When you allow customers to interact with an AI system, you are often legally required to disclose this. The EU AI Act and European transparency standards require that users be informed in a timely and clear manner when they are interacting with an automated system, so that they can make an informed choice. In this article, you’ll find practical answers to the most frequently asked questions about AI transparency in customer interactions, ranging from legal obligations to the best way to word your disclosure.
Are companies legally required to report this?
Yes, in most cases, companies are legally required to inform customers when they are interacting with an AI system. The EU AI Act (Regulation (EU) 2024/1689), which entered into force on August 1, 2024, imposes transparency obligations on both providers and controllers of AI systems, particularly in customer-facing applications.
Specifically, the law requires that AI systems designed to communicate with people—such as chatbots and virtual assistants—clearly disclose this to the user. This also applies to systems that detect emotions or categorize individuals. The obligation to inform customers about AI interactions falls under the “limited risk” category in the AI Act’s risk classification, but that does not mean it is non-binding.
In addition to the AI Act, the GDPR and sector-specific regulations also play a role. Furthermore, if you use AI in decisions that directly affect customers—such as assessing an application or handling a complaint—the customer may, under Article 86 of the AI Act, request an explanation of the factors that determined that decision. The compliance requirements for high-risk systems will become enforceable on August 2, 2026, but the obligation regarding AI literacy and the prohibitions on manipulative AI practices have been in effect since February 2, 2025.
In short: don’t wait for enforcement. The transparency requirement is already a legal reality.
When is the best time to inform customers about AI?
The best time to inform customers about AI is at the beginning of the interaction, before the substantive part of the conversation begins. This allows the customer to make an informed decision about how they want to proceed with the conversation and helps prevent them from feeling misled afterward.
In practice, there are two logical points in time:
- During the first interaction: As soon as a customer opens a chat, initiates a phone call, or sends a message, let them know right away that they are communicating with an AI system. This doesn’t have to be a lengthy explanation; a short, clear sentence is sufficient.
- When switching channels: When a customer is transferred from a human agent to an AI system—or vice versa—a new notification should be sent. Customers expect consistency and are likely to abandon the process if they feel they are being transferred without their knowledge.
What you want to avoid is burying the notice in the terms and conditions or somewhere at the bottom of a page. Transparency only works if the customer actually sees and understands the information. A notice that doesn’t appear until after three rounds of messages is too late and can undermine trust.
How do you word an AI notification without scaring customers away?
A good AI message is brief, friendly, and emphasizes the benefits to the customer. There’s no need to point out that it’s “just” a robot. Instead, focus on speed, availability, and the option to always be transferred to a human.
Here are a few practical tips for effective wording:
- Be direct but positive: “You’re now chatting with our AI assistant. It will help you quickly, even outside of business hours.” This is transparent without sounding alarming.
- Avoid technical jargon: Words like “automated system” or “machine learning interface” can raise suspicion. “Digital assistant” or “AI assistant” work better.
- Always offer an alternative: Make it clear right away that the customer can ask to speak with a human representative at any time. This makes it much easier for them to reach out.
- Keep it short: Two sentences are enough. No one reads a long disclaimer, and it’s more likely to raise suspicion than inspire trust.
The tone of your message sets the tone for the entire conversation. A warm, clear introduction makes customers more receptive to the AI interaction that follows.
How do customers react when they find out it’s an AI?
Customers’ reactions to AI notifications depend heavily on how the notification is delivered and what the customer expects. When the notification is friendly and transparent, and the AI then provides quick and accurate assistance, most customers react positively or neutrally. Resistance arises mainly when the AI fails to meet expectations.
What we see in practice is that customers accept AI in customer interactions as long as a few basic conditions are met. They want to know that a human is available if needed. They don’t want to have to repeat their story when they’re transferred. And they want the AI to actually answer their question, rather than just referring them elsewhere.
Customers who react negatively to AI generally do so not because it’s AI, but because they’ve had bad experiences in the past with chatbots that couldn’t solve their problems. Transparency combined with a well-functioning system is therefore the key. When customers realize that the AI is actually helping them, their resistance quickly diminishes.
When should an AI conversation be handed over to a human?
An AI conversation must be transferred to a human agent as soon as the situation falls outside the AI’s competence or mandate. These are the most common situations in which a transfer is necessary.
- Emotional or sensitive situations: When a customer is frustrated, sad, or angry, a human response is more valuable than an automated reply.
- Complex or unusual questions: If the AI cannot answer the question or provide an appropriate solution, transferring the call is the only correct option.
- Explicit customer preference: When a customer requests a human agent, the transfer must take place immediately and smoothly.
- High-risk decisions: For decisions that have direct consequences for the customer—such as rejecting an application or amending a contract—human oversight is not only desirable but, in some cases, also required by law.
The transfer itself is just as important as the moment of transfer. Make sure the human agent receives the full context of the conversation so the customer doesn’t have to repeat their story. This is one of the most commonly cited frustrations in customer interactions and can be completely prevented with the right technical setup.
