The Future of AI in Customer Service for Small Businesses

Artificial Intelligence (AI) has the potential to completely revolutionise customer service for businesses. However, alongside its many benefits, there are certain risks and challenges that small business owners must be conscious of.  

AI can be used to meet rising customer expectations and create exceptional customer service experiences. But in an increasingly digital world, it’s important for SMEs to understand how AI can be used in their business in an ethical and responsible way. 

How is AI used in customer service? 

AI can be used in customer service to automate, enhance and personalise interactions between the business and its clients.  

This is all about utilising machine learning (ML), natural language processing (NLP) and data analytics to simulate responses and actions that can help the customer. When used effectively, AI can help to support faster, more efficient customer service.  

Some of the most common forms of AI used in customer service are ones you’re probably already familiar with, including: 

• Chatbots: Designed to help answer simple questions, chatbots are automated systems that can provide instant responses relating to specific topics.  

• Voice recognition systems: These AI-powered voice assistants can understand and respond to customer commands and route customers to the appropriate department when necessary.  

• Predictive analysis: By analysing customer behaviour and preferences, predictive analytics can anticipate customer needs, suggest solutions and pre-empt problems before they arise.  

• Agentic AI: This is an advanced form of AI that can operate with some level of autonomy to make decisions. Agentic AI can proactively identify customer needs, suggest improvements, and escalate complex issues to human representatives. 

How can AI benefit small businesses? 

In the context of customer service, AI has a number of benefits for small businesses. 

Improved efficiency 

AI can help to automate time-consuming tasks that would otherwise eat up a lot of your precious time. As a small business owner, you often wear many different hats and juggle many tasks and responsibilities simultaneously. AI can automate certain tasks, freeing up your own time so you can concentrate on other, more high-value jobs.  

For example, a chatbot on your website could be used to answer simple customer questions. If the question is too complex, it can then forward the customer onto a human representative to provide more in-depth problem-solving.  

Actionable insights 

AI was developed to analyse huge amounts of data to reveal patterns and trends, offering in-depth, valuable insights for business owners. Predictive analytics can forecast sales, identify market opportunities and anticipate customer behaviours. With the right kind of planning and preparation, you can set yourself up to capitalise on these emerging trends. This can help you to potentially boost sales and improve customer retention.  

Certain AI tools can also be used to optimise resource allocation. This can help to ensure that time and money are being allocated into exactly the right areas for maximum return. 

Flexible scalability  

Is your business affected by seasonal trends? If your operation sees a significant uptick in business during peak periods, then you could utilise AI to help handle elevated levels of enquiries with minimal overhead. 

For instance, chatbots and AI-driven personalised support systems can handle an increased number of customer inquiries during busy periods. This can help to ensure customers receive timely responses even at peak times. Once the demand subsides, these tools can automatically scale back operations, eliminating the need to hire and train temporary staff. 

Small business risks and challenges of using AI 

While AI definitely offers plenty of benefits for small business owners, it does come with challenges and risks. 

Data security risks 

AI systems can be vulnerable to cyberattacks. As these systems collect and handle large amounts of sensitive data, it’s important that you have strong cybersecurity measures in place. This includes taking steps such as:

• Instigating encryption protocols for stored data and during transmission.
• Installing strong antivirus software and firewalls.
• Using multi-factor authentication.  

Cyber Liability insurance is one way that you can help protect your business if the worst should happen. Cyber Liability insurance is designed to help protect you from claims and support your profitability in the event of a cyber breach or attack. Costs associated with defending a cyber claim are also covered.  

Bias and ethical concerns

An AI system can perpetuate biases if the data it has been trained with is inherently biased. This is why it’s important for business owners using AI to closely monitor AI decisions and implement strategies to ensure fairness.  

Let’s say you have a chatbot that handles basic customer enquiries. The chatbot is trained from historical data of past customer interactions. If that historical data contains biased language or reflects a discriminatory practice (such as priotising one customer demographic over another) then this could impact its responses to customers from certain areas or with certain names.  

Adhering to privacy laws

The Australian government recently made changes to the country’s privacy laws to strengthen data security and protect people’s privacy. Small businesses with an annual turnover of less than $3 million are mostly exempt from these laws. However, there are exceptions. 

To find out more about the changes to Australian privacy laws and how they could impact you, read our blog: How will the new Australian privacy laws affect your small business? 

How to stay compliant

As a small business owner, it’s important that you always operate your business in line with Australian laws and regulations. This includes making sure you’re staying compliant when using AI in your business.

1. Get familiar with the Privacy Act: It’s important to make yourself familiar with Australian privacy laws and the latest updates to the Privacy Act. If you’re unsure if certain laws apply to you and your business, or if anything is unclear, then you should consult a legal expert.

1. Conduct a PIA: A privacy impact assessment (PIA) is an assessment of a project that seeks to identify the impact that the project may have on the privacy of individuals. The purpose of the PIA is to set out recommendations for managing, minimising and, ultimately, eliminating the impact. You might already be familiar with this process as conducting a PIA may be part of your overall business risk management plan.

1. Choose trusted vendors: Work only with AI vendors that priotise compliance and privacy, and can offer secure systems with transparent data handling practices.  

1. Train your staff: Educate your team on their compliance obligations and responsibilities around AI. This will help to minimise human errors.

Using AI in your small business 

The future of AI is continuously evolving, and more and more businesses are looking to incorporate it into their daily operations. Those businesses able to integrate AI to enhance customer service and boost efficiency, while also balancing their responsibilities towards data privacy and ethical considerations, will be the ones in the best position for long-term success.