Financial inclusion is the goal of ensuring that everyone, regardless of their income, location, gender, or other factors, has access to affordable and appropriate financial services and products. This concept can – in theory – improve the lives of millions of people around the world, especially in developing countries, by enabling them to save, invest, borrow, and manage their money more effectively.
However, financial inclusion – in a broad sense – still faces many challenges, such as low financial literacy, lack of trust in formal institutions in developing countries, high transaction costs for conducting monetary transactions, and regulatory barriers. According to the World Bank, a whopping 1.7 billion adults remain unbanked globally, meaning they do not have an account at a bank or another financial institution or through a mobile money provider.
This is where artificial intelligence (AI) can play a vital role. As readers of Digital Wealth News know, AI is highly sophisticated technology that enables machines to perform tasks that normally require human intelligence, such as learning, reasoning, and decision making. AI can help overcome some of the obstacles to financial inclusion by:
- Providing personalized and tailored financial advice and education to customers, especially those who are new to formal financial services or have low financial literacy.
- Enhancing the security and reliability of financial transactions and data, reducing fraud and identity theft, and increasing trust and confidence in financial providers.
- Lowering the cost and increasing the efficiency of financial operations and processes, such as customer service, credit scoring, risk management, and compliance.
- Expanding the reach and accessibility of financial services and products, especially in remote or underserved areas, through digital platforms and channels, such as mobile phones, chatbots, and biometric identification.
Some examples of how AI is already contributing to financial inclusion are:
- Tala, a fintech company that uses AI to provide microloans to customers in Kenya, Tanzania, India, Mexico, and the Philippines. Tala analyzes data from customers’ smartphones, such as SMS messages, call logs, and GPS locations, to assess their creditworthiness and offer them loans ranging from $10 to $500.
- Juntos Global, a company that uses AI to deliver personalized financial coaching and education to customers in Latin America, Africa, and Asia. Juntos Global uses natural language processing (NLP) to communicate with customers via SMS or WhatsApp messages, providing them with tips and guidance on how to save, budget, and manage their money.
- ZestFinance, a company that uses AI to help lenders make better credit decisions for underserved populations. ZestFinance uses machine learning (ML) to analyze alternative data sources, such as online behavior, social media activity, and phone usage patterns, to generate more accurate and fair credit scores for customers who lack traditional credit histories.
These are just some of the ways that AI can help advance financial inclusion for 2024 and beyond.
That said, AI also poses challenges and risks that continue to cause concern, including ethical issues, data privacy concerns, algorithmic bias and discrimination, and human-AI interaction problems. Therefore, it is important to ensure that the technology is developed and deployed in a responsible and inclusive manner that respects human rights and values.
The potential to transform the financial sector and improve the lives of billions of people around the world has become a more possible realityh with the use of the incredible computing power behind artificial intelligence. By harnessing AI for good, the objective must be to create a more inclusive and prosperous society for everyone.
Copilot, with the assistance of the humans at DWN