Conversational AI Market (By Type: Chatbots, IVA; By Deployment: Cloud, On-premise; By Technology: NLP, ASR; By End-user: Healthcare, BFSI; By Component) - Global Industry Analysis, Size, Share, Growth, Trends, Revenue, Regional Outlook and Forecast 2024-2033

The global conversational AI market size was valued at USD 9.42 billion in 2023 and it is predicted to surpass around USD 78.58 billion by 2033 with a CAGR of 23.63% from 2024 to 2033. 

Key Pointers

• North America accounted for a dominant revenue share of over 27% in 2023. 
• The solution segment led the market in 2023 accounting for over 62% share of the global revenue. 
• The managed service segment is expected to register a CAGR of over 24.03% during the forecast period. 
• The chatbot segment led the market in 2023 accounting for over 69% share of the global revenue. 
• The Intelligent Virtual Assistants (IVA) segment is expected to register a CAGR of over 24.06% from 2024 to 2033. 
• The on-premises segment led the market in 2023, accounting for over 65% share of the global revenue. 
• The cloud segment is expected to register a CAGR of over 24.05% during the forecast period.
• The NLP segment led the market in 2023 accounting for over 47% share of the global revenue. 
• The Automatic Speech Recognition (ASR) segment is expected to register a CAGR of 24.74% over the forecast period. 
• Based on the end-user, the retail & eCommerce segment led the market in 2023, accounting for over 23% of global revenue. 
• The automotive segment is expected to register a CAGR of 26.28% from 2024 to 2033.

Conversational AI Market Growth Factors 

The conversational AI market is experiencing robust growth driven by an increasing demand for personalized customer experiences is propelling the adoption of Conversational AI solutions across various industries. Businesses are leveraging AI-powered chatbots and virtual assistants to engage with customers in real-time, resolve queries efficiently, and deliver personalized recommendations, thus enhancing customer satisfaction and loyalty. Secondly, the proliferation of digital channels and mobile messaging platforms is accelerating the adoption of Conversational AI, as consumers seek seamless and intuitive communication experiences. Additionally, the integration of voice-enabled technologies is a significant driver, with voice assistants becoming ubiquitous in both consumer and enterprise applications. Lastly, the emphasis on operational efficiency and cost savings is fueling the adoption of Conversational AI within organizations, as AI-driven conversational interfaces streamline processes, automate routine tasks, and empower employees with instant access to information and support. Overall, these factors are driving the rapid expansion of the Conversational AI market, with continued growth expected in the foreseeable future.

Report Scope of the Conversational AI Market

Conversational AI Market Trends:

• Rise of Voice-Enabled Assistants: Voice-enabled technologies like Amazon Alexa, Google Assistant, and Apple's Siri are driving the adoption of Conversational AI, with businesses leveraging voice-driven interactions to enhance customer engagement and user experiences.
• Integration with Messaging Platforms: Conversational AI solutions are increasingly integrated with popular messaging platforms and social media channels, allowing businesses to engage with customers in their preferred digital environments seamlessly.
• Focus on Personalization: There's a growing emphasis on delivering personalized customer experiences through Conversational AI, with businesses leveraging AI algorithms to analyze user data and tailor interactions to individual preferences and needs.
• Expansion into New Verticals: Conversational AI is extending its reach beyond traditional sectors like customer service and support, with applications emerging in areas such as healthcare, finance, and education, where personalized interactions and virtual assistance are in high demand.
• Advancements in NLP and ML: Continued advancements in natural language processing (NLP) and machine learning (ML) algorithms are driving improvements in Conversational AI capabilities, enabling more accurate understanding of user intent and context, as well as more nuanced responses.
• Hybrid Models: A trend toward hybrid models combining automated chatbots with human agents is emerging, offering the benefits of AI-driven efficiency while ensuring human oversight and intervention when needed, particularly in complex or sensitive scenarios.

