. The market has seen major growth in the recent past and is predicted to grow significantly during the forecasted period as well.
The conversational AI market is rapidly expanding, driven by advancements in natural language processing (NLP) and machine learning. In 2024, businesses are increasingly adopting AI-driven chatbots, virtual assistants, and voice interfaces to enhance customer experiences. Key players like OpenAI, Google, and Microsoft are leading innovation, while concerns about data privacy and ethics remain prominent in discussions.
Conversational AI is a form of artificial intelligence (AI) that can replicate human conversation. It depends on natural language processing (NLP), an AI discipline allowing computers to comprehend & work with human language, along with foundational models, which drive innovative generative AI capabilities. It includes
chatbots or virtual agents, which users can talk to.
The conversational AI market is witnessing rapid advancements, with major tech companies like Google and Microsoft unveiling new AI-powered chatbots. These innovations aim to enhance customer experience and streamline business operations. As AI technology becomes more sophisticated, businesses are increasingly integrating it into their customer support systems.
As per Sprinklr In 2022, 37% of the American population (98 million people) engaged with banking chatbots, a figure expected to rise to 110 million by 2026, according to the Consumer Financial Protection Bureau. Banks benefit financially as well, saving an average of $0.60 per chatbot interaction, as reported by Opus Research, highlighting the growing efficiency and adoption of AI-driven customer service.
At the recent AI Expo 2024, leaders in the conversational AI industry discussed breakthroughs in natural language processing (NLP) and machine learning. Notable companies highlighted how AI tools are transforming industries like retail, healthcare, and finance, creating smarter and more efficient customer interaction platforms.
AI-powered chatbots and virtual assistants have seen an exponential surge across industries such as retail, finance, healthcare, telecommunications and telecom. Businesses are turning to conversational AI to enhance user experiences, boost customer satisfaction and reduce operational costs - while creating revenue streams for software providers and tech giants alike.
Opportunities in conversational AI are vast, particularly within sectors like healthcare where AI-powered virtual assistants can facilitate patient engagement and appointment scheduling. Furthermore, as AI becomes increasingly advanced businesses are seeking customized solutions; creating opportunities for startups as well as established players alike to provide tailored dialogue platforms tailored specifically for meeting unique business requirements.
As demand for automated customer service grows, industries are looking for scalable AI solutions to improve efficiency and reduce costs. The healthcare, banking, and e-commerce sectors are especially driving the demand. This growing need offers significant opportunities for developers and businesses to innovate and create tailored AI-driven solutions.
Market Dynamic
The growth of mobile devices & the growing presence of digital-native populations have created an expectation among individuals for quick online interactions with their governments. This trend is driving more PSUs (public sector organizations) to opt for conversational AI solutions, improving productivity & efficiency in delivering digital citizen services. Conversational AI chatbots with cognitive capabilities can also play a major role in helping consumers during their online purchasing journey.
However, a major challenge to the growth of the market is that many conversational AI products support only a limited number of languages, with virtual assistants & chatbots often being more compatible with English, such factors can impact the growth and expansion of the market in terms of non-English speakers.
Research Scope and Analysis
By Component
The solution segment takes the lead in the market in 2023, accounting for a significant majority share of global revenue. This dominant position is a result of the wide adoption of in-house conversational AI technologies by companies. These AI-powered assist systems provide users with simple access to services & round-the-clock assistance, allowing organizations to provide reliable customer service.
Also, significant growth is anticipated in the managed service segment over the forecast period, which is driven by key industry players who provide comprehensive management & assist services for conversational AI solutions. These companies play a major role in assisting organizations in installing, maintaining, & optimizing their conversational AI systems, ultimately making sure seamless & efficient customer interactions.
As businesses at large scale are accepting the value of conversational AI, the demand for managed services is on the rise, allowing organizations to use the full potential of this technology while focusing on their core operations.
By Type
Conversational AI is of two types, chatbots and intelligent virtual assistants (IVA), of which the chatbot segment leads the market in terms of both market share and global revenue in 2023. The significant advancements in
machine learning (ML) &
Natural Language Processing (NLP) technologies within chatbots are driving this growth.