What makes an AI notification credible to customers?
An AI notification is credible when it is consistent, is followed by behavior that lives up to its promise, and makes the customer feel that their interests are the top priority. Credibility isn’t built with words alone, but through the entire customer experience that follows.
Specifically, this means:
- Consistency across channels: If you mention on your website that you use AI but don’t mention it in the app or over the phone, it undermines trust.
- AI does what you promise: If you say the assistant will help quickly, it has to do just that. An AI that keeps customers running in circles not only harms itself but also undermines trust in your organization as a whole.
- Human oversight is visible: When customers know that people are monitoring the interaction and that they can always escalate the issue, they feel safer during an AI interaction.
- No hidden agenda: Don’t use AI to keep customers away from human employees. Customers can sense this, and it damages your reputation.
Ultimately, credibility is the result of honesty plus quality. A transparent notification from a well-functioning AI builds trust. A transparent notification from a poorly functioning AI only increases disappointment.
How Pegamento Helps Ensure AI Transparency in Customer Interactions
At Pegamento, we understand that AI transparency is not only a legal requirement but also an opportunity to strengthen your customers’ trust. We help organizations use AI responsibly and effectively in their customer interactions, with solutions built from proven modules that eliminate the need for costly customization.
What we can do for you:
- Intelligent AI assistants that introduce themselves properly and seamlessly hand off to a human agent when necessary
- An omnichannel setup where customer context is always carried along, so customers never have to repeat their story
- Agentic AI that goes beyond simply following instructions: our Agentic AI for customer service takes the initiative on its own and acts proactively, marking an evolution from executive bots to self-thinking assistants
- Everything under one roof: from implementation to management and support, without having to manage multiple vendors
- Compliance-ready solutions that take into account the requirements of the EU AI Act and related regulations
Would you like to know how to implement AI transparency in your organization? Contact us, and we’d be happy to help you figure it out.
Frequently Asked Questions
Does the transparency requirement also apply to AI used internally, or only to customer-facing systems?
The transparency obligations under the EU AI Act primarily focus on AI systems that interact directly with people, such as chatbots and virtual assistants used in customer interactions. Different rules apply to internal use, depending on the system’s risk category. Examples include AI used for personnel decisions or performance evaluations—these often fall under the high-risk category and have their own obligations. If in doubt, consult a legal advisor who specializes in AI regulations.
What are the consequences of failing to comply with the AI transparency requirements?
Non-compliance with the EU AI Act can result in substantial fines: up to 15 million euros or 3% of global annual revenue for violations of transparency obligations, whichever is higher. In addition, you risk reputational damage if customers discover that they were communicating with AI without realizing it. Enforcement powers are being phased in, but the obligations themselves are already in effect—so waiting for active enforcement is a risk you’re better off avoiding.
How do you tailor the AI disclosure for different channels, such as phone versus chat?
The core of the disclosure remains the same—clear, friendly, and at the start of the interaction—but you should adapt the format to the channel. In a chat, a short opening message such as “Hello! You’re speaking with our AI assistant” is sufficient. For phone calls, a recorded greeting works best, preferably in a natural voice that matches your brand’s tone. In all cases, make sure the message doesn’t get lost in a long welcome text or an IVR menu with multiple options.
Should you also include the AI message in your privacy policy or terms of service?
Yes, it is advisable to also mention the use of AI in your privacy statement, especially when the AI processes personal data or is involved in automated decision-making. This is an additional obligation beyond the active disclosure at the start of customer contact—the privacy policy does not replace that direct disclosure. Under the GDPR, you are also required to be transparent about how you process personal data, including the role that AI plays in that process.
How do you measure whether your AI disclosure is effective and well-received by customers?
A simple way is to monitor the number of customers who hang up immediately after the notification or request a human agent—a high percentage may indicate that the notification comes across as unnecessarily alarming. In addition, you can compare customer satisfaction scores (CSAT) between AI interactions and human interactions, and include specific questions in your customer satisfaction survey about perceived transparency. A/B testing with different phrasing provides concrete data on which approach works best for your target audience.
What should you do if a customer objects on principle to communicating with AI?
When a customer explicitly states that they do not want to communicate with an AI, you must respect that preference and immediately transfer them to a human agent. This is not only a matter of customer-friendliness but also aligns with the spirit of the EU AI Act, which prioritizes human autonomy and freedom of choice. Ensure that this handoff runs smoothly from a technical standpoint and that the agent receives the available conversation context, so the customer doesn’t have to repeat their story.
How do you handle multilingual customers when it comes to the AI notification?
The AI notification must be understandable to the customer, which means that, ideally, you should present the notification in the language of the channel or the customer’s preferred language. With omnichannel systems, you can automate this based on language detection or the customer’s previously specified preference. A notification in a language the customer does not understand does not meet the transparency requirement—understandability is an explicit requirement under the EU AI Act.
