The Future of Finance in Sub-Sahara Africa with AI: A Case of Reckless Optimism or Calculated Adoption
The future of finance in Sub-Saharan Africa is predicted to be heavily influenced by the growth of artificial intelligence (AI) and other frontier technologies. As the region continues to develop and modernize, the use of AI models in finance has the potential to bring huge potential upside to both consumers, financial institutions and capital allocators.
One key area likely to be impacted is the field of financial inclusion. Sub-Saharan Africa currently lacks access to basic financial services such as bank accounts and credit, making it difficult for the average indigene to manage their money, invest in businesses, or plan for the future. However, with AI in the picture, financial institutions will be able to reach under-served people and offer more bespoke financial products and services.
A classic example could be using trained AI models to help banks identify and segment potential customers based on data such as mobile phone usage or online transaction footprint, paving way for alternative “credit scoring systems” to facilitate increased financial intermediation.
The field of risk management is also likely to see seismic changes. This will undoubtedly open up huge swathes of opportunities. Financial institutions currently rely on a variety of “traditional” methods to assess the creditworthiness of customers and to flag potential fraud, most of which can be time-consuming and costly.
Machine learning models “fed” with copious institutional and customer datapoints will enable financial institutions be able to better synthesize large amounts of data much more efficiently for insights, which could help them mitigate risk inherent in the business of extending credit.
On an operational level, AI is reshaping the way financial institutions do business with AI-powered chatbots and virtual assistants already deployed by some banks and fintech companies seeking to run leaner models to cut back on the cost of customer service.
Also worthy of mention is how AI trading algorithms are already helping improve efficiency of financial markets and product offerings with quantitative and high frequency trading (HFT) technology on Wallstreet and other sophisticated bourses.
The emergence and subsequent adoption of any new technology invariably comes huge risk and reward potential and the use of AI in finance is no stranger to this universal rule. One of the main concerns is that the broad use of AI will lead to job losses in the financial sector, as machines take over repetitive and complex tasks that are currently performed by humans. Another concern is the potential for bias in AI algorithms, which could lead to discrimination against certain groups of people.
There have numerous calls by tech activist groups and CSOs for more stringent ethical guidelines to better govern artificial intelligence deployment for real-world use given now exponential the effect of bias AI could be.
This is, however, an ongoing conversation by stakeholders who are seeking reconcile pure capitalist incentive with the values of equity, inclusion and diversity.
To ensure that the benefits of AI in finance are equitable, governments and financial institutions in sub-Saharan Africa need to closely collaborate to develop and implement policies that promote responsible use of this nascent technology.
This may include investing in education and training programs to help people develop the skills they need to work in an AI-driven economy, as well as implementing regulations and oversight to ensure that the use of AI is fair and ethical.
In summary, AI has the potential to supercharge growth and the future of finance in sub-Saharan Africa, bringing immense benefits to both consumers and financial institutions.
By working together and taking a wholesale yet responsible approach to the use of the technology, we can help to ensure that AI in finance are widely shared, and that the potential risks and challenges are nipped in the bud.
