A Review of AI-Powered Chatbots in Customer Service: Trends, Challenges, and Future Prospects

Abstract

AI-driven chatbots have transformed customer service by providing instant and personalized responses. This paper reviews the evolution of chatbot architectures, including rule-based, retrieval-based, and generative AI models. We analyze their applications across industries such as banking, healthcare, and e-commerce. Challenges such as natural language understanding, emotional intelligence, and chatbot hallucinations are discussed. Future directions focus on multimodal interactions, ethical AI, and improved human-AI collaboration.