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Natural Language Processing: A comprehensive overview

Natural Language Processing

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Have you ever wondered how robots like Sophia or your home assistant can sound so much like humans and understand what we say? Natural Language Processing (NLP) technology enables machines to comprehend and communicate with us using natural language. Humans naturally convey information through words and text, but computers speak the binary language of 1s and 0s. This poses a challenge: How can we make machines understand, emulate, and respond intelligently to human speech? NLP is the branch of artificial intelligence that tackles this challenge. It combines the fields of linguistics and computer science to develop models that allow machines to read, understand, and derive meaning from human languages. It equips computers to break down and extract important details from text and speech by deciphering language structure and rules.

NLP serves as a bridge, connecting human thoughts and ideas to the digital world. It unlocks the vast reservoir of unstructured information, transforming words into valuable knowledge and data into actionable insights. As per Markets and Markets, with a notable worth of $15.7 billion in 2022, the NLP market is expected to undergo remarkable growth at a CAGR of 25.7%, reaching a significant value of $49.4 billion by 2027. This growth trend suggests a strong and positive trajectory for the NLP industry in the coming years.

Now let us take a deep dive into NLP and gain insights into it. What is NLP? How does it operate? And what are the fundamental components that make up NLP? This comprehensive article answers all your questions related to natural language processing.

What is natural language processing?

Natural Language Processing (NLP) is a branch of AI that enables computers to understand and interpret text and spoken words, similar to how humans do. In today’s digital landscape, organizations accumulate vast amounts of data from different sources, such as emails, text messages, social media posts, videos, and audio recordings. NLP allows organizations to process and make sense of this data automatically.

With NLP, computers can analyze the intent and sentiment behind human communication. For example, NLP makes it possible to determine if a customer’s email is a complaint, a positive review, or a social media post that expresses happiness or frustration. This language understanding enables organizations to extract valuable insights and respond to customers in real time.

The application of Natural Language Processing (NLP) has permeated various aspects of our daily lives, and its influence continues to expand as language technology is integrated into diverse fields. From customer service chatbots in retailing to interpreting and summarizing electronic health records in medicine, NLP plays an important role in enhancing user experiences and interactions across industries.

Key components of natural language processing

Here are the key components of NLP:

Natural Language Understanding (NLU)

NLU is a branch of computer science that focuses on comprehending human language beyond the surface-level analysis of individual words. It seeks to understand the meaning, context, intentions, and emotions behind human communication. By leveraging algorithms and artificial intelligence techniques, NLU enables computers to analyze and interpret natural language text, accurately understanding and responding to the sentiments expressed in written or spoken language.

In NLU, the process of extracting meaning from text involves three key steps. First, the semantic analysis examines the words used and their context to determine their meaning. This step considers how words can have different interpretations based on their surrounding context. The second, i.e., syntactic analysis, focuses on the grammatical structure of sentences, analyzing word order and combinations to derive meaning. The third, discourse analysis, explores the relationships between sentences, identifying the main subject and understanding how each sentence contributes to the text’s overall meaning. NLU systems leverage these steps to analyze and comprehend natural language, enabling them to extract nuanced meanings from text data.

The NLU system is trained on extensive datasets encompassing diverse linguistic patterns and contextual variations. These algorithms utilize information and contextual knowledge to facilitate a more human-like understanding of language.

Natural Language Generation (NLG)

NLG involves the process of generating text from computer data, serving as a translator that converts machine representations into natural language. It functions as the counterpart to NLU, where instead of interpreting language, NLG focuses on producing coherent and meaningful textual output. The NLG system uses collected data and user input to generate conclusions or text.

The stages in NLG include content determination and deciding which information to be included, while document structuring focuses on organizing the conveyed information. Aggregation merges similar sentences, and lexical choice selects appropriate words. Expression generation creates expressions for identification, and realization ensures grammatical correctness. These stages collectively contribute to generating coherent and meaningful text in NLG systems, allowing for the production of natural language representations from computer data.

These three basic techniques are used for evaluating NLG systems:

Task-based evaluation involves assessing the system’s performance in helping humans accomplish specific tasks, such as evaluating summaries of medical data by giving them to doctors and measuring their impact on decision-making.

Human ratings involve individuals’ subjective assessments of the generated text’s quality and usefulness.

Metrics comparison entails comparing the generated texts to professionally written texts, using objective measures to evaluate the system’s output against established standards. These evaluation techniques provide valuable insights into the effectiveness and performance of NLG systems, aiding in their refinement and improvement.

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5 phases of the natural language processing pipeline

The 5 phases of the NLP pipeline are:

Lexical analysis

Lexical analysis is a crucial phase in NLP that focuses on understanding words’ meanings, relationships, and contexts. It is the initial step in an NLP pipeline, where the input program is converted into tokens in a specific order.

Tokens refer to sequences of characters that are treated as a single unit according to the grammar of the language being analyzed.

Lexical analysis finds applications in various scenarios. For instance, it plays a vital role in the compilation process of programming languages. In this context, it takes the input code, breaks it into tokens, and eliminates white spaces and comments irrelevant to the programming language. Following tokenization, the analyzer extracts the meaning of the code by identifying keywords, operations, and variables represented by the tokens.

In the case of chatbots, lexical analysis aids in understanding user input by looking up tokens in a database to determine the intention behind the words and their relation to the entire sentence. This form of analysis may involve considering multiple words together, also known as n-grams, to analyze the sentence comprehensively.


