June 16, 2024
Conversational AI Market

Conversational AI Market Poised to Grow at a CAGR of 22% Due to Rising Demand for AI-powered Customer Support Services

The conversational AI market has experienced significant growth in recent years. Conversational AI, also known as chatbots, utilizes artificial intelligence and natural language processing to simulate conversations with human users via messaging applications, websites, mobile apps and smart speakers. Chatbots are capable of answering questions, making recommendations and completing other tasks for customers without the need for human involvement. The increasing popularity of virtual assistants such as Amazon’s Alexa and Apple’s Siri has driven the development of more advanced AI-based conversational platforms.

The global conversational AI market is estimated to be valued at US$ 10.65 Bn in 2024 and is expected to exhibit a CAGR of 22% over the forecast period from 2024 to 2031.

As organizations across various industry verticals aim to enhance customer experience and reduce operating costs, demand for AI-powered customer support services is on the rise. Chatbots can now understand user intent with near-human level accuracy, resolve common issues instantly and escalate more complex queries to human agents seamlessly.

Key Takeaways

Key players: Key players operating in the Conversational AI Market Growth include Google, Microsoft, Amazon Web Services, Inc., IBM, Oracle, Nuance Communications, Inc., FIS, SAP SE, Artificial Solutions, Kore.ai, Inc., Avaamo, Conversica, Inc. and Jio Haptik Technologies Ltd.

Key opportunities: Growing need to automate customer support, increasing popularity of smart speakers and smart displays, and focus on continuous innovation are expected to create significant growth opportunities for players in the conversational AI market.

Global expansion: Major conversational AI companies are investing heavily in R&D to advance technologies such as deep learning and natural language processing. In order to leverage lucrative business opportunities, players are also focusing on global expansion plans through partnerships and acquisitions.

Market drivers

Rising demand for AI-powered customer support services is a major market driver. Chatbots help companies reduce overhead costs associated with running call centers while improving self-service capabilities and customer satisfaction. Moreover, developments in areas such as deep learning, sentiment analysis and contextual responses have made chatbots more effective at resolving complex customer queries. This is expected to further fuel the adoption of conversational AI solutions worldwide.

PEST Analysis

Political: Conversational AI adoption growth is supported by government policies focusing on digitalization and automation. Initiatives to develop AI startup ecosystems can boost market expansion.

Economic: This market is growing owing to cost-savings achieved through replacing human agents with AI chatbots. It offers higher customer satisfaction and resource optimization for businesses.

Social: Younger generations are driving greater adoption with preference for instant messaging over calling or emails. Social media integration expands conversational commerce via messaging platforms.

Technological: Advancements in deep learning, NLP and neural networks enhance natural conversation capabilities. Integration of IoT, big data and cloud computing extends scope of applications in various industries.

The North American region accounts for the largest share of the global conversational AI market in terms of value. This can be attributed to large-scale adoption of AI technologies across various sectors such as healthcare, retail, BFSI etc. in countries like the United States and Canada. Retail and e-commerce industries are major contributors to market growth in the region.

Asia Pacific is touted as the fastest growing regional market owing to rapid digitalization initiatives by governments. Countries like China, India and Japan are focusing on developing indigenous AI capabilities and solutions. Growing internet and smartphone penetration combined with expanding middle-class population offers huge growth potential. BFSI, education and customer service sectors present significant demand.

*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it