AI Chatbot Market - Forecasts from 2023 to 2028

The AI chatbot market is projected to grow at a CAGR of 24.15% to reach US$36.87 billion in 2028 from US$8.112 billion in 2021.

An AI chatbot is an artificial intelligence-powered computer program designed to simulate conversation with human users, especially over the Internet. They can be built using various technologies and techniques, including natural language processing (NLP) and machine learning (ML). There are different types of chatbots, including rule-based chatbots and self-learning chatbots. Rule-based chatbots are programmed to respond to specific questions and commands using pre-defined rules and decision trees. Self-learning chatbots, on the other hand, use artificial intelligence and machine learning algorithms to learn from the interactions they have with users and improve their responses over time.

They are widely used by businesses and organizations to automate routine tasks and improve customer engagement. They can also be integrated with messaging platforms and mobile apps to provide users with quick and convenient access to information and services. For instance, they can be integrated into e-commerce websites to assist customers with product recommendations, ordering, and tracking deliveries can be used to provide students with instant access to information, answer their questions, and guide them through their learning journey. They can be used to assist citizens with information about government services and processes, such as renewing licenses or paying taxes.

Market Drivers

Increasing demand for automation

AI chatbots provide a cost-effective solution for automating customer service and other business processes by providing support to customers 24/7, and by giving quick responses. They can handle multiple customer interactions simultaneously, reducing the need for human staff and resulting in cost savings for organizations. It can be scaled up or down as needed, making them a flexible solution for organizations with fluctuating customer demand, improving the efficiency of operations. They can also automate repetitive tasks, freeing up human staff to focus on more complex tasks. It is also helping e-commerce by collecting data for analysis, generating leads, boosting customer engagement, offering personalized discounts and recommendations, and tracking orders. Consequently, this increasing demand for automation is driving the growth of the AI chatbot market. For instance, H&M uses the AI chatbot to assist customers with product recommendations, ordering, and tracking deliveries. The chatbot can also answer common customer queries and provide support.

Advancements in AI technology

AI technology has improved significantly in recent years, leading to better natural language processing capabilities. It has improved the ability to integrate chatbots with other systems and platforms, such as websites, mobile apps, and messaging platforms, to secure chatbots, reducing the risk of data breaches and ensuring the privacy of customer information. Chatbots are giving businesses an opportunity to understand the behavior of their clients and gain insights that can save their cost of marketing, and labor.

Recent Developments

Many companies that use AI chatbots in various industries are Sephora, and Zara in retail, Capital One in banking and financial services, Mayo Clinic in Healthcare, Internal Revenue Service (IRS) in government organizations, and E-bay in e-commerce.

In July 2022, Serviceaide Inc. announced Automation 2.0, a portfolio-wide upgrade of the company's AI-powered chatbots and other service management products, to improve the efficiency and effectiveness of IT service management by leveraging AI technology.

In March 2022, Kore.ai, a significant enterprise conversational AI software platform and solutions provider announced Health Assist, a testament to the company's commitment to innovation and digital transformation to provide a range of benefits to healthcare organizations, including improved patient satisfaction, increased efficiency, and reduced costs at the HIMSS global health conference and exhibition.

In August 2021, Bharat Petroleum Corporation Ltd (BPCL) introduced Urja, an AI-powered chatbot, to assist customers with their queries and provide information about BPCL's products and services. By using Urja, BPCL aims to improve customer service and provide instant and accurate information to customers, reducing the need for them to wait on hold or navigate through complex menus.

Asia-Pacific to witness high growth

The Asia-Pacific (APAC) region is expected to witness a notable CAGR in the AI chatbot market during the forecast period. Countries such as China, India, and Japan are at the forefront of technological advancements, including AI and chatbots, which are driving regional growth. Consumers in the region are becoming more familiar with digital technologies and are increasingly demanding instant and accessible customer service. APAC is home to over half of the world's population, and a large proportion of these people have access to smartphones. This presents a huge opportunity for companies to reach customers through chatbots and mobile apps. For instance, SBI Holdings, a financial services company in Japan, has developed AI chatbots that help customers with their banking needs, including account management and loan applications. Grab, a leading ride-hailing company in Southeast Asia has developed an AI chatbot that helps customers with ride bookings, driver tracking, and customer support.

Market Segmentation:

By Component

• Hardware
• Software and Services

By Deployment

• Cloud
• On-Premises

By Industry Vertical

• BFSI
• Media & Entertainment
• Education
• Retail
• Healthcare
• Others

By Geography

• North America
• USA
• Canada
• Mexico
• South America
• Brazil
• Argentina
• Others
• Europe
• Germany
• France
• United Kingdom
• Spain
• Others
• Middle East And Africa
• Saudi Arabia
• UAE
• Israel
• Others
• Asia Pacific
• China
• Japan
• India
• South Korea
• Indonesia
• Thailand
• Taiwan
• Others