The term “parsing” originates from the Latin word “pars,” meaning “part.” It refers to the process of breaking down a given sentence into its grammatical constituents. The objective is to extract the exact meaning or dictionary meaning from the text. Syntax analysis ensures the text adheres to formal grammar rules and checks for meaningfulness. For example, a semantic analyzer would reject a sentence like “hot ice cream” because it lacks meaningful syntax.

A parser is a software component used to perform parsing tasks. It takes input data (text) and provides a structural representation of the input by verifying its correct syntax according to formal grammar. The parser typically constructs a data structure, such as a parse tree or abstract syntax tree, to represent the input hierarchically.

The main responsibilities of a parser include reporting syntax errors, recovering from common errors to allow continued processing of the program, creating a parse tree, building a symbol table, and generating intermediate representations.

Semantic analysis

Semantic analysis is the process of comprehending natural language, like human communication. Its primary goal is to extract the meaning from a given text by considering the context and nuances. By focusing on the literal interpretation of words, phrases, and sentences, semantics aims to uncover the dictionary or actual meaning within the text. This analysis begins by examining each word, identifying its role within the content, and assessing its logical and grammatical functions. Moreover, it considers the surrounding context or corpus to understand the intended meaning better and disambiguate words with multiple interpretations. Various techniques are employed to achieve effective semantic analysis:

Co-reference resolution is a technique used to determine the references of entities in a text, considering not only pronouns but also word phrases like “this,” “that,” or “it.” By analyzing the context, it identifies which phrases refer to the same entity, aiding in the comprehension of the text.

Semantic role labeling involves identifying the roles of words or phrases in relation to the main verb of a sentence. It helps in understanding the semantic relationships and roles played by different elements in conveying the meaning of a sentence. This process aids in capturing the underlying structure and meaning of language.

Word Sense Disambiguation (WSD) is the process of determining the correct meaning of a word in a given context. It addresses the challenge of resolving ambiguity by analyzing the surrounding words and context to identify the most appropriate meaning for a particular word. For example, in the sentence “I need to deposit money at the bank,” WSD would recognize “bank” as a financial institution. While in another example, like “I sat by the bank and enjoyed the view,” WSD would understand “bank” as the edge of a river considering the context of sitting and enjoying the view. By disambiguating words in this manner, WSD improves the accuracy of NLU and facilitates more precise language processing.

Named Entity Recognition (NER) is a method that identifies and categorizes named entities like persons, locations, and organizations in text. For example, in the sentence “Manchester United defeated Newcastle United at Old Trafford,” NER would recognize “Manchester United” and “Newcastle United” as organizations and “Old Trafford” as a location. NER is used in various applications such as text classification, topic modeling, and trend detection.

Discourse integration

The structure of discourse, or how sentences and clauses are organized, is determined by the segmentation applied. Discourse relations are key in establishing connections between these sentences or clauses, ensuring they flow coherently. The meaning of an individual sentence is not isolated but can be influenced by the context provided by preceding sentences. Similarly, it can also have an impact on the meaning of the sentences that follow. Discourse integration is highly important in various NLP tasks, including information retrieval, text summarization, and information extraction, where understanding the relationships between sentences is crucial for effective analysis and interpretation.

Pragmatic analysis

The pragmatic analysis is a linguistic approach that focuses on understanding a text’s intended meaning by considering the contextual factors surrounding it. It goes beyond the literal interpretation of words and phrases and considers the speaker’s intentions, implied meaning, and the social and cultural context in which the communication occurs.

The key aspect of pragmatic analysis is addressing ambiguity. Natural language is inherently ambiguous, with words and phrases often having multiple possible interpretations. Pragmatic analysis helps disambiguate such instances by considering contextual cues, such as the speaker’s tone, gestures, and prior knowledge, to determine the intended meaning.

Pragmatic analysis enables the accurate extraction of meaning from text by considering contextual cues, allowing systems to interpret user queries, understand figurative language, and recognize implied information. By considering pragmatic factors, such as the speaker’s goals, presuppositions, and conversational implicatures, pragmatic analysis enables a deeper understanding of the underlying message conveyed in a text. It helps bridge the gap between the explicit information present in the text and the implicit or intended meaning behind it.

5 phases of NLP

How does natural language processing work?

NLP models function by establishing connections between the fundamental elements of language, such as letters, words, and sentences, present in a given text dataset. To accomplish this, the NLP architecture employs diverse data pre-processing, feature extraction, and modeling techniques. These processes include:

Data preprocessing

Data preprocessing is essential in preparing text data for NLP models to enhance their performance and enable effective understanding. It involves transforming words and characters into a format the model can readily comprehend. Data-centric AI emphasizes the significance of data preprocessing and considers it a vital component of the overall process. By prioritizing data preprocessing, AI practitioners aim to optimize the quality and structure of the input data to maximize the model’s capabilities and improve its overall performance on specific tasks. Various techniques are used to preprocess data, which include:

Sentence segmentation: It is the process of breaking a big chunk of text into smaller, meaningful sentences. In languages like English, we usually use a period to indicate the end of a sentence. However, it can get tricky because periods are also used in abbreviations, where they are part of the word. In some languages, like ancient Chinese, there aren’t clear indicators to mark the end of a sentence. So, sentence segmentation helps us separate a long text into meaningful sentences for analysis and understanding.

