Customer Service and AI Chatbots Are Failing Indian Consumers

Home » Blog » Declining Customer Service in India: AI Chatbots and Global Competitiveness

Introduction

In recent years, Indian customers across telecom, e-commerce, banking, and other sectors have faced growing frustration with support services. Companies are increasingly pushing AI chatbots and automated systems to handle complaints and queries, often with minimal human oversight or training, in the name of efficiency. Paradoxically, this trend has worsened the customer service experience rather than improving it. Numerous surveys and reports show that Indian consumers now spend billions of hours on hold or in endless bot loops, leading to eroded trust and loyalty. Many analysts warn that this decline in service quality is undermining India’s global competitiveness, as international customers and partners expect reliable, high-touch support that Indian companies are failing to provide.

The Rise of AI and Automation in Support

Businesses across industries have embraced AI-driven support. A ServiceNow study finds that 80% of Indian consumers now rely on chatbots for tasks like checking complaint status or getting product information. In telecom and e-commerce, for example, automated voice menus and chat windows are increasingly the first (and sometimes only) contact point. Companies cite cost savings and scalability, but there are signs that these AI systems are often under-trained or too rigid to be effective. ServiceNow’s report notes that more than half of consumers have turned to self-service tools or chatbots, and trust in these solutions is growing. Yet the supposed benefits of automation have not materialised in faster resolutions; in fact, wait times remain stubbornly long.

Key Survey Findings

15 billion hours on hold: Indians collectively spent over 15 billion hours waiting to lodge complaints in the past year, despite 80% relying on AI chatbots for service. This contributed to an estimated $55 billion in economic loss.
Shorter waits unmet: The average consumer still spends 30.7 hours on hold per year, and over half say wait times have increased. Incredibly, 66% of customers would switch companies if their issues aren’t resolved within three days.
Escalating to self-help: 62% of consumers now use online or AI-powered self-service options for support. While this reflects acceptance of technology, it also signals frustration with human channels.

Despite the hype around “intelligent” chatbots, the actual resolution speed and quality remain poor. Agents and surveys reveal a huge perception gap: support staff claim they resolve simple issues in half an hour, but customers report those same cases dragging on for 3–4 days. In short, automation is widely used but not delivering timely answers.

The Customer Experience Gap

The data paint a stark picture of consumer dissatisfaction. Surveys consistently show that Indian customers face slow, fragmented service, leading them to penalise companies quickly.

Brand-switching risk: 89–90% of Indian consumers say they would switch to another brand if the service is slow or inefficient. In 2023 alone, analysts warned Indian businesses risked losing two-thirds of their customers to poor support.
Negative feedback: 84% of consumers would publicly post negative reviews after a bad support experience, amplifying reputational damage.
Long wait times and transfers: 39% of customers report being kept on hold, and 36% being transferred repeatedly before reaching a resolution. Over one-third (34%) even feel companies complicate complaint processes intentionally.
Demands for improvement: Roughly half of customers demand much faster resolution and better-trained agents, and nearly the same number demand much less hold time.

These frustrations manifest in concrete consumer actions. A 2017 global survey found 63% of Indians would abandon a purchase if customer service was poor – an alarmingly high number compared to other countries. Indians also talk about service experiences more: in the same study, 84% rated service quality as “very important” when choosing a brand, far above the 70% of Americans or 59% of Britons.

“Nearly impossible to get direct access to a customer care executive. One has to go through mostly useless AI chatbots that can only give template answers.” — Mumbai shopper on Flipkart

Indeed, data from India’s Consumer Affairs Ministry underscores these issues. In FY2023-24, 4.4 lakh consumer grievances were filed against e-commerce platforms, an increase of more than 10% over the prior year. Flipkart alone faced ~161,000 complaints, Amazon ~58,900 (with others like Meesho and Myntra also significant). Common gripes included damaged or defective products, delayed deliveries, payment issues, and misleading ads, all problems that customers often try to resolve through support channels.

Industry Spotlights

Telecom and Digital Services

Telecommunications companies top the complaint charts. The Consumer Affairs report notes telecom, retail, and banking generate the most grievances, with nearly 9 in 10 Indians reporting time spent resolving issues in these areas. On average, customers spent 4.3 hours on a telecom complaint, more than four hours on retail issues, and 4.2 hours on banking issues. These lengthy engagements underscore systemic inefficiencies.

E-commerce and Retail

Online marketplaces rank high in consumer ire. Flipkart and Amazon together saw over 220,000 complaints in FY24. Many of these issues (delays, damages, fraud) require human intervention, but customers often first encounter an automated chat window. One report noted a user getting a call about an order placed 6 years earlier after complaining on social media – a glitch traced back to the automated systems reviewing old records. A Kapture CX survey found 43% of shoppers cite ineffective chatbots as their top frustration.