Chatbots play a major role in data collection & allow customers to look into product information, and services, or make appointments. Through the progress in NLP, chatbots can also understand & generate human-like language in recent times. Further, deep learning models & machine learning algorithms have played a significant role in enhancing chatbot accuracy & their ability to grasp context.
Also, the
Intelligent Virtual Assistants (IVA) segment is anticipated to notice significant growth during the forecasted period. As, many conversational AI service providers are constantly looking to create virtual assistants & chatbots, though with limited personalized user features for the consumer.
By Deployment
The deployment segment is being categorized into two, namely cloud and on-premises. In 2023, the on-premises segment is leading the market, capturing the largest share of global revenue, which is mainly because it provides customers with flexibility by allowing one-time transactions & cost savings compared to cloud-based solutions.
In sectors such as healthcare, banking, & government, where data privacy & security are of most importance, on-premises conversational AI is preferred. It enables organizations to maintain complete control over their data, minimizing the risk of data breaches & unauthorized access. Additionally, on-premises conversational AI is important for real-time communication & lesser latency, ensuring fast response times for time-sensitive applications.
By Technology
The NLP (Natural Language Processing) technology takes the lead in the market in 2023 by contributing significantly to global revenue. NLP plays an essential role in handling large natural language data & streamlining documentation processes, fueling their efficiency & accuracy. Like, a prominent software company like SAP introduced advanced applications with automated features, such as automatic translation & ML (Machine Learning), and AI-driven Incident Solution Matching services.
In addition, NLP includes speech recognition systems that convert spoken words into written text, allowing conversational AI systems to interact with users through voice inputs, making communication more seamless & efficient.
Also, the Automatic Speech Recognition (ASR) segment is anticipated for rapid growth. ASR technology allows speech-based interactions with conversational AI systems, providing hands-free & natural communication. However, challenges like pronunciation differences & background noise may cause transcription inaccuracies. To address this, error correction algorithms & confidence scores are utilized in enhancing transcription accuracy & assessing the reliability of recognized speech.
By End User
In terms of end users, the retail & e-commerce sectors are the major drivers of the global market, which is made possible by the adoption of effective & highly expressive conversational AI tools & techniques, which allowed these industries to improve their customer service significantly.
Through the installation of chatbots & virtual assistants, companies are suited to offer round-the-clock assistance to customers, quickly addressing common queries, delivering product information, helping in order tracking, & providing post-purchase assistance. By using conversational AI, response times are reduced, & customer satisfaction soars due to the immediate & personalized support it offers.
The Global Conversational AI Market Report is segmented on the basis of the following
By Component
- Solution
- Professional Services
- Managed Services
By Type
By Deployment
By Technology
- Natural Language Processing
- Machine Learning & Deep Learning
- Automatic Speech Recognition
By End User
- BFSI
- IT & Telecom
- Healthcare
- Education
- Retail & E-commerce
- Media & Entertainment
- Automotive
- Others
Regional Analysis
North America stands out as the leading contributor to the conversational AI market in 2023, accounting for a significant share of revenue of about
25.8%, which can be attributed to different factors. Like, the region has encouraged emerging technologies with enthusiasm, driving the adoption of AI-powered customer support services.
Also, many businesses in North America are constantly investing in technological developments to meet the changing requirements of their customers, showing a commitment to improving user experiences.
Additionally, the increase in emphasis on health & wellness among the population is increasing the need for conversational AI, especially in the healthcare sector, which is rapidly adopting advanced technologies like augmented reality (AR), virtual reality (VR), robotics, & AI to boost the quality of healthcare services provided.
Also, the Asia Pacific region is set to achieve high growth in the conversational AI market, driven by growing awareness among organizations about innovative customer support services. Factors like e-commerce development, the adoption of conversational AI in retail, technological advancements in consulting & healthcare, & increase in internet penetration are contributing to this rapid expansion.
By Region
North America
- Germany
- The U.K.