Tokenization: Tokenization is the process of dividing text into separate words or word parts. For example, the sentence “I love eating ice cream” would be tokenized into [“I,” “love,” “eating,” “ice,” “cream”]. This tokenized representation allows language models to process the text more efficiently. Additionally, by instructing the model to ignore unimportant tokens, such as common words like “the” or “a,” we can further enhance efficiency during language processing.

Stemming and lemmatization: Stemming is an informal process that applies heuristic rules to convert words into their base forms. It aims to remove suffixes and prefixes to obtain the root form of a word. For example, “university,” “universities,” and “university’s” would all be stemmed to “univers.” However, stemming may have limitations, such as mapping unrelated words like “universe” to the same stem.

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Lemmatization is a linguistic process that aims to find a word’s base form or root by analyzing its morphology using a vocabulary or dictionary. In languages like English, words can appear in different forms based on tense, number, or other grammatical features. For example, the word “pony” can appear as “ponies” in its plural form. It considers factors like part of speech and context to determine the root form accurately. Lemmatization ensures that the resulting form is a valid word. Libraries like spaCy and NLTK implement stemming and lemmatization algorithms for NLP tasks.

Stop word removal: In NLP, it’s important to consider the significance of each word in a sentence. English contains many filler words like “and,” “the,” and “a” that occur frequently but don’t carry much meaningful information. These words can introduce noise when performing statistical analysis on text. To address this, some NLP pipelines identify these words as stop words, suggesting they should be filtered out before analysis. Stop words are commonly determined using a predefined list, although no universal list is suitable for all applications. The choice of stop words depends on the specific context and application.

For instance, if you are building a search engine for rock bands, it would be unwise to ignore the word “The.” This is because the word “The” appears in many band names, and there is even a famous rock band from the 1980s called “The The.” Thus, considering the context is crucial in determining which words to treat as stop words and which to retain for meaningful analysis.

Feature extraction

Feature extraction refers to the process of converting textual data into numerical representations. Once the text data is cleaned and normalized, it needs to be transformed into features that can be understood and processed by a machine-learning model. Since computers work with numbers more efficiently, we represent individual words or text elements using numerical values. This numerical representation allows the machine to process and analyze the data effectively. Feature extraction plays a crucial role in NLP tasks as it converts text-based information into a format that can be used for modeling and further analysis. There are various ways in which this can be done:

Bag-of-words: This approach in NLP counts how many times each word or group of words appears in a document. It then creates a numerical representation based on these counts. For example, if we have the sentence “The cat sat on the mat,” the bag-of-words model would represent it as [1, 1, 1, 1, 1], indicating that each word appears once in the sentence. This helps convert the text into numbers that can be easily processed by computers, making it useful for tasks like analyzing document content or training machine learning models.

Term Frequency-Inverse Document Frequency (TF-IDF): It is a method that assigns weights to words based on their importance in a document and across a corpus. It considers two factors: term frequency and inverse document frequency.

Term frequency measures how important a word is within a document. It calculates the ratio of the number of times a word appears in a document to the total number of words in that document.

The inverse document frequency evaluates how important a word is in the entire corpus. It calculates the logarithm of the ratio between the total number of documents in the corpus and the number of documents that contain the word. Words that occur frequently within a document will have a high TF score. However, common words like “a” and “the” may have high TF scores even though they are not particularly meaningful. To address this, IDF gives higher weights to words that are rare in the corpus and lower weights to common words.

Word2vec: It is a popular method that uses a neural network to generate high-dimensional word embeddings from raw text. It offers two variations: Skip-gram and Continuous Bag-of-Words (CBOW). Skip-gram predicts surrounding words given a target word, while CBOW predicts the target word from its surrounding words. By training the models on large text corpora and discarding the final layer, Word2Vec generates word embeddings that capture contextual information. Words with similar contexts will have similar embeddings. These embeddings serve as inputs for various NLP tasks, enabling algorithms to understand and analyze word meanings and relationships within a given text.

Global vectors for word representation (GLoVe): It is another method for learning word embeddings, similar to Word2Vec. However, GLoVe takes a different approach using matrix factorization techniques instead of neural networks. It creates a matrix representing how often words co-occur in a large text dataset. By analyzing this matrix, GLoVe learns the relationships between words based on their co-occurrence patterns. These relationships capture the semantic and syntactic similarities between words. GLoVe embeddings are useful for understanding word meanings and can be applied to various language-related tasks.


In natural language processing, modeling refers to the process of creating computational models that can understand and generate human language. NLP modeling involves designing algorithms, architectures, and techniques to process and analyze natural language data.

Modeling is the process of building computational models that can understand and generate human language. These models are designed to analyze and interpret text data, enabling computers to perform various language-related tasks.

Several models are used in NLP, but the most popular and effective approach is based on deep learning. Here are two common types of NLP models:

Language models: Language models are trained to predict the probability of a sequence of words in a sentence. They learn the statistical patterns and relationships in text data, which enables them to generate coherent and contextually appropriate sentences. Language models can be used for tasks such as machine translation, text summarization, and speech recognition.

Sequence models: Sequence models are designed to understand the sequential nature of language. They consider the dependencies between words and can capture the context and meaning of a sentence. Sequence models include RNNs and transformer models like the transformer architecture, which have gained significant popularity.

These models are trained on large amounts of text data, such as books, articles, and internet text, to learn the underlying patterns and structures of language. The training process involves feeding the model with input data and adjusting its internal parameters to minimize the difference between the predicted output and the desired output.

