatbots are gaining popularity in a number of sectors owing to the benefits such as remote connectivity and virtual presence, which substantially reduces the transportation cost. The travel & tourism vertical is expected to portray the highest growth during the forecast period.