- France
- Italy
- Russia
- Spain
- Benelux
- Nordic
- Rest of Europe
Asia-Pacific
- China
- Japan
- South Korea
- India
- ANZ
- ASEAN
- Rest of Asia-Pacific
Latin America
- Brazil
- Mexico
- Argentina
- Colombia
- Rest of Latin America
Middle East & Africa
- Saudi Arabia
- UAE
- South Africa
- Israel
- Egypt
- Rest of MEA
Competitive Landscape
The conversational AI market experiences a diverse landscape, where a handful of mid-sized & smaller companies dominate the majority of revenue. Key players in the conversational AI industry use different tactics like forming partnerships, entering into agreements, and engaging in mergers & acquisitions to enhance their market position & expand their offerings.
This competitive environment looks into innovation & collaboration as these companies compete for prominence in the fast-growing conversational AI sector, ultimately benefiting consumers & driving advancements in this technology.
Like, in March 2023, Nuance Communications, Inc. introduced its Dragon Ambient eXperience Express, which combines established conversational & ambient AI technologies with OpenAI's latest & highly powerful model, GPT-4.
This development shows a major improvement to Nuance's well-established Dragon Medical product line & further strengthens its leading position in the market for clinical documentation systems. The Dragon Ambient eXperience Express is a workflow-integrated solution that automates the process of clinical documentation, providing healthcare professionals with a more effective & streamlined way to handle their tasks, ultimately benefiting patient care & medical workflows.
Some of the prominent players in the Global Conversational AI Market are:
- Google LLC
- Microsoft Corp
- SAP SE
- Amazon Web Services
- Oracle
- IBM Corp
- Nuance Communication
- Artificial Solutions
- Baidu
- MindMeld
- Other Key Players
COVID-19 Pandemic & Recession: Impact on the Global Conversational AI Market
The COVID-19 pandemic & the following economic recession had a significant impact on the global conversational AI market. As businesses struggled with lockdowns & social distancing measures, the demand for remote customer support & effective communication solutions increased. Conversational AI emerged as an important tool for companies to adjust to these challenging circumstances.
Organizations across different industries turned to virtual assistants, chatbots, and automated messaging systems to control customer inquiries, streamline operations, & manage remote workforces affordably, which increased adoption & investment in conversational AI technologies and led to significant market growth during the recession.
As businesses found ways to reduce costs, enhance efficiency, & maintain customer engagement, conversational AI proved to be a valuable asset, shaping the market's growth & future prospects.
| Report Characteristics |
| Market Size (2023) |
USD 10.0 Bn |
| Forecast Value (2032) |
USD 71.8 Bn |
| CAGR (2023-2032) |
24.5% |
| Historical Data |
2017 - 2022 |
| Forecast Data |
2023 - 2032 |
| Base Year |
2022 |
| Estimate Year |
2023 |
| Report Coverage |
Market Revenue Estimation, Market Dynamics, Competitive Landscape, Growth Factors and etc. |
| Segments Covered |
By Component (Solutions, Professional Services and
Managed Services), By Type (Chatbots and IVA), By
Deployment (On-Premises and Cloud), By Technology
(Natural Language Processing, Machine Learning &
Deep Learning, and Automatic Speech Recognition),
By End User (BFSI, IT & Telecom, Healthcare,
Education, Retail & E-Commerce, Media &
Entertainment, Automotive and Others) |
| Regional Coverage |
North America – The US and Canada; Europe – Germany, The UK, France, Russia, Spain, Italy, Benelux, Nordic, & Rest of Europe; Asia- Pacific– China, Japan, South Korea, India, ANZ, ASEAN, Rest of APAC; Latin America – Brazil, Mexico, Argentina, Colombia, Rest of Latin America; Middle East & Africa – Saudi Arabia, UAE, South Africa, Turkey, Egypt, Israel, & Rest of MEA
|
| Prominent Players |
Google LLC, Microsoft Corp, SAP SE, Amazon Web
Services, Oracle, IBM Corp, Nuance Communication,
Artificial Solutions, Baidu, MIndMeld and Other Key
Players |
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