NLP tasks

The intricacies of human language present significant challenges in developing software that accurately interprets the intended meaning of text or voice data. Homonyms, homophones, sarcasm, idioms, metaphors, grammar exceptions, and variations in sentence structure are just a few of the complexities that programmers must address in natural language-driven applications.

Multiple NLP tasks help computers effectively understand and process human text and voice data. These tasks include:

Speech recognition (speech-to-text): It involves the reliable conversion of voice data into text data. It is crucial for applications that utilize voice commands or provide spoken responses. The complexity of speech recognition arises from the inherent challenges of human speech patterns, including fast-paced speech, word slurring, diverse emphasis and intonation, different accents, and the presence of grammatical errors. Overcoming these challenges is essential to achieve accurate and effective speech recognition systems.

Part of speech tagging (grammatical tagging): It is the process of assigning the appropriate part of speech to a word or piece of text based on its usage and context. This task involves determining whether a word functions as a noun, verb, adjective, adverb, or other grammatical categories. For example, in the sentence “I can make a paper plane,” part of speech tagging identifies “make” as a verb. The sentence “What make of car do you own?” identifies “make” as a noun, indicating that it refers to the type or brand of the car.

Word sense disambiguation: It is the task of choosing the correct meaning of a word that has multiple possible interpretations based on the context in which it appears. Through semantic analysis, this process aims to determine the most appropriate sense of the word in a given context. For instance, word sense disambiguation helps differentiate between the meanings of the verb “make” in phrases like “make the grade” (achieve a certain level of success) and “make a bet” (place a wager). By analyzing the surrounding words and context, word sense disambiguation enables accurate interpretation and understanding of the intended meaning of ambiguous words.

Named entity recognition: It is a task that involves identifying and classifying specific words or phrases in text as named entities or useful entities. NER identifies entities such as names of people, locations, organizations, dates, and other predefined categories. For example, NER would identify ‘Kentucky’ as a location entity and ‘Fred’ as a person’s name, extracting meaningful information from text by recognizing and categorizing these named entities.

Co-reference resolution: It is the process of determining whether two or more words in a text refer to the same entity. This task commonly involves resolving pronouns to their antecedents, such as determining that ‘she’ refers to ‘Mary.’ However, co-reference resolution can extend beyond pronouns and include identifying metaphorical or idiomatic references in the text. For example, it can recognize that in a particular context, the word ‘bear’ does not refer to the animal but instead represents a large hairy person. Co-reference resolution plays a vital role in understanding the relationships between different elements in a text and ensuring accurate comprehension of the intended meaning.

Sentiment analysis: It is the process of extracting subjective qualities and determining the sentiment expressed in text. It aims to identify and understand attitudes, emotions, opinions, sarcasm, confusion, suspicion, and other subjective written content aspects. By analyzing the language used, sentiment analysis can categorize text into positive, negative, or neutral sentiments, providing valuable insights into the overall sentiment conveyed. This analysis is commonly used in social media monitoring, customer feedback analysis, market research, and other applications where understanding sentiment is crucial for decision-making and understanding public opinion.

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How to perform text analysis using Python?

Here, the Python library NLTK (Natural Language Toolkit) will be used for text analysis in English. The NLTK is a group of Python packages created specifically for locating and tagging components of speech present in texts written in natural languages.

Step-1: Install NLTK

We may install NLTK in our Python environment by using the command below:

pip install nltk

If Anaconda is employed, the following command can create a Conda package for NLTK.

conda install -c anaconda nltk

Step-2: Download NLTK data

Downloading NLTK’s predefined text repositories is necessary for easy use after installation to make it usable. But first, just like with any other Python package, we must import NLTK. We may import NLTK by using the command below.

import nltk

Use the command below to start downloading NLTK data.

It will take some time to install all available packages of NLTK.

Step-3: Download other necessary packages

Two other essential Python packages for text analysis and natural language processing (NLP) tasks are gensim and pattern. These packages can be easily installed using the following commands:


Gensim is a powerful library for semantic modeling that can be applied in various situations. We may install it using the command:

pip install gensim


Gensim package functionality can be improved with patterns. The command below facilitates installing the pattern.

pip install pattern

Step-4: Tokenization

Tokenization is the process of splitting a text into smaller components known as tokens. Tokens can be letters, numbers, or commas. Another name for it is word segmentation.

A variety of NLTK packages supports tokenization. Depending on our needs, we can utilize these packages. Here are the packages and the information on how to install them:

Sent_tokenize package

To import the package that can be used to divide the input text into sentences, you can use the following command:

from nltk.tokenize import sent_tokenize

The sent_tokenize function from the nltk.tokenize module allows you to split a given text into sentences based on language-specific rules and heuristics. By importing this package, you can leverage its functionality to perform sentence tokenization, which is a crucial step in many natural language processing tasks.

Word_tokenize package

To import the package that can be used to divide the input text into words, you can use the following command:

from nltk.tokenize import word_tokenize

WordPunctTokenizer package

To import the package that can be used to divide the input text into words and punctuation marks, you can use the following command:

from nltk.tokenize import WordPuncttokenizer

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Step-5: Stemming

Language has many nuances because of grammatical considerations. Variations in the sense that words can take on several forms in both English and other languages. As an illustration, consider the words democracy, democratic, and democratization. It is crucial for machines to comprehend that various terms, like the ones above, have the same basic shape when working on machine learning projects. As a result, extracting the word’s basic forms is highly helpful when analyzing the text.

