Conversational Artificial Intelligence (AI) Market | 2031

Report Description

Conversational Artificial Intelligence (AI) Market Outlook 2031

The global conversational artificial intelligence (AI) market size was valued at USD 433.39 Billion in 2022 and is likely to reach USD 751.07 Billion by 2031, expanding at a CAGR of 6.3% during 2023–2031. The market growth is attributed to the rising demand for AI-powered customer support services and the rapid adoption of new advancements in AI technology.

Conversational AI is a type of artificial intelligence such as chatbots or virtual agents that users can talk to. Conversational AI helps with scheduling meetings to answer critical questions with a simple voice or text command. It uses machine learning, large volumes of data, and natural language processing to help imitate human interactions, recognizing speech and text inputs and translating their meanings across various languages.

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Using AI-powered technologies such as chatbots, voice assistant systems, and Intelligent Virtual Assistants (IVA) organizations are expected to provide personalized and differentiated experiences that build relationships with their customers. These AI technologies offer customers personalized products, recommendations, and content more likely to meet their needs.

CAI chatbots are expected to replace human agents in the near future with their ability to answer frequently asked questions (FAQs) around topics, like shipping, providing personalized advice, suggesting sizes for users, cross-selling products, and so on.

The COVID-19 pandemic opened up immense opportunities for the global conversational AI market owing to the increasing demand for AI-based technologies to increase efficiency and productivity from major global companies. Governments across the globe imposed strict regulations on traveling such as social distancing to prevent the spread of coronavirus. Due to these strict regulations, major IT companies enabled work-from-home options for their employees, these fueled the use of chatbots and IVA.

During the pandemic, conversational AI has become an essential tool in the arsenal of healthcare and public sector entities that were trying hard to spread the right information and awareness amongst the public. Many companies faced difficulties in providing customer services as the number of employees decreased, which leads to the increased demand for conversational AI services and solutions for customer satisfaction.

Conversational Artificial Intelligence (AI) Market Dynamics

The research report presents a complete market overview by providing detailed information about the current market trends, existing drivers, growth opportunities and potentials, and emerging challenges. The conversational ai market report has up-to-date insights about market scenarios that can shape the overall market performance and output during the forecast period, 2023 to 2031.

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Major Drivers

Rising demand for AI-based technologies for customer support services is expected to propel the global market. AI-based customer support services including chatbots are gaining rapid traction in various sectors, especially in the retail & e-commerce, and IT sectors.  

• For instance, in May 2023, Lazada Group, one of Southeast Asia’s e-commerce companies released LazzieChat, the first e-Commerce AI chatbot of its kind in Southeast Asia powered by OpenAI ChatGPT technology in Azure OpenAI Service. The chatbot can answer users' shopping queries on the Lazada platform to offer an engaging, and informed shopping experience.

These conversational bots further help companies in automating administrative tasks like scheduling interviews, screening resumes, or managing paperwork. Companies are focusing on adopting conversational AI systems to increase efficiency is likely to fuel the conversational ai market growth.

Existing Restraints 

The lack of awareness regarding conversational AI technologies is expected to restrain the market. Several types of AI-based technologies have a lot of advantages in service-type businesses but consumers have limited knowledge of AI technologies such as voice assistants, chatbots, and IVA.

AI-based technologies are almost present in every smartphone but due to a lack of awareness and proper knowledge regarding the benefits of AI-based technologies across the globe, especially in emerging economies, the market is further restrained. For instance, India and Brazil, are one of the top consumers of smartphones but the awareness regarding AI-based technologies is comparatively lower than the usage. This can be a major factor to hamper the global market.

Moreover, the high cost of conversational AI is expected to impede the global market. Chatbots and IVAs need 24×7 surveillance, for the surveillance companies need employees only dedicated to the service which can cost a lot of money. The high cost of AI-based technology is expected to hinder the market as only major companies adhere to expensive AI technologies.

Emerging Opportunities

AI-powered technologies are gaining high traction across the globe. The rapid adoption of advanced AI-powered technologies to increase productivity and enhance the efficiency of companies is expected to produce lucrative opportunities for conversational AI in the global market.

