AR/VR for Customer Engagement Models

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AR, VR, AI, and XR - Insights

AR, VR, AI and XR technologies have the potential to meaningfully change the customer engagement process for businesses before, during, after and outside of the purchase process. Not only are consumers interested in using such extended reality tools while shopping, but evidence suggests that they are positively influenced by these experiences when making purchase decisions.

Types of Customer Engagement Impacts

  • According to a 2019 analysis by IBM, AR, VR, AI and XR technologies (also referred to as extended reality technologies) are enhancing customer engagement processes for businesses in four core areas: (1) product pre-experiences, (2) post-purchase relationships, (3) in-store experiences and (4) brand expression and perception.
  • IMB asserts that one of the more ubiquitous ways in which extended reality technology is changing the customer engagement process is by evolving the customer browsing experience and other pre-purchase processes.
  • Primarily impacting customers through online channels, this change involves the deployment of AR tools that enable customers to "configure, personalize, try on" or otherwise test business products in a virtual manner.
  • Existing examples of such pre-experience tools include Sherwin Williams' ColorSnap Visualizer, Sally Beauty's ColorView and Nike Fit.
  • Notably, the current prevalence of extended reality technologies in the pre-purchase process is driving the continued business adoption of such tools, by creating a new customer expectation for organizations to provide quality pre-purchase extended reality experiences in industries ranging from appliances and apparel to homes.
  • In parallel, such extended reality tools are beginning to appear in customer engagement processes that follow product purchases, with examples including AI-enhanced user manuals and digital apps that allow users to interact with their physical product purchases.
  • Not only are these post-purchase process changes enabling businesses to capture new customer and product use information, but extended reality tools are also expected to create new revenue streams from ancillary products and other related services that extend beyond the normal purchase lifecycle.
  • Meanwhile, IBM also reports that extended reality technologies are likely to meaningfully transform the customer engagement process in stores as well as with brands.
  • Examples of these customer engagement changes include the use of AI-powered AR to enable sales associates to function as personal shoppers, XR-enabled group shopping experiences and the deployment of XR brand avatars that provide "AI-driven personalization" through an XR experience.

Evidence of Engagement Impacts

  • A variety of industry experts (e.g., IBM, Accenture, SYZYGY AR) report that customers are both interested and responsive to extended reality technology when interacting with brands and their products.
  • For example, the IBM Institute for Business Value (IBV) found in a survey of 19,000 consumers globally that almost half have either tried (7%) or are interested (35%) in shopping experiences that are AR-assisted.
  • Moreover, younger generations (e.g., Generation X, Millennials, Generation Z) are even more likely to have either tried (between 14%-21%) or expressed interest in trying (45%-47%) such extended reality purchase experiences.
  • A separate SYZYGY XR corroborated these findings, by reporting that 71% of shoppers are interested in extended reality experiences when purchasing products/services.
  • In particular, consumers were particularly interested in extended reality experiences to try on or visualize retail products (47%) or explore hotel rooms and travel destinations before making a purchase (43%).
  • Meanwhile, SYZYGY XR also found that extended reality experiences were likely to increase customer responsiveness to brands and their products, given over half (53%) of surveyed consumers believed they would be more likely to purchase a product if the shopping process included an extended reality experience.
  • An analysis by Houzz validated this finding, by reporting that customers using AR are eleven times more likely to make a purchase, and generally spend almost three times as long using shopping apps that incorporate extended reality experiences.
  • Moreover, Accenture found that extended reality experiences such as VR and AR advertisements have a "positive impact on purchase intent," as highlighted in the following charts.