A heuristic technique known as stemming involves cutting off the ends of words to reveal their fundamental forms.

The following list includes the several stemming packages offered by the NLTK module:

Porter stemmer package

This package implements Porter’s stemming algorithm. It can be imported using the following command:

from nltk.stem.porter import PorterStemmer

For example, when the word ‘writing’ is given as input to this stemmer, the output will be ‘write.’

Lancaster stemmer package

This package implements Lancaster’s stemming algorithm. It can be imported using the following command:

from import LancasterStemmer

For example, when the word ‘writing’ is given as input to this stemmer, the output will be ‘writ.’

Snowball stemmer package

To import the SnowballStemmer package, which uses Snowball’s algorithm for stemming, you can use the following command:

from nltk.stem.snowball import SnowballStemmer

This package allows you to extract the base form of words by applying Snowball’s stemming algorithm. For example, when you provide the word ‘writing’ as input to this stemmer, the output will be ‘write.’

Step-6: Lemmatization

This package is used to extract the base form of words by removing inflectional endings. It utilizes vocabulary and morphological analysis to determine the lemma of a word. You can import the WordNetLemmatizer package using the following command:

from nltk.stem import WordNetLemmatizer

Step-7: Counting POS Tags–Chunking

With the help of chunking, it is possible to identify brief phrases and parts of speech (POS). It is a crucial step in the processing of natural language. As we know, tokenization is the method used to produce tokens, while chunking is the procedure used to label those tokens. In other words, we might claim that the chunking procedure helps us to obtain the sentence’s structure.

For example, we will use the NLTK Python module to build noun-phrase chunking, a type of chunking that looks for noun-phrase chunks in the sentence.

To perform noun-phrase chunking using the NLTK Python module, you can follow these steps:

Chunk grammar definition: Define the grammar rules for chunking, specifying patterns to identify noun phrases. For example, you can define rules to match determiners, adjectives, and nouns in a sequence.

Chunk parser creation: Create a chunk parser object using the defined grammar. This parser will apply the grammar rules to the input text and generate the output.

The output parse: The input text uses the chunk parser to obtain the output in a tree format. The resulting tree will show the identified noun phrases and their structure within the sentence.

By following these steps, you can effectively perform noun-phrase chunking using the NLTK Python module. The output in tree format allows you to visualize the structure of noun phrases within the sentence, enabling further analysis and processing of the text.

Step-8: Running the NLP script

Start by importing the NLTK package −

import nltk

Now, define the sentence.


  • DT is the determinant
  • VBP is the verb
  • JJ is the adjective
  • IN is the preposition
  • NN is the noun
sentence = [("a", "DT"),("clever","JJ"),("fox","NN"),("was","VBP"),

Next, the grammar should be given in the form of regular expression.

grammar = "NP:{?*}"

Now, we need to define a parser for parsing the grammar.

parser_chunking = nltk.RegexpParser(grammar)

Now, the parser will parse the sentence as follows −


Next, the output will be in the variable as follows:-

Output = parser_chunking.parse(sentence)

Now, the following code will help you draw your output in the form of a tree.


Use cases of NLP across industries

Natural language processing finds applications in various industries, enhancing operational processes and boosting user experiences. Explore below some common NLP applications across industries:


Analyzing clinical notes: Clinical assertion modeling is a valuable tool for healthcare providers, as it allows them to analyze clinical notes and determine whether a patient is currently experiencing a particular medical issue, as well as whether that issue is present, absent, or conditional. This approach plays a crucial role in the diagnosis and treatment of patients.

Let’s consider a scenario where a patient reports to her doctor that she has been suffering from headaches for the past two weeks and experiences anxiety when walking briskly. After a thorough examination, the doctor notes that the patient does not exhibit any symptoms of alopecia and is not in any pain.

Subsequently, the doctor can employ a combination of Named Entity Recognition (NER) and text classification techniques to scrutinize the clinical notes from the appointment. This process involves identifying key terms such as “headache,” “anxious,” “alopecia,” and “pain” as PROBLEM entities. The doctor can then further categorize these problems by asserting whether they are present, conditional, or absent. In this case, the doctor would determine that the patient’s headache is present, her anxiousness is conditional, and both alopecia and pain are absent.

This example demonstrates how applying Natural Language Processing (NLP) in healthcare empowers physicians to enhance patient care by prioritizing urgent issues and promptly administering appropriate treatment.

Clinical de-identification: Under the Health Insurance Portability and Accountability Act (HIPAA), healthcare providers, health plans, and other entities covered by the law are mandated to safeguard sensitive patient health information unless they have the patient’s consent or it is done with the patient’s knowledge.

Deidentified data refers to information from which specific individual identifiers, such as names, addresses, telephone numbers, and other personal details, have been removed. Once data has been de-identified, it is no longer categorized as Protected Health Information (PHI) because it no longer contains information that could compromise the patient’s privacy.

NLP technology plays a crucial role in this process. Healthcare providers can utilize NLP to identify potential instances of PHI content and then deidentify or obfuscate this information by substituting PHI with semantic tags. This proactive measure enables healthcare organizations to ensure compliance with HIPAA regulations, reducing the risk of unauthorized disclosure of sensitive patient data.

Finance and banking

Risk assessments: Credit risk assessments are crucial for banks to predict the likelihood of successful loan repayments. However, in cases where financial history data is lacking, particularly among impoverished populations, NLP can provide valuable assistance. NLP methods utilize various data points to assess credit risk. For instance, they can evaluate the attitude and entrepreneurial mindset in business financing and identify anomalies for further investigation.

