Conversational AI Market Size, Share, Forecast, & Trends Analysis by Offering, Application, Organization Size, Deployment Mode, Sector (IT & Telecommunications, BFSI, Retail & E-commerce, Healthcare & Life Sciences, Travel & Hospitality, Education, Manufacturing) - Global Forecast to 2031

Conversational AI Market Size & Forecast

The Conversational AI Market is projected to reach $54.1 billion by 2031, at a CAGR of 23.9% from 2024 to 2031. The growth of the conversational AI market is driven by the surge in demand for conversational AI solutions to improve call center operations and the proliferation of voice-enabled devices. Furthermore, the high potential of AI-enabled voice assistants in the healthcare industry and the increasing proliferation of conversational AI solutions for sales and marketing management are expected to create growth opportunities for the players operating in the conversational AI market.

Conversational AI Market Growth Drivers

A Surge in Demand for Conversational AI Solutions to Improve Call Center Operations

Conversational AI solutions allow call centers to provide superior customer service. Conversational AI can enable individualized and efficient service by leveraging machine learning (ML) and natural language processing (NLP) technologies. AI-powered virtual assistants can understand customer needs, identify their problems, and provide relevant information to help them overcome the problems, enhancing customer experience. Chatbots can lower operational costs by offering a robust self-service channel to customers, making them essential for call centers. A call center chatbot understands and responds to real-time customer queries, providing relevant resolutions with minimal agent intervention. Chatbots can be programmed to suit business use cases such as collecting data or feedback.

Leading market players are focused on launching advanced products with added functionalities to increase their market shares. For instance, in September 2021, IBM Corporation (U.S.) announced that IBM’s virtual agent, Watson Assistant, was available with an add-on feature designed to connect to nearly every major contact center platform that uses the SIP protocol, including Genesys and NICE inContact, in as little as half an hour with no coding. Voice assistants built with Watson Assistant’s no-code interface can answer customer calls to help call centers increase their first-contact resolution rates, reduce hold times, and hand off calls to human agents when necessary.

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Proliferation of Voice-enabled Devices

Technological advancements in AI are leading to transformation in industries, including automotive, healthcare, BFSI, retail, and IT & telecommunications. The emergence of smart technologies and the rising adoption of voice-enabled devices across industries are driving the integration of speech and voice recognition capabilities into smart solutions to improve user experience. According to Comscore, Inc. (U.S.), in 2021, smart speaker ownership hit an all-time high, with almost 50% of internet users owning at least one smart speaker. This ownership increased by 70% between 2019 and 2020. Moreover, according to Google Inc. (U.S.), 72% of people owning voice-activated speakers stated that their voice-enabled devices are a part of their daily routines. Thus, the proliferation of voice-enabled devices is boosting the utilization of conversational AI technology, driving the growth of this market.

Conversational AI Market Trends

AI Chatbots with High Emotional Intelligence

The development of chatbots with high emotional intelligence is a prominent trend in the conversational AI market. These chatbots are designed to recognize and respond to human emotions, making them even more effective at engaging with customers. Although emotional AI is in its developmental stage, it holds immense potential to transform how we engage with technology. AI chatbots can leverage AI and machine learning algorithms to analyze large human interactions and emotional datasets. A chatbot’s model can learn to recognize and respond to various emotional states through training data, enhancing the technology’s ability to provide a personalized and empathetic customer experience.

The primary purpose of chatbots with high emotional intelligence is to make users feel heard and potentially address their mental health issues. ELIZA and Woebot are examples of chatbots that provide mental healthcare. Assuming that users’ data privacy is secure, encrypted emotional chatbots can be trusty companions. Users could share their personal problems, stories, feelings, or psychological symptoms. The technology is at its nascent stages and requires extensive research and observation. At the basic level, a chatbot is a companion that listens and talks to patients. Technological advancements and the unique features of AI chatbots are expected to boost this trend in the coming years.

Conversational AI Market Analysis: Key Findings

By Offering: In 2024, the Solutions Segment to Dominate the Conversational AI Market

Based on offering, the global conversational AI market is segmented into solutions and services. In 2024, the solutions segment is expected to account for the largest share of over 76.0% of the global conversational AI market. The large market share of this segment is attributed to the increasing focus on solution-centric automation capabilities, the presence of multiple solution providers investing in R&D, and the growing adoption of conversational AI solutions in various industries.

Moreover, the solutions segment is projected to register the highest CAGR during the forecast period. The growth of this segment is driven by the increasing deployment of chatbots and digital assistants, a surge in demand for IVR systems, and initiatives by companies to launch speech recognition solutions and content management solutions.

By Application: In 2024, the Customer Service Segment to Dominate the Conversational AI Market

Based on application, the global conversational AI market is segmented into customer service, information technology service management, human resource management, sales and marketing management, operations and supply chain management, finance and accounting, and other applications. In 2024, the customer service segment is expected to account for the largest share of over 27.0% of the global conversational AI market. The large market share of this segment is attributed to the growing demand for digital assistants and chatbots in customer service for answering FAQs, increasing usage of AI-powered chatbots or virtual assistants for account management, rising need to analyze customer queries or statements, and conversational AI for multilingual support.

