AI for Financial Inclusion: Paving the way for the Economically Marginalized
There is no denying that the world today is witnessing rapid technological advancements like never before. While some people argue that technology has made us more isolated, others believe that it has brought us closer together.
One of the most significant benefits of the digital age is undoubtedly the democratization of financial services. Thanks to these innovations, millions of people worldwide are now able to access banking, insurance, and other financial services which were not accessible to them earlier.
However, despite the steady growth of this industry, there are still many individuals and communities in underserved regions that have limited or no access to financial services. In the absence of these services, people suffer from poverty, unemployment, and other economic issues. The situation is particularly acute in developing countries where the majority of the population lacks access to traditional banking.
Financial inclusion, which is the provision of affordable, accessible and usable financial products, requires the availability of technologies that can bridge the gap between traditional banking institutions and underserved communities. Enter Artificial Intelligence.
AI, which is a branch of computer science, involves the creation of algorithms that can be trained to process and analyze large datasets to detect patterns and provide insights. With machine learning, an AI system can improve its accuracy and efficiency over time by learning from data inputs.
To promote financial inclusion, AI is being employed in several areas of finance, including payment processing, credit analysis, fraud detection, and customer service, among others. Here are some examples:
1. Payment Processing:
One of the central challenges affecting financial inclusion is the high cost of payment processing. For instance, mobile money transactions in several African countries can cost up to 20% of the value of the transaction, a rate that is unaffordable for most people.
Fortunately, AI is helping to reduce the costs associated with payment processing. The technology can analyze payment data, detect fraudulent transactions and help reduce operational and administrative costs. This, in turn, enables firms to pass on these savings to their customers in the form of lower transaction fees, which can help increase financial inclusion.
2. Credit Analysis:
Credit analysis is a vital component of financial inclusion since it enables lenders to assess the creditworthiness of borrowers. AI algorithms can comb through large volumes of data from both traditional and non-traditional sources, such as social media, to provide insights into an applicant’s creditworthiness. This can help lenders to “predict” the likelihood of repayment and reduce the risks associated with lending to potential borrowers.
3. Fraud Detection:
As financial institutions become increasingly digitized, the incidence of fraud has also risen. Fraudulent transactions can cause significant losses to both financial institutions and their customers, especially in developing countries where cybersecurity may not be a top priority.
AI can assist in identifying fraudulent transactions by analyzing data in real-time for suspicious activity, thereby reducing the likelihood of financial fraud.
4. Customer Service:
Artificial Intelligence can assist in delivering excellent customer service and support to underserved customers. With machine learning, an AI system learns from interactions with customers, and the more interactions it has, the better it becomes at providing personalized service.
AI-powered chatbots in banking, for instance, can provide 24/7 support to customers, answering their questions or escalating issues to the appropriate department. This approach can help overcome language barriers, reduce costs, and reach customers in remote or underserved areas where traditional banking services may not exist.
In conclusion:
Financial inclusion is critical for sustainable economic growth and poverty reduction. Artificial Intelligence can contribute significantly to increasing financial inclusion by providing affordable, accessible and usable financial products and services to the underserved.
The application of AI in financial services will not only increase access to financial services but will also reduce operational costs for financial institutions. By leveraging AI, financial institutions can offer innovative products and services to their customers, thereby boosting financial inclusion, and reducing the gap between the rich and the poor.
In summary, the integration of AI-enabled technologies in financial services is a positive step towards bridging the financial inclusion gap, empowering millions of people worldwide to achieve their financial goals, and participate in the global economy.