NLP also enables the incorporation of subtle variables like the lender’s and borrower’s emotional aspects during the loan process. Typically, extensive data from personal loan documents is extracted and input into credit risk models for analysis.

However, errors in data extraction can result in incorrect judgments. In such instances, Named Entity Recognition (NER), an NLP technique, proves beneficial by accurately extracting relevant entities from loan agreements, including dates, locations, and party details.

Classification of financial documents: NLP techniques play a vital role in classifying financial documents and extracting valuable insights:

  • NLP automatically classifies various financial agreements, such as loans, service contracts, and consulting agreements.

  • Environmental, Social, and Governance (ESG) news can be categorized using NLP techniques, enabling organizations to stay updated on relevant information.

  • NLP in finance helps identify forward-looking statements in financial texts, such as 10K filings and annual reports, providing insights into a company’s future outlook.

  • NLP assists in categorizing banking-related texts into various topics, enhancing the organization and retrieval of information.

  • NLP models can classify customer complaints related to banking products, streamlining customer service processes.

  • While NLP is adept at processing text for visual data, techniques like Vision Transformers are employed to detect and categorize images of receipts in scanned documents and mobile captures, enhancing record management and expense monitoring.

Recognizing financial entities: NLP is instrumental in identifying and categorizing named entities within the text, which includes people, places, dates, numbers, and more, leading to informed recommendations and predictions. Named Entity Recognition (NER) is a fundamental NLP technique for mining entities from unstructured text, enabling various financial applications.

NER aids in offering insights based on news articles about specific companies and is used to discern investment indicators from news headlines. Banks and Non-Banking Financial Companies (NBFCs) utilize NER to extract critical information from customer interactions.

Key applications of NER in finance include:

  • Extracting financial terms from annual reports, such as expenditures, losses, profit margins, and more.

  • Identifying entities like organization names and product names.

  • Extracting crucial details from the first page of 10-K filings, including company names, trading symbols, stock market trends, addresses, contact information, stock categories and values.

  • Recognizing company entities, their aliases (alternative names in financial contexts), and products.

Fraud detection: NLP aids in fraud detection within financial transactions by analyzing textual data, encompassing transaction descriptions and customer communications. This analysis uncovers irregularities and anomalies that could signify fraudulent activities, ultimately bolstering security measures and mitigating potential financial losses.

NLP scans emails, chat logs, and other written communication within the organization for signs of internal fraud or collusion. It can identify keywords or phrases associated with fraudulent activities, such as “suspicious transfer” or “unauthorized access.” It can recognize phishing attempts by analyzing the text in emails and messages. They can identify suspicious links, email headers, or content that may indicate a phishing attack.

NLP is a powerful tool for fraud detection in finance and banking. Analyzing and understanding textual data can assist in identifying suspicious activities, prevent fraudulent transactions, and enhance security measures. It complements traditional fraud detection methods and enables financial institutions to stay ahead of evolving threats in the digital age.

Credit scoring: NLP complements conventional credit scoring models by leveraging alternative data sources such as social media and online behavior. This extended data analysis empowers financial institutions to enhance their ability to assess the creditworthiness of individuals with limited or non-traditional credit histories, ultimately improving the accuracy of their evaluations.

NLP can extract relevant information from unstructured data sources such as text documents, emails, and PDFs. For instance, it can parse financial statements, bank statements, and tax returns to gather key financial data contributing to a person’s or business’s credit score. This ensures that all available data is considered in the credit evaluation. It can be employed to analyze the contents of credit reports, extracting valuable insights from these documents. It can identify trends, credit utilization, payment history, and other factors influencing credit scores, thereby contributing to a more comprehensive assessment.

NLP can help identify emerging risks by scanning news articles and reports for keywords and phrases related to potential risks in a borrower’s industry or location. This helps financial institutions proactively manage their credit portfolios. NLP applications in credit scoring streamline the assessment process, improve accuracy, and enable financial institutions to make more informed lending decisions.


Customer reviews: In retail, NLP is utilized for analyzing customer reviews to extract product feedback and perform sentiment analysis, providing valuable insights into consumer satisfaction and preferences.

Demand forecasting: Demand forecasting in retail leverages NLP to analyze market trends and customer preferences, enhancing the accuracy of inventory predictions and planning.

Chatbots and virtual assistants: Customer support and chatbots empowered by NLP have become valuable tools for enhancing the customer experience. Here’s how this application works in practice:

Consider a practical scenario:

A customer visits an online retail site or uses a mobile app with a question about a product or to inquire about the status of their recent order. Previously, this would involve searching the website for information or enduring long waits for a customer service representative. Now, with NLP-powered chatbots, customers can simply type or ask questions conversationally. The chatbot employs NLP algorithms to comprehend the query and respond appropriately.

The chatbot understands the intent behind the customer’s request and can also retrieve real-time data from the retailer’s database. It can quickly locate the order information and provide an update, such as the expected delivery date and current status. This immediate and accurate assistance improves customer service and response times. Customers appreciate the convenience of getting answers to their questions without delays. It also reduces the workload on human customer service agents, allowing them to focus on more complex or unique customer inquiries, further enhancing overall operational efficiency.

Sentiment analysis: Natural language processing is a valuable tool for retailers to gain insights into customer sentiment. Here’s how it works:

Retailers have vast data, including customer reviews, social media mentions, and product and service feedback. This data can be overwhelming to analyze manually, but NLP comes to the rescue.