Banking and Financial Services

India’s increasingly digital banks have one of the highest complaint tallies. In FY2023-24, 95 scheduled banks lodged over 10 million customer grievances. Millions of banking disputes end up at the Reserve Bank’s Ombudsman scheme: 2023-24 saw a 50% annual jump to 9.34 lakh maintainable complaints handled, with 57% requiring formal RBI mediation. RBI Governor Sanjay Malhotra warns that a “rising volume of customer complaints” is a crisis of confidence. He noted that most top managers of banks spend too little time on customer service, so many issues fester. The result is churning customers and potential reputational losses just as Indian banks expand globally.

Insurance and Travel

These sectors show similar pains. Tourists and travellers have long complained on social media about non-responsive support from airlines and hotels. While insurers tout 24/7 helplines, claimants frequently report being stuck in automated call trees with no resolution. For example, low-cost carriers often push issues to email or forms with no person to answer. While insurers tout 24/7 helplines, claimants frequently report being stuck in automated call trees with no resolution.

Government Services

Even public services are embracing automation. The National Consumer Helpline, the central grievance portal, is upgrading its systems with AI-based speech recognition and a multilingual chatbot. This is meant to handle the tenfold increase in call volume over the past decade. While technology may speed preliminary intake, the Helpline ultimately forwards issues to companies or regulators for resolution. If businesses on the receiving end remain slow or robotic, unresolved complaints pile up. Government officials admit that AI must be paired with accountability: NCH’s Convergence Programme already enlists 1,000 companies to directly address complaints, but top offenders still face regular summons. The move to AI in government helplines underscores the magnitude of demand, but also reflects the same trend: pushing tech rather than expanding frontline help.

Voices from Customers and Experts

The human impact of these trends is underscored by what people are saying. Social media and surveys are full of consumer grievances about India’s bot-filled support. As noted above, one shopper quipped that Flipkart’s chatbot answers are “mostly useless.” Similarly, in a first-hand account, an India Today journalist described how an automated chat response only “added to my fury” when her Amazon order was delayed.

Industry analysts stress that this is a false economy. Brian Cantor, a customer-experience expert, warns that “companies that roll out chatbots to save money, particularly by reducing their agent headcount or cutting back on training, are more likely to upset customers.” He explains: “Customers still very much rely on live agents, and they see the loss of access to humans as one of the greatest pain points.” In other words, if chatbots are deployed simply to cut costs, brands will suffer in customer satisfaction.

Experts advocate a hybrid approach. Vikas Garg of Kapture CX notes: “Chatbots are great for simple tasks, but consumers expect more when it comes to their online experience… shoppers are frustrated when bots can’t handle more nuanced conversations or provide the context they need.” His point, and that of many CX consultants, is that automation must enhance, not replace, the human touch. When an AI can swiftly answer “where is my order?”, that frees staff to focus on complex issues that truly need a person’s judgment. But in India today, such seamless hand-off is rare: too often the bot’s “solution” is to loop the customer back or toss them aside.

International Comparison

When set against global standards, India’s slide in service quality is stark. Indians value good service highly – perhaps even more than Western consumers. In a 2017 survey by American Express, 84% of Indian respondents said service quality was “very important” in choosing a brand, compared to 70% in the U.S. and 59% in the U.K. Moreover, Indians share their service experiences widely: 83% of Indian consumers report telling at least 31 people about a bad service incident. The same poll found that 63% of Indians have abandoned a purchase due to poor service, a far higher rate than in many advanced markets.

By contrast, many global companies have made service a competitive edge. Leading U.S. and European brands invest heavily in training and integrating support channels, often benchmarking against high satisfaction indices. For example, top U.S. retailers like Apple or Amazon commit to fast issue resolution and human callbacks when things go wrong, metrics considered mission-critical. Asian competitors from Japan and Singapore also emphasise efficiency and multilingual support. While no country has perfect service, Indian firms are trending in the wrong direction. If anything, surveys suggest Indians demand better service than before, and are now voting with their wallets and voices.

Conclusion

In sum, the data and anecdotes make it clear that Indian customer service is deteriorating, not improving. Companies rely on under-trained AI and rigid self-service tools, but have failed to invest in well-trained human support or streamlined processes. The result is growing consumer frustration, lost sales, and reputational damage. As one analysis bluntly puts it, if businesses continue on this path, they will “risk losing customer loyalty.” In a connected world where word of mouth spreads instantly and customers compare experiences across borders, this decline is a strategic liability.

The value of customer service is declining in India instead of improving, and this is what makes our companies and products unfit for global markets. Without reversing this trend, by retraining support staff, refining AI tools, and prioritising customer needs, Indian industries will struggle to compete on the world stage. The evidence is clear: superior customer experience is not a luxury, but a prerequisite for success at home and abroad.