The growing use of AI and new technologies offer companies in building intelligent services to perform tasks that open new doors for advanced AI-powered technologies to drive. These conversational bots further help companies automate administrative tasks like scheduling interviews, screening resumes, or managing paperwork. Companies are focusing on adopting conversational AI systems for delivering customer support services and increasing efficiency is likely to fuel the conversational ai market growth.

• In July 2023, NEC Corporation launched a generative artificial intelligence (AI) that is customizable for each customer in order to create new value for companies in response to business changes caused by new technologies.

Scope of Conversational Artificial Intelligence (AI) Market Report

The market report includes an assessment of the market trends, market segments, and regional markets. Overview and dynamics have also been included in the report.

Conversational Artificial Intelligence (AI) Market Segment Insights

Type Segment Analysis

Based on type, the global conversational AI market is divided into Intelligent Virtual Assistants, chatbots, and voice assistant systems. The voice assistant system segment is expected to expand at a significant growth rate during the projected period due to the increasing use of voice assistant systems in smartphones, and automotive navigation systems, and to create of smart offices and homes.

Voice assistant systems are powerful hands-free computing tools that are most used in day-to-day life. Consumers are preferring hands-free voice assistant systems such as Amazon Alexa, Google Voice Assistant, Apple Siri, or Microsoft Cortana.  All these systems are web-connected software tools that listen to the command, interpret them, and act on them.

These systems are extensively used in smart home speakers such as Amazon Echo and Google Home for easy hands-free assistance to get all the needful information. Increasing the use of voice assistant systems to get news, weather information, and traffic updates is likely to boost the segment in the global market.

Moreover, Major automotive manufacturing companies are pre-installing voice assistant systems to enable driving hands-free mode for consumers. AI-based technologies such as Cortana, Google voice assistant, and Siri can give directions, receive calls, and send messages without even touching the handset.

• For instance, in June 2023, Mercedes-Benz plans to expand the use of artificial intelligence and integrate it into the voice control of its vehicles. It is further planning to add ChatGPT, voice control via the "Hey Mercedes" MBUX Voice Assistant which will become even more natural. This program is expected to begin on June 16, 2023, for over 900,000 vehicles equipped with the MBUX infotainment system1.  

However, the chatbots segment is anticipated to hold a major share of the market in the coming years owing to the increasing use of chatbots as a mediator in customer support service. Chatbots are AI-generated program that is designed to conduct an online conversation via text-to-speech or text.

CAI chatbots are widely used in organizations to increase service productivity or sales for time-saving and efficiency. This helps employees to focus on more important tasks and prevents customers from waiting to receive responses. The rapid adoption of voice-enabled chatbots which are created by using text-to-speech and voice recognition is likely to drive the segment in the global market during the forecast period.

Deployment Segment Analysis

On the basis of deployment, the global market is bifurcated into cloud and on-premise. The cloud segment held the major revenue share in 2021 and is expected to expand at a significant rate owing to the rising prominence of cloud services in the global market.

Cloud service enables AI that can power self-service solutions and the advantage of access to data from anywhere. Major IT & telecom and e-commerce companies are preferring cloud deployments for easy access that can drive the segment in the global market.

The On-premise segment is projected to register a considerable CAGR during the forecast period due to the steady demand for on-premise-based conversational AI services. On-premise ones are cheaper than cloud-based which can be a major factor for the rapid adoption of this deployment in the global conversational AI market.

• For instance, in May 2023, Dell Technologies and NVIDIA announce a joint initiative called Project Helix to make it easier for businesses to build and use generative AI models on-premises to quickly and securely deliver better customer service, market intelligence, and other capabilities. It will provide a number of full-stack solutions with technical expertise and pre-built tools based on Dell and NVIDIA infrastructure and software.

Technology Segment Analysis

Based on technology, the global conversational AI market is divided into Automatic Speech Recognition (ASR), Natural Language Processing (NLP), and ML & Deep Learning. The Natural Language Processing segment is expected to expand at a significant rate due to the capability of processing large quantities of natural language data.

AI technology-based companies can extract information or data from text-based documents and improve on more complex analytics tasks using NLP technologies. This technology enables the streamlining of the documentation process by enhancing efficiency with documentation accuracy. 