With sentiment analysis, NLP algorithms process and categorize this textual data to determine whether the sentiment expressed is positive, negative, or neutral. For example:

  • Customer review: “I love the new smartphone; the camera quality is amazing!”

NLP sentiment analysis: “Positive sentiment”

  • Social media mention: “Had a terrible experience with their customer service today.”

NLP sentiment analysis: “Negative sentiment”

By analyzing thousands or millions of such data points, retailers can understand what customers like or dislike about their products and services. They can identify trends and patterns in customer sentiment, such as common issues, praise for specific features, or recurring complaints.

In-store virtual assistants: In-store virtual assistants are an innovative application of NLP and avatar technology in the retail industry. These virtual assistants aim to enhance the customer’s relationship with the brand by providing a highly personalized and interactive shopping experience. Here’s how they work and what they can offer to retailers:

  • In-store virtual assistants are computer-generated avatars that can communicate with customers using NLP. They are more interactive and engaging than traditional chatbots or static kiosks. These virtual assistants, like Millie, can read and interpret customer body language and gestures. This enables them to assess the customer’s emotional state and mood, making interactions more human-like and empathetic.

  • Virtual assistants can answer customer inquiries about products, sales, and features. Customers can ask questions about individual products, get information about upcoming sales, or even have product features explained while examining or trying on items.

  • The virtual assistant can discern the preferences of returning customers. It may create customer profiles based on the customer’s name and appearance. This level of personalization allows retailers to offer tailored recommendations and assistance, which can enhance the shopping experience.

Using in-store virtual assistants powered by NLP and avatar technology represents a cutting-edge approach to retail customer engagement. It provides a more immersive and interactive shopping experience, making customers feel more connected to the brand. Retailers can use these virtual assistants to provide information, marketing, and customer relationship-building activities, ultimately improving the overall retail experience and increasing customer loyalty.

Contract drafting and analysis: Effective drafting and analysis of legal documents demand precision in word choice and syntax. Any contract or legal text ambiguity can lead to unintended consequences. NLP can analyze and extract information from legal documents, including contracts, case law, and statutes. This can help identify relevant clauses, obligations, and precedents, making legal research more efficient.

NLP-powered contract review programs can process documents in multiple languages, facilitating global legal collaboration. Additionally, they can automatically generate templates based on specific laws, agreements, or company policies. These tools save lawyers’ time and effort while ensuring accurate language and syntax use.

In the hustle and bustle of legal practice, lawyers may need to pay attention to mistakes or inadvertent vagueness in documents, which can result in costly repercussions. Utilizing NLP programs for thorough document review helps lawyers ensure the clarity and precision necessary to safeguard their clients’ interests and maintain their professional reputations.

E-discovery: E-discovery leverages NLP for various critical information retrieval and extraction tasks. NLP greatly aids in sifting through extensive document collections, recognizing relevant terms, and suggesting additional keywords that frequently co-occur with the search terms. Think of it as a digital “highlighter” for attorneys, drawing their attention to specific documents and sections that hold significance. NLP applications are also proficient in extracting crucial information, such as dates, party or custodian names, and other specific details from large volumes of data, effectively focusing the attention of legal professionals where it’s most valuable.

Several common e-discovery applications substantially rely on NLP. For instance:

  • Concept clustering: This method employs language analysis to identify contextually related words, grouping similar documents. This allows a single reviewer to assess them collectively, streamlining the review process.

  • Email threading: NLP recognizes ongoing email conversations and consolidates them into a coherent view, eliminating the need for redundant or inconsistent reviews.

  • Near-deduplication: This goes beyond standard deduplication by identifying substantially similar documents, such as iterative drafts of a final document, and organizing them together.

  • Predictive coding: NLP plays a vital role in predictive coding during the review process by identifying word associations and key phrases, which helps prioritize the review of potentially relevant documents.

All these applications significantly expedite and simplify the E-discovery process. It’s important to note that these applications rely on “shallow” or “statistical” processing techniques. While they may not fully understand the underlying concepts, they have learned to recognize word associations and contextual relationships, making them invaluable tools for efficiently managing large volumes of legal data.


Automated grading and feedback: Automated grading and feedback systems powered by NLP have the potential to significantly streamline the evaluation process for educators and provide timely, constructive feedback to students. Here’s how it works:

  • Essay grading: NLP algorithms can assess essays and written assignments by analyzing grammar, syntax, coherence, and content relevance. They can assign scores or grades based on predefined criteria.

  • Plagiarism detection: NLP can compare student submissions to a vast database of existing academic and online content to identify instances of plagiarism. This helps maintain academic integrity.

  • Feedback generation: NLP systems can generate specific, actionable feedback for students. They can point out areas of improvement, suggest alternative phrases or wording, and explain corrections.

  • Consistency: Automated grading ensures consistency in evaluation, reducing the potential for human bias and errors.

The benefits of automated grading and feedback include:

  • Saves time for educators.

  • Faster turnaround on assignments.

  • The opportunity for students to receive feedback immediately.

However, striking a balance is important by offering human review for complex or creative assignments.

Personalized learning: NLP-driven personalized learning platforms are designed to tailor educational experiences to each student’s needs and preferences. Here’s how it is implemented:

  • Data analysis: NLP systems collect and analyze data from various sources, including students’ test scores, responses to quizzes, and even their interactions with learning materials and digital resources.