Current State of Adoption

  • Industry experts including IBM, Gartner and SYZYGY AR report that extended reality technologies have already been adopted by a substantial cohort of consumers and businesses.
  • For example, Gartner forecasts that 100 million consumers will be shopping using extended reality technologies both online and in-store by the end of this year.
  • IBM adds that approximately one-third of consumers are already using extended reality apps, while SYZYGY AR found that 36% of consumers under 34 have participated in an extended reality experience when buying a product.
  • According to IBM, one of the primary reasons that extended reality technologies are becoming commonplace in commerce is the fact that most consumers carry smartphones and other technologies with XR capabilities.
  • Considering that 3.4 billion phones will be enabled with "advanced AR capabilities" by the end of this year, billions of consumers already have the ability to engage with extended reality technologies as part of their buying process.

Evolution in Next 3-5 Years

  • Moreover, companies that are actively deploying extended reality technologies (e.g., Isobar, SYZYGY AR) as well as industry researchers (e.g., IDC) forecast that the adoption of extended reality will significantly increase in the next three to five years.
  • According to Dave Meeker, the Chief Innovation Officer of Isobar, the extended reality marketplace is going to grow and "change drastically" in the next 36 months.
  • Similarly, Bartek Rozbicki, the Group XR Director at SYZYGY AR, adds that commerce is "changing at an ever-increasing rate" due to the "crucial role" of extended reality.
  • From a quantitative perspective, IDC estimates that global spending on extended reality tools such as AR and VR will reach $160 billion in 2023, up from $16.8 billion in 2019.
  • Overall, IDC forecasts a five-year CAGR for these extended reality technologies of 78.3%, primarily due to investments from the commercial and public sectors.
  • Meanwhile, consumers themselves believe that extended reality will increasingly become a part of their regular routines, with 81% of consumers under 34 commenting that extended reality will "soon be used in our daily lives."
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AR, VR, AI, and XR - Case Studies

This research provides case studies of companies that have made use of augmented reality (AR) technology to change the way that they interact with customers. Block Scientific and Budweiser have both used NextTech's AR solutions to improve customer engagement and drive sales.

Block Scientific — Medical Equipment Sales

  • Block Scientific made use of AR ARitize, an augmented reality (AR) solution provided by NextTech, to help more of its customers make quick and appropriate decisions.
  • Why Block Scientific Used AR ARitize: Medical lab equipment are usually expensive, bulky, and big. As a result, it was difficult for Block Scientific to carry them along to trade shows or customers. Also, customers who shop for medical equipment from home face challenges in deciding the most suitable product to purchase. This inspired Block Scientific to find a means to solve these challenges and help more of its customers make the right decisions quickly.
  • How It Worked: Through AR ARitize, Block Scientific's medical products have become accessible on its website, allowing customers to view those products in 3D. Also, customers can place those products in their facility in order to determine what fit and size is appropriate for the facility.
  • Additionally, "the web-enabled Augmented Reality in E-commerce platform can easily create 3D virtual replicas of a variety of medical equipment, thus allowing the staff to train and access demos remotely."
  • The unique features offered by this technology are 'virtual try-ons'. Through this technology, Block Scientific can directly engage with its customers from any location without the customers having to visit its premises.
  • Further, by adding a 3D medical twin to the company's 360-degree shopping feature, it enables medical sales representatives to display products at trade shows and show them to other professional doctors that might need them.
  • The Results: As of September 2019, the integration of AR into its system enabled Block Scientific to record a 237% increase in its average total visits across seven products. The average total visits on one of its product pages increased as high as 450%.
  • Also, the average unique visits increased by 180%. The top-performing pages recorded a 330% boost. Generally, all pages experienced significant growth in traffic. The company also recorded a 15% reduction in bounce rate.
  • Overall, Block Scientific successfully boosted its customer engagement offline (at trade shows and other locations) and online (on its product pages). The company recorded a "400% conversion increase that proved the effectiveness of having an AR system in place."

