Artificial Intelligence in the Financial Services Sector

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Artificial Intelligence (AI) is changing the competitive dynamics of the financial services sector in Africa, driving financial institutions to differentiate themselves by investing in technologies to build new capabilities, improve customer experience and drive growth. Although Artificial intelligence (AI) is at its nascent stage in Africa, it’s gradually making inroads into the business environment.

According to a McKinsey report, Africa’s retail banking penetration stands at just 38% of GDP, half the global average for emerging markets. (Roaring to life: Growth and innovation in African retail banking). Against this background, it is evident that the African banking sector is an exciting, fast-growing hotbed of innovation.

There is still a lot of room for the adoption of technologies such as AI, only 16% of Africa CIOs are experimenting with AI against a global average of 35% according to Gartner’s 2018 CIO Agenda: An Africa Perspective.

Africa is certainly on the global AI radar. Google recently built an AI Research Lab in Accra, Ghana. In Kigali, Rwanda, Facebook and Google are sponsoring the African Masters in Machine Intelligence degree program at the African Institute for Mathematical Sciences.

AI in motion

Absa, one of the largest banks in South Africa has successfully used AI to gain market share in a tightly contested banking sector. Absa started its AI journey by deploying chatbots to help customers in opening new accounts. While chatbots are not pure AI tools, AI features are embedded in them and they are widely used in the banking sector.

Chatbots allow customers to conduct basic banking transactions without human intervention. They can provide responses to enquires and can facilitate services such as funds transfers. Chatbots are helping to deliver a radical change in customer experience by allowing customers' finances to run themselves and acting as trusted advisers. According to research by Juniper, chatbots conversations will deliver $8 billion in cost savings by 2022.

Besides conversational interfaces like chatbots, AI is also helping in the area of personal financial management and credit risk assessment. Absa has successfully used AI-processed behavioral data to advise clients on applicable investment products.

Union Bank, a major bank in Nigeria, announced the deployment of Robotic Process Automation (RPA) technology in its operations; a first in the Nigerian Banking sector. With RPA, Union Bank was able to automate routine rules-based processes. This is one of the most promising applications of AI in banking because automating high-volume, low-value processes can help to significantly reduce the cost to serve each customer. Union Bank’s intent is certainly in line with global trends. A study conducted by Cognizant found that 90% of business leaders in North America are convinced that process automation is critical to their business.

According to James Mwangi, Group MD &CEO of Equity Group Holdings, a financial services holding company in Kenya, “Artificial Intelligence, machine learning, robotics, and blockchain are technologies that any company worth its name will need to adopt as early adopters or fast followers. No company can afford to be left behind as the 4th Industrial Revolution sets in across the world”

Startup world

The AI startup ecosystem is quite vibrant with companies such as Aerobotics, DataProphet, and CLEVVA.

Q&A with CLEVVA Co-CEO

CLEVVA is a South African startup that creates AI-powered virtual advisors to drive sales and perform technical consultations. Ryan Falkenberg, the Co-CEO shared his thoughts.

Q - How have African businesses embraced your products and services?

A - “While the market is still relatively immature, we are seeing increased take up as companies’ gain a better understanding of what AI technology can offer them. And of course, it’s commonplace in products from Google, Facebook, and the like on the consumer end of the market.

Most companies know they need to get moving on their digital journey. They are just being held back by the current dependencies on integration, connectivity, and access to relevant data. The reality is also that many companies remain largely human-powered, and so they have limitations to moving straight to full automation (even if the technology supports it). This, however, is opening up more discussions around augmented intelligence solutions - ones that use digital intelligence to empower not simply replace staff. By augmenting first before you move to full automation, you allow AI to gain traction within the current reality. This realization is now dawning on those companies which are more realistic about the journey to full automation, and which now acknowledge that, in most cases, the starting point is combining AI with staff.

From a CLEVVA point of view, the businesses we engage are increasingly attracted to the rapid way they can build digital experts to help optimise current decision-making accuracy and consistency. We also offer a pragmatic first step in a digital journey, one not dependent on rich training data - something few have available. As such interest in our offering is growing exponentially”

Q - What are your thoughts around the future of AI in Africa?

A – “As a market, Africa offers enormous potential for AI solutions. This is because skills are at a premium and if we can offer powerful digital intelligence to people who have the resilience, determination, and drive to make a difference (just not the knowledge and/or experience), we can help them unlock rapidly. Plus we can use AI to create jobs by making more people employable.

A challenge with growing the market in Africa remains the inconsistent IT infrastructure, lack of relevant big data, as well as varying cultures, languages, and political/legal frameworks that need to be overcome - unlike countries like the US that have effectively 51 countries that are similar in most respects. Platforms like CLEVVA that don’t rely on big data but rather on access to ‘live’ experts, allow companies to start their AI journeys by digitizing their known logic before moving on to unlocking the potential of unknown logic.

Africa, therefore, needs pragmatic solutions; not ones that can only work if multiple dependencies can be resolved. Solutions need to work within existing realities and offer value by overcoming current blocks in an intelligent way”

The future

PwC research shows global GDP could be up to 14% higher by 2030 as a result of AI - the equivalent of an additional $15.7 trillion – making it the biggest commercial opportunity in today’s fast-changing economy.

AI has the potential to solve some of the most pressing business problems and drive growth and development. Despite these strengths, there are structural challenges that can hamper the development of a healthy AI ecosystem, particularly skills shortage, lack of infrastructure and a weak regulatory environment.

Some African governments are taking steps to address the challenges. Nigeria recently inaugurated the National Agency for Research in Robotics & Artificial Intelligence (NARRAI). The next step is for African governments to develop a coordinated pan-African plan. AI-powered technology will continue having a transformative effect on the banking sector and the use of technology such as AI-powered facial recognition will become increasingly commonplace. This presents African digital entrepreneurs and investors with a myriad of opportunities for growth.

WHAT IS AI?

According to the Web Foundation, AI is an intelligent system, which is able to solve problems by selecting the best possible action in a given scenario.

AI does not exist in a vacuum, its capabilities are intertwined with other key technological innovations.

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Artificial Intelligence in the Financial Services Sector. (2021, Nov 26). Retrieved October 15, 2024 , from
https://studydriver.com/artificial-intelligence-in-the-financial-services-sector/

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