  • Recommendation systems: Based on the data analysis, NLP algorithms can recommend specific learning resources, such as articles, videos, or practice exercises, most relevant to a student’s current knowledge level and learning goals.

  • Adaptive learning: NLP can adjust the difficulty of questions or assignments based on a student’s performance. If a student excels, the system can provide more challenging tasks, while struggling students receive additional support and simpler tasks.

  • Progress tracking: NLP can track a student’s progress over time and identify areas where they may fall behind, enabling timely intervention by educators or mentors.

Personalized learning enhances engagement, comprehension, and retention, as students are more likely to be motivated when they see their learning experiences align with their interests and capabilities.

Chatbots for student support: Chatbots powered by NLP technology are becoming increasingly popular for addressing student queries and providing support around the clock. Here’s how they operate:

  • 24/7 availability: NLP-driven chatbots can respond immediately to student inquiries anytime, which is especially valuable for online courses or institutions with diverse time zones.

  • Frequently asked questions: Chatbots are equipped with a database of frequently asked questions and their answers. NLP helps them understand and respond to a wide range of questions naturally.

  • Navigation assistance: Chatbots can guide students through complex administrative processes, such as enrollment, financial aid applications, and course selection.

  • Data retrieval: They can retrieve personalized student information, such as their class schedules, grades, or account balances.

By handling routine inquiries, chatbots free up human staff to focus on more complex tasks, improving the overall efficiency of educational institutions. Moreover, students benefit from quick access to information and support when needed.

Business use cases of NLP

Natural language processing has numerous applications in the business domain. Here are some specific use cases where NLP can be beneficial:

Search engine optimization: NLP can help optimize content for online searches by analyzing searches and understanding how search engines rank results. By leveraging NLP techniques effectively, businesses can improve their online visibility and rank higher in search engine results.

Analyzing and organizing large document collections: NLP techniques like document clustering and topic modeling aid in understanding and organizing large document collections. This is particularly useful for tasks like legal discovery, analyzing corporate reports, scientific documents, and news articles.

Social media analytics: NLP enables scale analysis of customer reviews and social media comments. Sentiment analysis, in particular, helps identify positive and negative sentiments in real-time, providing valuable insights for customer satisfaction, reputation management, and revenue generation.

Market insights: By analyzing customer language, NLP helps businesses gain insights into customer preferences and improve communication strategies. Aspect-oriented sentiment analysis helps understand sentiments associated with specific aspects or products, guiding product design and marketing efforts.

Moderating content: NLP can assist in content moderation by analyzing the language, tone, and intent of user or customer comments. This enables businesses to maintain quality, civility, and a positive online environment.

These applications showcase how NLP can benefit businesses significantly, ranging from automation and efficiency improvements to enhanced customer understanding and informed decision-making.

Emerging technologies in NLP

There are several new techniques on the horizon in the field of natural language processing that business owners should keep in mind:

  1. Transfer learning: Transfer learning involves leveraging pre-trained models for new problem-solving. NLP is gaining popularity due to its ability to train deep learning models with limited data, which can be a cost-saving advantage for businesses.

  2. Explainable AI (XAI): As AI systems become increasingly complex, businesses must comprehend and clarify how decisions are reached. XAI offers a range of techniques to make opaque models more interpretable and transparent.

  3. Capsule networks: Capsule networks, also known as CapsNets, represent an innovative type of neural network designed to overcome some of the limitations of Convolutional Neural Networks (CNNs), particularly in tasks involving spatial hierarchies between features. They hold promise, not only for image processing but also for text analysis and comprehension.

  4. Highly efficient models: While BERT (Bidirectional Encoder Representations from Transformers) marked a significant advancement in tasks requiring a deep understanding of language context, the NLP field continues to evolve. New models like RoBERTa, ALBERT, and DeBERTa are emerging, offering more efficient and accurate language comprehension capabilities.

  5. Multimodal models: These models integrate insights from various data types, such as text and images. They are becoming increasingly important as businesses strive to create more intuitive and natural interactions with AI systems, harnessing multiple sources of information for a richer understanding.

These emerging techniques in NLP hold the potential to transform how businesses leverage natural language processing for a variety of applications, from more efficient text analysis to better decision-making in AI systems.


Natural language processing has emerged as a significant field with diverse applications. It enables machines to understand and process human language through various components and phases. Tasks like tokenization, part-of-speech tagging, named entity recognition, and sentiment analysis contribute to NLP’s effectiveness. NLP has reshaped industries and enhanced customer experiences with practical use cases like virtual assistants, machine translation, and text summarization. As NLP continues to advance, with ongoing research in areas like deep learning and language modeling, we can anticipate even greater strides in language understanding and communication. By embracing NLP, we unlock the potential for machines to effectively interpret, interact, and communicate in human language, paving the way for exciting advancements in the future.

Want to level up your internal workflow and custom-facing systems with NLP-powered solutions? Connect with LeewayHertz for all your consultancy and development needs!

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Author’s Bio


Akash Takyar

Akash Takyar LinkedIn
CEO LeewayHertz
Akash Takyar is the founder and CEO of LeewayHertz. With a proven track record of conceptualizing and architecting 100+ user-centric and scalable solutions for startups and enterprises, he brings a deep understanding of both technical and user experience aspects.
Akash's ability to build enterprise-grade technology solutions has garnered the trust of over 30 Fortune 500 companies, including Siemens, 3M, P&G, and Hershey's. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

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