Budweiser — Attendance and Sales

  • During the 25th anniversary of the Budweiser Stage (May – October 2019), Budweiser used ARitize to bring its beer can to life through an augmented reality experience.
  • Why Budweiser Used ARitize: Budweiser wanted to increase attendance and beer sales at the Budweiser Stage while celebrating the 25th anniversary of the venue. The company wanted to incentivize concert participants to attend multiple shows that season, drive engagement with the Budweiser brand, and boost beer sales at the event.
  • How It Worked: To achieve its aim, the brand used NexTech's technology, ARitize, to "[create] a shareable augmented reality experience celebrating The Budweiser Stage 25th anniversary." This process was also used to further incentivize attendees to buy its limited-edition tall cans.
  • Notable elements involved in this campaign include QR Code Scanning, Animated Illustrations, King Can Object Recognition, Social Media Contest, and SFX. On behalf of Budweiser, NexTech "created four animated experiences based on four icons from the tall can, complete with sound effects and shareability on social media."
  • To encourage further interaction with the augmented reality experience, NexTech also announced a social media contest. In this contest, the brand gave away Bud Stage season passes to several participants who shared their AR experience using the #BudAR hashtag. To qualify, these participants also had to guess which band those icons represent.
  • The Results: By using AR to interact with its customers, "hundreds of participants downloaded the ARitize app and engaged in the #BudAR experience with purchases of the limited edition Budweiser 25oz tall cans."
  • Ultimately, the brand was able to increase beer sales at the Budweiser Stage. Also, in-app and social media engagement surged with media views and impressions from more than 50,000 music fans across Southern Ontario.
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AR, VR, AI, and XR - Trends

AR (Augmented Reality), VR (Virtual Reality), AI (Artificial Intelligence), and Extended Reality (XR) have changed the world dramatically. This research outlines a couple of trends that explore the role of these technologies in driving business for brands.

Enhancing Customer Service through AI

  • Customer service can be the differentiator when it comes to customer retention and businesses are increasingly leveraging artificial intelligence to cover ground in this field.
  • According to Forrester, "76% of executives cite improving customer experience as a high or critical priority".
  • According to Accenture, "75% of consumers are more likely to buy from a company which knows their name, purchase history, and recommends products on preferences."
  • According to LinkedIn, customer experience is gaining importance. This is evident from the increased demand for specialized talent in the field.
  • Al Cook, vice president and general manager of AI at Twilio, said while commenting about Artificial Intelligence, "Over the next few years, we'll see the smartest businesses use the technology to transform the very nature of how every department solves problems. Conversational AI will turn anecdotes into real data, and provide true insight into how the business is performing."
  • As per Conversocial, 66% of customers cite the reason for switching brands being poor customer service. Research from Gartner suggests that "89% of businesses will compete mostly on customer experience" in the near future.
  • Social messaging, e.g. Facebook Messenger, will also help brands improve their customer engagement by allowing them to improvise new models by combining social messaging with AI.
  • Another example of AI helping brands drive commerce by improving customer experience is the use of voice-activated devices through what is termed as "voice commerce". Voice commerce rates are rising and sales through this relatively new channel are expected to exceed $40 billion by 2022.

Engaging Customers through AR/VR

  • Brands have been using AR (Augmented Reality) technology to engage customers since 2014. However, the best of it is yet to come as brands continue to experiment with the technology and figure out new and innovative ways to engage customers.
  • With the integration of AR in Android and iOS devices, brands have a new opportunity and they will continue to create experiences to engage customers right on their mobile devices.
  • Since these technologies are relatively new, customers are more attracted to them as opposed to traditional engagement methods.
  • Several renowned brands in the retail space have adopted this technology to engage customers by allowing them to 'experience' things without having to go into stores. Prime examples of this include IKEA's Place app and another app from Pottery Barn.
  • Mark Asher, director of corporate strategy at Adobe, said while commenting on the future prospects of these technologies, "I think we are already seeing a trend where retailers are trying to reinvigorate the brick-and-mortar experience. Building novelty through immersive experiences like AR is a great incentive to bring people out of their homes to the store or create a reason for traffic that’s moving by your store to come into the store."
  • AR and VR (Virtual Reality) technologies are enabling a more visual customer journey. Google Lens, for example, allows customers to look things up using their device's camera. This creates a visual customer journey and brands can leverage this added channel for customer engagement.
  • 5G will have an additional impact on this visual customer journey created by AR/VR technologies. It will "open the door to new experiences."
  • According to a report, 48% of consumers are more likely to engage with brands that offer AR experiences. As a result, 32% of retailers plan to offer AR/VR experiences over the next 3 years.
  • While outdoor navigation has been around for quite some time now, AR technology has enabled indoor navigation. Using this technology, "users can simply whip out their phones, point their cameras and see information about surrounding features in real time." Other use cases of AR include smart glasses, headsets, and many more.
  • The AR/VR industry is expected to reach a value of $25 billion by 2025.

