The conversational AI market enables organizations to interact with customers through natural language conversations using artificial intelligence and machine learning capabilities. Conversational AI helps deliver personalized, streamlined, and engaging customer experiences across multiple channels such as messaging platforms, mobile applications, smart speakers, and virtual assistants. Voice assistants like Alexa, Cortana, and Google Assistant use conversational AI to allow users to operate devices and access information through natural language conversations. These assistants are now expanding beyond smart speakers into automotive infotainment systems. Conversational chatbots powered by conversational AI are also being adopted by organizations across industries to automate customer support queries and streamline internal processes like procurement, administration, and employee onboarding.
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 2024 To 2031.
Key Takeaways
Key players operating in the Conversational Ai Market Growth are 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. Major players are focusing on advancing their conversational AI technologies through investments in natural language processing and deep learning. For instance, in 2022, Google announced the general availability of its conversation modeling tool called Constitutional AI to help build ethical and inclusive conversational AI models.
Growing applications of conversational AI across industries such as healthcare, retail, BFSI, telecom and travel is driving the market growth. Conversational AI is enabling healthcare organizations to provide virtual healthcare assistance to remotely monitor patients, answer health queries and schedule appointments. In the retail industry, conversational chatbots and virtual shopping assistants are enhancing customer experience.
The conversational AI market is witnessing significant expansion in Asia Pacific and Middle East & Africa. Rapid digitalization of businesses across countries like India, China, and UAE is augmenting the adoption of conversational AI. Increasing investments by technology companies in these regions is also supporting the market growth. For example, in 2021, IBM established its first Client Innovation Centre in Vietnam to drive adoption of AI, cloud and other technologies among local businesses.
Market drivers
Increasing demand for intelligent customer engagement is a major market driver. Using conversational AI, organizations can provide personalized customer assistance and a seamless shopping experience across multiple channels. This improves customer satisfaction and loyalty. Growing emphasis on operational efficiency is also propelling the conversational AI market. Chatbots help automate repetitive tasks and enable organizations to reallocate agent resources to more strategic activities. Advancements in natural language processing and machine learning have made conversational AI more accurate, affordable and accessible. This is expected to further support the market growth over the forecast period.
Impact of geopolitical situation on the growth of Conversational AI Market
The growth of the conversational AI market is facing a few geopolitical challenges due to the ongoing global situation. The rising geopolitical tensions and trade wars are negatively impacting the collaborations and partnerships between companies based in different countries and regions. This is slowing down the development and deployment of new conversational AI solutions. Additionally, restrictions on data localization and data transfer between countries pose a hurdle for companies relying on global data to train their conversational models. Geopolitical instability in some parts also affects the technology spending and priorities of organizations in those regions. The market players need to devise strategies such as forging partnerships within regions, localizing operations and data, and focusing on developing localized AI assistants that can work effectively even with limited offline functionality and data access. Adopting such approaches can help sustain the growth momentum of the conversational AI market.
Concentration of geographical regions in terms of market value
In terms of value, the conversational AI market is currently concentrated highly in North America and Western Europe. These developed markets account for over 60% of the global market revenue. This is due to advanced technologies adoption, presence of key technology companies, and high enterprise spending on AI technologies in countries such as the United States, Canada, the United Kingdom, Germany, and France. The retail, BFSI, and healthcare verticals in these regions are major revenue generators for conversational AI vendors. However, with growing digitalization and the expanding middle class, other regions such as Asia Pacific and Latin America are expected to offer lucrative growth opportunities over the coming years.
Fastest growing region for the Conversational AI Market
The Asia Pacific region is poised to be the fastest growing regional market for conversational AI over the next decade. Rapid digitalization, increasing internet penetration, rising disposable incomes, and growing awareness about AI-based technologies are driving the demand for conversational AI platforms and solutions across industries in countries like China, India, Japan, and South Korea. The government initiatives to promote AI and presence of global technology players are also contributing to market growth. Other high potential areas include Southeast Asian countries with young populations, China’s massive internal market, and India’s robust digitalization infrastructure and thriving startup ecosystem. Vendors need to tap into these opportunities by customizing offerings as per regional requirements and partnering with local players.
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