Component Insights

The solution segment led the market in 2023 accounting for over 62% share of the global revenue. The leading share is attributed to companies' large-scale implementation of in-house conversational AI technologies. Moreover, AI-enhanced support systems can offer users accessibility to services and round-the-clock assistance, enabling organizations to deliver dependable customer service. For instance, in January 2023, Vision state Corp. introduced innovative Vicci 2.0, a state-of-the-art conversational chatbot AI-powered customer service kiosk. Vision state is implementing this technology into its Vicci 2.0 platform to serve on-site customer service influenced by AI. The Vicci 2.0 platform can back a broad range of consumers through its modification capability to support various languages.

The managed service segment is expected to register a CAGR of over 24.03% during the forecast period. Major players in the market, like Accenture, offer wholesome AI training and system integration services to enable businesses to implement AI advancements in their communication services. The company’s Conversational AI Platform is created to handle organizations' usual problems when executing conversational AI solutions. These challenges include delivering at pace, enhancing from proof of concept to enterprise-level, and how to operate a living system. By centralizing the maintenance, design, creation, and publishing of conversational experiences in a common platform, organizations can enable scaling across the enterprise by breaking conventional silos.

Type Insights

The chatbot segment led the market in 2023 accounting for over 69% share of the global revenue. Prominent development in machine learning (ML) and NLP in chatbots is augmenting the market growth. Chatbots are primarily used for collecting data. In addition, customers can engage with chatbots to obtain clarity about any product or service or if they need to book any appointments. With the advancement of NLP technology, chatbots can now comprehend and produce language like that of humans. Deep learning models and machine learning algorithms have been essential in improving chatbot accuracy and contextual awareness.

The Intelligent Virtual Assistants (IVA) segment is expected to register a CAGR of over 24.06% from 2024 to 2033. There are numerous conversational AI service providers in the market, developing virtual assistants and chatbots with restricted user-personalized characteristics. For instance, in September 2021, Astro, a new and different kind of robot, was launched. It is structured to help customers with tasks like keeping in touch with family and home monitoring. In November 2023, Alphabet, the parent company of Google, introduced Bard, an AI chatbot, throughout Europe and Brazil. The product has undergone its largest expansion since its launch in February. The bot competes with ChatGPT, which is supported by Microsoft.

Deployment Insights

The on-premises segment led the market in 2023, accounting for over 65% share of the global revenue. This is attributed to the flexibility delivered to the customer, due to which the transaction is done only once. The costs are relatively cheaper than expenditures incurred on the cloud by the consumer. Strict rules or concerns about data privacy and security may exist in some sectors, such as healthcare, banking, or government. Organizations have complete control over their data and lower the risk of data breaches or unauthorized access by keeping conversational AI on-premises, which is fueling segment growth. Moreover, when real-time communication and minimal latency are essential, on-premises conversational AI is useful. Organizations reduce network latency and guarantee quick reaction times by deploying the conversational AI system locally, which is crucial for time-sensitive applications.

The cloud segment is expected to register a CAGR of over 24.05% during the forecast period owing to the rising prominence of cloud-based technologies and services in businesses across the globe. Platforms for cloud conversational AI are frequently updated with new functions, enhancements, and developments in machine learning and natural language processing. By doing this, organizations benefit from the newest innovations and advancements without having to invest significantly in infrastructure or software changes. Global access to cloud conversational AI technologies enables companies to service clients in various time zones and geographical locations. Their universal accessibility increases the impact and reach of conversational AI applications.

Technology Insights

The NLP segment led the market in 2023 accounting for over 47% share of the global revenue. NLP ensures the processing of large quantities of natural language data. It also enables streamlining of the documentation processes to enhance their efficiency, including documentation accuracy. For instance, SAP (Systems, Applications, and Products in Data Processing) SE (Societas Europaea), a global operating software company based in Europe, developed current applications with improved, automated capabilities like automatic translation and the Incident Solution Matching service based on ML and AI advancements. Moreover, speech recognition systems that translate spoken words into written text are included in NLP. Thus, voice-based interactions with users can be facilitated by conversational AI systems that can process and comprehend spoken inputs.