Research Strategy

We have provided a couple of trends that explore the role of AR/VR/AI/XR technologies in driving business for brands. Trends have been determined by the frequency of their appearance across several credible sources in the industry. We have focused on trends that are impacting the industry right now and are expected to continue to impact the industry for years to come.
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AR, VR, AI, and XR - Insights for Banks

Three areas where extended reality (XR) is currently being used and impacting the financial services' industry are tracking customer communications, real estate and financing, and training/education. In the near future (3-5 years out), chat bots are expected to save financial institutions more than $7 billion, the use of AI in fraud detection is likely to expand, and it may be used more in investment recommendations.

Apply AI to Customer Engagement Opportunities

  • According to Deloitte, one of the practices being used by financial institutions that are considered to be front runners in AI is focusing on "applying AI to revenue and customer engagement opportunities." In fact, 47% of the leading financial institutions are tracking metrics related to AI and the customer experience.
  • The main metrics being tracked by these companies are engagement, satisfaction, and retention.

Using AI to Track Customer Concerns

  • Banks could be receiving millions of messages per day from customers. Although all these messages must be dealt with, the bigger picture is trying to determine which issues are occurring most frequently so banks can attempt to lessen the number of times an issue occurs. Tracking this without a system is virtually impossible.
  • Banks are utilizing AI to identify patterns in these communications, and then to categorize the data. This allows them to understand which issues customers are most impacted by, and then take steps to correct them.
  • Bank of America is an example of one large bank that is utilizing this practice. They use AI to track complaints and concerns, and then allocate resources based on where there is the greatest need. This is important because 77% of consumers have a more favorable view of brands that accept and act on customer feedback.
  • In addition to using AI to track the overall issues, it is also being used to track conversations in real time, so upset customers can be quickly identified by managers while the call is in progress, and hopefully the issue can be diffused before escalating.

Real Estate

  • Financial institutions are using AR and VR in several ways in the real estate market.
  • The Commonwealth Bank of Australia and Halifax both developed "home-finder" apps which allow users to hold up their phone on a street and see nearby properties that are for sale. As part of the app, data on monthly mortgage payments is provided. These tools allow the banks to target customers who are house hunting, and provide a new way to engage with them.
  • BNP Paribas developed VR teleport which allows customers to view properties from anywhere. The focus of the app is on real estate projects, and provides cost and time efficiencies by eliminating the need to travel in order to evaluate an opportunity.
  • Union Bank is looking into the possibility of using VR to conduct appraisals of high-end properties.


  • According to Capgemini, financial institutions are investing in developing their workforces in emerging technologies, including AR and VR.
  • "Banks are using virtual reality (VR) to simulate customer engagement via virtual retail banks. Simulations include a range of situations, from advising customers about products to preparing for more unlikely situations such as exigencies, criminal activity, or even a terrorist attack."
  • Fidelity Investments is developing an employee training model using a VR agent. All of this training has the ultimate goal of improving the customer experience.
  • Banks are also using AR to educate members. One example is GTE 3D, developed by GTE Financial, which is an AR experience used to educate members about the products offered by GTE.