Moreover, the customer services segment is also projected to register the highest CAGR during the forecast period. The growth of this segment is driven by the increasing usage of conversational AI for payment management and the increasing need for conversational AI for order tracking and order updates.

By Organization Size: In 2024, the Large Enterprises Segment to Dominate the Conversational AI Market

Based on organization size, the global conversational AI market is segmented into large enterprises and small & medium-sized enterprises. In 2024, the large enterprises segment is expected to account for a larger share of over 63.0% of the global conversational AI market. The large market share of this segment is attributed to the keen focus on developing strategic IT initiatives by large enterprises, the growing need to handle large volumes of customer-level data, early adoption of advanced technologies in retail, manufacturing, healthcare, and automotive sectors, and the growing need for better insights into customer responses.

However, the small & medium-sized enterprises segment is projected to register the highest CAGR during the forecast period. The growth of this segment is driven by the increasing need for chatbots and digital assistants by small & medium-sized enterprises, the growing demand for IVR solutions by small-scale enterprises, notable benefits offered by chatbots for small & medium-sized enterprises, and the increasing need to improve performance, quality management, and customer satisfaction in call centers.

By Deployment Mode: In 2024, the Cloud-based Deployment Segment to Dominate the Conversational AI Market

Based on deployment mode, the global conversational AI market is segmented into cloud-based deployment and on-premise deployment. In 2024, the cloud-based deployment segment is expected to account for a larger share of above 67.0% of the global conversational AI market. The large market share of this segment is attributed to the rising demand for benefits such as easy maintenance of customer data, cost-effectiveness, scalability, and growing demand for conversational AI solutions for multi-cloud deployments.

Additionally, the cloud-based deployment segment is expected to register the highest CAGR during the forecast period. The growth of this segment is driven by the increasing implementations of cloud-based conversational AI and ongoing efforts by companies to launch cloud-based chatbots and digital assistants.

By Sector: In 2024, the IT & Telecommunications Segment to Dominate the Conversational AI Market

Based on sector, the global conversational AI market is segmented into IT & telecommunications, BFSI, retail & e-commerce, healthcare & life sciences, travel & hospitality, education, government & public sector, media & entertainment, energy & utilities, manufacturing, and other sectors. In 2024, the IT & telecommunications segment is expected to account for the largest share of over 28.0% of the global conversational AI market. The large market share of this segment is attributed to the increasing adoption of AI solutions for fraud detection and prevention, the surge in demand for conversational AI to improve call center operations, exerting efforts by companies to launch chatbots for IT service management, rising need for network optimization and maintenance.

Additionally, the IT & telecommunications segment is expected to register the highest CAGR during the forecast period. The growth of this segment is driven by the increasing implementation of chatbots and digital assistants to address different IT customer questions and the growing need to resolve IT service issues quickly.

Geographical Analysis

In 2024, North America to Dominate the Conversational AI Market

In 2024, North America is expected to account for the largest share of over 37.0% of the global conversational AI market. The large share of this regional market is attributed to the presence of prominent players offering advanced conversational AI solutions & services, the growing demand for AI-powered customer support services, the growing usage of chatbots to provide efficient customer services, the increasing adoption of voice-enabled devices, and increased technological advancement across the region encourage consumers to install conversational AI solutions & services.

However, the market in Asia-Pacific is projected to register the highest CAGR of above 26.0% during the forecast period. The growth of this regional market is driven by companies' growing emphasis on launching chatbots and virtual assistants in the region, rising demand for chatbots and voice assistant solutions, and increasing demand for AI-powered customer support services.

Conversational AI Market: Key Companies

The report offers a competitive analysis based on an extensive assessment of the leading players’ product portfolios, geographic presence, and key growth strategies adopted in the last three to four years. Some of the key players operating in the global conversational AI market are Google LLC (U.S.), Microsoft Corporation (U.S.), Amazon Web Services, Inc. (a subsidiary of Amazon.com, Inc.) (U.S.), Oracle Corporation (U.S.), International Business Machine Corporation (U.S.), NVIDIA Corporation (U.S.), Baidu, Inc. (China), Verint Systems Inc. (U.S.), SAP SE (Germany), AT & T Inc. (U.S.), Conversica, Inc. (U.S.), AssemblyAI, Inc.(U.S.), Kore.ai Inc. (U.S.), OpenAI OpCo, LLC (U.S.), and DRUID S.A. (Romania).

Conversational AI Industry Overview: Latest Developments from Key Industry Players

• In May 2023, Google Cloud, a cloud business unit of Google LLC (U.S.), launched new business models for generative AI. Generative AI has unleashed a new breed of digital assistants, content-creation tools, and applications. It has changed how apps are built, who can build them, and the capabilities end users expect from them.
• In March 2023, Microsoft Corporation (U.S.) launched Microsoft Security Copilot, giving defenders a much-needed tool to quickly detect and respond to threats and better understand the threat landscape. Security Copilot will combine Microsoft’s vast threat intelligence footprint with industry-leading expertise to augment the work of security professionals through an easy-to-use AI assistant.

Conversational AI Market Research Summary

Key questions answered in the conversational AI market report: