Financial Inclusion using artificial intelligence in banking

No predictable income, no bank account, no credit, no sustained living!

This about sums up the situation for community residents in Tchula, a small town in Homes County, Mississippi. Take a moment to think about this…

– Nearly 43% of residents in Tchula live below the poverty line.
–Homes County has the lowest median household income in the country. Where the average household earns $22,045 per year.
– For as long as the residents remember, there is only one bank in Tchula.

For the people in Tchula, it’s about basic needs that have to be met from paying for gas, heat, water and other utilities, some people can’t wait for a check. They need small-dollar loans to make ends meet.  With lack of access to banks and financial institutions, they go to secondary lenders to get small amounts to pay off bills. Because they are maxed out at the bank, and there are not many alternatives to payday lenders, many residents are in debt of more than $200,000.

Mississippi has the highest concentration of predatory lenders in the country. They charge on an average annual percentage rate (APR) of almost 400%.

Holmes County has some the highest rate of unbanked or underbanked households in the country. Like one of the residents said if they had better access to banking and credit solutions, and if there would be more opportunity to make a sustained living, they would.”
2018 Wall Street Journal Financial Inclusion Challenge

The Potential of Artificial intelligence in Banking and How it Enables Financial Inclusion

In nearly 60 countries, the potential for financial inclusion is approximately US$ 200 billion in revenue according to EY.

Financial inclusion provides an opportunity for banks to improve their revenue and boost economic development. While banks cannot reach all people through a ‘brick and mortar’ model, new and advanced banking technology has enabled financial inclusion through branchless banking.

In towns such as Tchula, people may not have access to banks, but they definitely have access to mobile technology. Smartphones are widely used for communication and they have learned to use mobile messaging apps to access information and interact. Leveraging the adoption of mobile technology, banks and FIs have a huge opportunity to connect to people who are financially excluded.

By using artificial intelligence in banking, banks have a cost-effective and efficient solution to provide access to services to the financially excluded.

• Through messaging apps, they can communicate, educate, guide and ensure people’s financial well being.
• Through an AI chatbot, customer queries can be answered 24/7, simple day-to-day transactions can be made simple and as the chatbot evolves it can converse and support complex queries in several languages.

Imagine if the residents of Tchula have access to an AI banking solution that provides information, support, guidance and access to banking solutions. Their financial situation would improve drastically!

How Banks can Leverage Artificial intelligence in Banking in Emerging Market Economies (EMEs)

For any growing economy, a robust policy framework for financial services and stable technology-based innovation are two essential aspects to create high financial stability. Emerging market economies (EMEs) are adopting banking technology and leveraging the power it provides to improve financial inclusion.

Here is a snapshot of how some of the EMEs are adopting banking technology and how they could leverage it to create better financial stability:

The Way Forward – Using Artificial intelligence in Banking to Build Financial Stability

Artificial intelligence in banking is disrupting the way FIs and banks can reach out to people who are financially excluded. They must leverage AI in banking to help people who have little or no access to credit to get affordable loans and build a credit history.

In towns and rural communities like Tchula, why should they be marginalized from financial mainstream services? Why should they be excluded from access to banking services that would help create sustainable lives? It is a long road towards financial stability, and only if everyone plays their part will a healthy financial ecosystem materialize.

If you wish to know more about the current state of financial inclusion, the reasons restricting inclusive banking, the digital technologies that enable financial inclusion and the future of banking assistive technology, here is a Whitepaper on The Business Case for Financial Inclusion.