Changes in the Next 3-5 Years

  • By 2023, the savings realized in the financial services' industry due to the use of AI and chatbots is expected to reach $7.3 billion.
  • In one survey of top U.S. financial institutions, only 5.5 % said they used "true" AI systems. Of those, only 45.5% utilized the AI as part of their fraud prevention efforts. With 72% of respondents stating that AI would be a more effective tool for detecting fraud than data mining or business rules management, this seems an area that is well-positioned to see growth in the upcoming years.
  • JP Morgan is experimenting with using AI to make investment recommendations, and early indications are that it is showing promise. This is an area that is likely to continue to develop and grow.
  • Although further out than the 3-5 window being examined, research found that incumbent financial institutions expect AI to replace 9% of jobs by 2030, while fintechs expect AI to replace 19% of jobs.
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AR, VR, AI, and XR - Case Studies for Banks

Technological advancements are driving changes in the modern financial services industry. AR, VR, AI, and XR technologies are being used to transform how banks and their employees interact with their customers. For example, Manulife Bank uses a conversational AI chat bot to attract millennial customers and build trust through encouraging their customers to better their financial health and avoid fees. HSBC has implemented the use of Pepper, a humanoid robot powered by AI technology, in several of its branches in an effort to increase efficiency and uniquely engage with customers. Finally, NatWest has launched a platform that uses AI-powered ID verification technology to allow its customers to open a bank account from home with just a selfie and photo ID.

MAI for Manulife Bank

  • Manulife Bank is a digital banking company based in Canada.
  • In June 2019, Manulife Bank partnered with Kasisto, a company that creates conversational AI platforms for financial institutions, to launch MAI.
  • MAI is a "conversational AI solution" linked to Manulife's digital "All-In Banking Package," designed to allow its customers to sign up for a checking account, high-interest savings account, and credit card within minutes.
  • Manulife's goal was to attract millennial customers with its innovative technology.
  • MAI acts as a kind of virtual assistant to help customers "develop better financial habits and improve their financial wellbeing" through managing account balances, analyzing "spending habits," and answering "questions about personal finance."
  • Manulife's All-In Banking Package comes with a $10 monthly fee, which customers can avoid by saving at least $100 every month, and MAI is programmed to help customers avoid this fee by notifying them of how much they have left to save each time they login.
  • Manulife Bank CEO Ricky Lunny says this "new approach to consumers" is to "build trust with them and hopefully they'll trust us with more and more of their business."
  • Banks and financial institutions that are using Kasisto's AI platforms have seen as much as "90 percent of their customers' questions handled by KAI without human intervention, a 50 percent reduction in live chats, and four times more digital engagement."

Pepper for HSBC Bank

  • HSBC is a multinational banking and financial services organization that serves over 40 million customers.
  • Designed by SoftBank Robotics, Pepper is a humanoid robot that can recognize faces, interpret basic human emotions, engage in conversation, and interact with customers through a touch screen.
  • In the past two years, Pepper has been utilized in HSBC's bank branches in New York, Seattle, Beverly Hills, and Toronto.
  • Pepper is programmed to educate customers about the financial services offered at the banks, answer basic questions, and refer customers to an employee who can help them, cutting down on wait times.
  • Pepper's features also include #PoseWithPepper, a campaign to encourage customers to pose for a selfie with the robot in an effort to "make the retail experience fun and enjoyable for customers."
  • Since Pepper was implemented by HSBC, they have reported an increase in "ATM transaction volumes," "new credit card applications," and "an overall increase in new business and products" at the branches, including a 60 percent increase at their New York branch.
  • In April 2019, HSBC said Pepper had over 15,000 customer interactions in the Seattle and Beverly Hills branches.
  • In April 2019, HSBC Bank was announced as the winner of the Consumer Banking Innovation Award by FinTech Breakthrough for their use of Pepper "in delivering a consumer banking solution that not only increases efficiency of the banking process, but also provides an exciting and engaging experience for customers."