The Automatic Speech Recognition (ASR) segment is expected to register a CAGR of 24.74% over the forecast period. ASR facilitates the creation of speech user interfaces that let people converse verbally with conversational AI systems. ASR systems enable natural and intuitive interactions by transcribing spoken inputs, giving users hands-free and eye-free experiences. Moreover, since there are differences in pronunciation, background noise, and other circumstances, ASR systems produce transcriptions that could be inaccurate. Methods including mistake correction algorithms and confidence scores are used to increase the accuracy of transcriptions and determine the degree of confidence in the speech recognized.

End-user Insights

Based on the end-user, the retail & eCommerce segment led the market in 2023, accounting for over 23% of global revenue. Through persuasive, more expressive, and intelligent conversational AI tools and techniques, the retail & e-commerce industries serve customers better. Conversational AI enables companies to provide chatbots and virtual assistants for round-the-clock customer service. These AI-powered customer service representatives can respond to frequent consumer questions, give product details, help with order tracking, and provide after-sale assistance. Conversational AI minimizes response times and increases customer satisfaction by providing immediate, personalized support.

The automotive segment is expected to register a CAGR of 26.28% over the forecast period. AI voice assistants can serve vehicle controls, alerts, real-time recommendations, and much more, catering to passengers and drivers for a more convenient daily commute. By offering voice-guided directions, real-time traffic updates, and contextual information about nearby sites of interest, AI improves navigation systems. Voice commands can be used by drivers to input locations, seek alternate routes, or inquire about gas stations, dining options, or parking facilities in the area.

The conversational AI healthcare chatbot is one of the most influential and mature AI-powered healthcare technology established so far, which stands to radically change the way patients, payers, and medical care providers interact with one another. These bots also play a crucial part in providing vital healthcare information to specifically targeted people at the right time. Healthcare or Medical chatbots can be implemented to achieve various objectives, from revealing valuable insights and improving healthcare systems to assisting medical personnel and improving patient experience.

Regional Insights

North America accounted for a dominant revenue share of over 27% in 2023. The widespread adoption of emerging technologies and the rapidly increasing need for customer support services powered by AI are both driving regional market growth. Furthermore, most organizations in North America are investing in technological advancements to satisfy and help their customers' requirements. The rapidly growing health consciousness among the population also fuels the demand for conversational AI. The healthcare industry in North America is advancing to implement augmented reality (AR), virtual reality (VR), robotics, and AI.

This would help deliver intelligent services and technologies for evidence-based health and focus on preventive and collaborative care. The Asia Pacific region is projected to witness the fastest growth rate during the forecast period. The growth is attributed to increasing awareness among organizations about innovative customer support services and technologies. In addition, increasing development in the e-commerce sector, rising acceptance of conversational AI in the retail industry, technological advancement in consulting & healthcare, and progressing internet penetration in this region.

Conversational AI Market Key Companies

• Google
• Microsoft
• Amazon Web Services, Inc.
• IBM
• Oracle
• Nuance Communications, Inc.
• FIS
• SAP SE
• Artificial Solutions
• Kore.ai, Inc.
• Avaamo
• Conversica, Inc.
• Jio Haptik Technologies Ltd.
• Rasa Technologies Inc.
• Solvvy
• Pypestream Inc.
• Kasisto
• Cognigy

Conversational AI Market Segmentations:

By Component 

• Solutions
• Managed Services
• Professional Services
  • Training & Consulting
  • System Integration & Implementation
  • Support & Maintenance

By Type 

• Chatbots
• Intelligent Virtual Assistant (IVA)

By Deployment 

• On-premises
• Cloud

By Technology 

• Natural Language Processing (NLP)
• ML and Deep Learning
• Automatic Speech Recognition (ASR)

By End-user 

• BFSI
• Healthcare
• IT & Telecom
• Retail & eCommerce
• Education
• Media & Entertainment
• Automotive
• Others (Government, Hospitality, Manufacturing, etc.)

By Region

• North America
• Europe
• Asia Pacific
• Latin America
• Middle East and Africa (MEA)