Could Financial Inclusion in Africa be pushed forward with Large Language Models(AI)?
Espen Kvelland
Chief Executive Officer at Wakandi | Director Wakandi Tanzania, Kenya, Uganda
In Africa's bustling streets, traditional banking systems lack tools to engage users. Good news for stakeholders may be on the horizon.
The Untapped Potential of Everyday Data
Every swipe, tap, and mobile money transaction creates a trail of digital data. This data is the golden key to creating a comprehensive financial profile for the average consumer, especially in the informal sectors of African economies. However, the challenge has always been the high customer acquisition costs for banks, which made it uneconomical to target low-income individuals or those operating in the informal economy. The second problem is that transactions are happening in silos in banks, mobile money providers or other Financial Services Providers.
Can this change with the introduction of Large Language Models, AI and Open Banking?
Large Language Models, the brains (models) behind AI's ability to understand and generate human-like text, could be leveraged to reduce these costs drastically. They could offer a smarter, modern approach to Know Your Customer (KYC) protocols, cheaper customer engagement, and new ways of creating credit scores, all of them essential for any financial service provider. By, for example, automating the KYC process, LLMs make it feasible—and financially viable—for banks to engage with a previously untapped market segment. This could again drive the interest of open banking even stronger from the various stakeholders.
AI and the potential to drive Financial Inclusion
Artificial Intelligence (AI) has the potential to significantly drive financial inclusion by transforming the way financial services are delivered, especially to underserved communities. Here’s a summary of how AI can contribute to this goal:
- Credit Accessibility: AI can help provide affordable credit without sacrificing profitability.
- Risk Management: AI’s predictive analytics can improve risk management, allowing financial institutions to offer services to a broader customer base while maintaining control over risk levels at an acceptable cost level.
- Operational Efficiency: AI can streamline operations, reduce costs, and make financial services more accessible. Automated processes and chatbots can handle customer inquiries and transactions, making services available 24/7.
- Digital Identification: AI can support digital identification systems that reduce the cost of reaching ‘last mile’ users.
- Innovation in Lending: AI can help banks innovate in lending by identifying new customer segments and creating tailored financial products that meet the needs of diverse populations1.
In summary, AI can be a powerful tool for enhancing financial inclusion by enabling more affordable, efficient, and accessible financial services, particularly for those traditionally excluded from the formal financial system.
In the future, banks can parse through vast amounts of unstructured data through AI to create accurate financial profiles. This breakthrough approach streamlines the onboarding process and opens new avenues for credit scoring, loan approvals, and personalised banking services.
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Beyond Numbers: The Real-World Impact
The implications of integrating LLMs into Africa's financial landscape extend far beyond simplified banking processes. For millions, it's the gateway to financial empowerment. Imagine small-scale traders accessing credit without the red tape, families ensuring their futures without prohibitive costs, and entrepreneurs scaling their ventures with the tap of a button.
Furthermore, this tech-driven approach aligns perfectly with Africa's mobile-first economy. With most of the population already relying on mobile technology for daily transactions, LLMs enhance this digital ecosystem by making sophisticated financial tools accessible through a simple mobile interface.
Collaborating for a Brighter Future
Partnerships are crucial for this vision to materialise. Collaborations between fintech startups, traditional banks, and telecom companies are laying the groundwork for an inclusive financial system. These partnerships not only facilitate the technological infrastructure but also ensure that the fruits of this financial revolution are within the reach of every African citizen.
Fintech companies like Nala, Interswitch, Jumia, Flutterwave and Wakandi are making waves in the African ecosystem. According to McKinsey, only 5-7% of transactions are conducted digitally on this continent. So it's safe to say, we have a lot of work left to do.
Sources:
Banks | Mobile Money | Fintechs | Digital Solutions Design | Digital Transformations | Technology Products | Business Intelligence | Data & Analytics | Software Engineering
10 个月A very fine read and thoughtful. Since LLMs requires a lot of data for training thus to bring accuracy, i think there is a challenge to be settled on Data Privacy..
AI has the potential to revolutionize financial services by providing scalable and personalized solutions that could help bridge the inclusion gap in Africa's dynamic markets.