HooYu Identify for NatWest

  • NatWest is a retail and commercial bank based in the United Kingdom.
  • In 2019, NatWest announced that it had partnered with HooYu, an ID verification company, to launch a digital account opening platform for its customers.
  • Using HooYu Identify, NatWest customers can open a new account through their smartphone in only four minutes.
  • The customer takes a selfie and uploads a photo ID, such as a passport, then the AI uses biometric checks to match the selfie with the ID to verify the customer's identity.
  • HooYu Identify's AI system, which includes "identity verification technologies such as geo-location, identity document authentication, facial biometrics, digital footprint analysis, traditional identity database checks, and identity confidence scoring," is designed to increase convenience and compliance with KYC (Know Your Customer) regulations, as well as decrease fraud.
  • HooYu Marketing Director David Pope says NatWest launched this AI-powered interface in order to satisfy customers' expectations for everything to be "on-demand," explaining that "they don’t want to have to go into a branch or wait for a day or two for account opening to be completed."
  • When the platform launched, it had already gone through a reportedly successful pilot period with 60,000 customers.
  • NatWest reported a significant decrease in fraudulent applications during the pilot period.

Research Strategy

To research case studies of banks and financial institutions that are currently using AR, VR, AI, or XR technology to change the way they interact with customers, we reviewed a variety of financial technology reports, company websites, and news articles. We focused on technology that affects customer engagement and has been launched post-2018. We found that most technological advancements that have launched in the past two years in the financial services industry were centered around AI. However, XR technologies are reportedly being explored for future application by institutions such as Bank of America.

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AR, VR, AI, and XR - Trends for Banks

Two ways that XR will impact financial institutions and customer experience at these institutions is by assisting with big data and AI assisted banking.

Assisting with Big Data

  • Augmented reality will help employees of financial institutions better visualize and analyze large data sets.
  • The expansion of 5G technology will only add more data for banks to analyze and that 5G can increase the amount of data that can be analyzed.
  • Driving this trend is the explosive growth in the amount of data that financial institutions are required to analyze. The IDC estimated that data growth in financial services companies will grow at a CAGR of 26% between 2018-2025.
  • This could change how investors are able to view their stock investments with financial institutions. For example,, a retail forex broker based in Japan, created MarketMR, which is a forex trading tool that "holographically displays forex rates, charts and economic news in a virtual space."
  • Another example of this trend influencing customer experience is polish fin-tech Comarch, which developed a virtual reality wealth management tool.
  • Citibank has created an AR data analysis tool for their bank employees to "visualize holographic 3D models of data, interact with them and have more confidence in decision making."

AI Assisted Banking

  • Banks and financial institutions will begin assisting customers via AI tellers or assistants. A recent survey showed that "79% of bankers believe that within the next two years AI will work alongside humans as a colleague, advisor, collaborator."
  • 5G will aid in the development and implementation of AI virtual assistants as 5G will enable these assistants to react and learn in real-time, thanks to the faster speeds of 5G.
  • This trend is being driven by banking executives desire to "better service their customers, improve performance and increase revenue" through the use of new AI technology.
  • This will directly impact how customers interact with banks. For example, Bank of America developed Erica, "an intelligent virtual assistant that leverages predictive analytics and cognitive messaging to provide 24/7 assistance to the company’s over 45 million customers."
  • Another example of this trend comes from Fidelity Labs, which created Cora’s Virtual Chart Room for customers to manage their investments. By putting on the VR headset, customers can bank with "Cora, ...a friendly, competent and helpful virtual adviser who shows each client how well their portfolio performs, as well as opportunities to buy or sell stocks depending on the market trends."

Research Strategy

Trends were identified as such based on their mention by multiple industry expert publications and the availability of real-world examples of the trend being used or research by well-known financial institutions. Additionally, the research team reviewed the potential impact of 5G could impact financial institutions and chose XR trends that would be influenced by expanding 5G technology.

From Part 05