Global companies across the globe are focusing on delivering better customer support services through AI chatbots and emails. CAI chatbots use NLP technology to connect and assist customers to conduct human-like interactions.

Rising use of chatbot to achieve business acumen regarding customer preferences, and purchase patterns and to increase productivity. For instance, in November 2021, a US-based technical service company, ZeroShotBot in Ann Arbor announced the launch of a new conversational AI technology that allows for chatbots that can be scalable within hours and requires no training data, allowing those with no coding experience to create a fully functional chatbot. 

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Components Segment Analysis

In terms of component, the global market is segregated into solutions and services. The services segment is expected a significant growth rate owing to the rising demand for conversational AI for personal services such as training & consultancy. The service segment is further segregated into managed services and professional services. Professional services are widely used in the e-commerce and IT sectors for training and consulting purposes.

Conversational AI has been a major driving factor in the rapid growth of the retail e-commerce sector as many companies are adopting AI-based technology for daily customer interaction. Companies are focusing on providing maintenance and support services for customer satisfaction in the form of voice assistants, chatbots, and applications that can deliver informal and repetitive customer service tasks or execute complex processes in many industries.

The solutions segment is likely to register a considerable CAGR during the forecast period due to the rising demand for customer support solutions across various sectors such as BFSI, healthcare, and IT & Telecom. Some major global players in the market, such as Accenture, are offering AI-enhanced support solutions that serve users with the availability of services and 24/7 assistance, making businesses capable of providing reliable customer support.

Amazon Web Services, Inc which is the subsidiary company of a US-based, multinational e-commerce company, is in partnership with Accenture for conversational AI solutions to improve customer satisfaction, reduce wait times, ease call volume surges, and facilitate continuous improvements through AI and machine learning.

End-user Segment Analysis

On the basis of end-user, the global market is divided into healthcare, IT & Telecom, retail & e-commerce media & entertainment, automotive, education, and BFSI. The retail & e-commerce segment is expected to grow at a significant rate owing to the extensive use of conversational AI in professional services and solutions for customer support services. 

Retail & eCommerce companies use AI-powered technologies for system integration and implementation. By using conversational AI, companies across the retail and eCommerce sectors can significantly increase their conversion rates by using Conversational AI in the sales process. 

The BFSI segment is expected to register a considerable CAGR in the global market during the forecast period due to the increased use of cloud-based conversational bots and more attention to improving customer alignment. The virtual assistant helps the business serve customers by offering an extra method of communication where customers can also ask virtual assistants for assistance on any subject that pertains to a particular firm. 

The rising surge for conversational AI solutions in the BFSI sector, especially in banking uses NLP technology to interact, collaborate, and transact with customers. By adopting AI-powered solutions, banks now have the chance to innovate and enhance brand awareness and retain customers to build their brand identity.

• For instance, in July 2023, Mastercard unveiled a new artificial intelligence (AI)-power tool which aimed to help banks fight payment scams and fraud in real time prior to any monetary exploits. Through analyzing the data, the system is able to predict whether or not a user is trying to make a transfer of funds to another account.

Regional Analysis

In terms of region, the global conversational AI market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. The market size of North America is expected to dominate the market during the projected period due to the rapid adoption of AI-based technologies for customer service support to strengthen customer retention.

Increasing technological advancements in artificial intelligence services in the region and the presence of major key players are likely to boost the global market in the coming years.

• For instance, in July 2023, Elon Musk, the multi-millionaire entrepreneur, launched his artificial intelligence startup xAI. He further revealed his plan for building a safer AI rather than explicitly programming morality into its AI.

The market of the Asia Pacific is anticipated to expand at a rapid pace during the forecast period owing to the increasing awareness regarding the benefits of conversational AI. Increasing adoption of new AI-based technological advancements in the retail and e-commerce sector in emerging economies such as India and China is likely to drive market growth during the forecast period.

• For instance, in March 2023, Fobi AI, a leading AI company said it is expanding its technology solutions to the Asia-Pacific (APAC) region starting with its technology officially launching in Japan. According to the analysis by the company, they see possible opportunities within the tech, hospitality, and sports markets in Japan.

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