AI Reinventing Banks – The evolution of financial systems is a long story but interesting journey characterised by sudden changes in underlying technologies. Reality lacks hype though, about artificial intelligence in the banking sector. AI-driven banks must start with fundamentals of customer needs not technological changes. It should do complete banking experience makeover or transformation.  Thus AI should create

  • Banking experience an indispensable and independent
  • An excellent resource for bankers to serve customers far better than now
  • It should convey fresh ideas, solutions, insights, and trends on daily basis based on learnings from the markets, customer behaviour and data trends.


Banking in Africa – Is AI Reinventing Banks?

Retail banking in Africa is far from where it should have been, it has never followed the natural progression anyway. African banking experience level far off from efficient banking level, the current level is nowhere near where it’s comparable. In Africa, we’re only at the beginning of this new age of computing which holds the potential to transform the entire working of a bank. The rest of the world is also far off from the banking what we will get when we will have quantum computing, the blockchain, 6G network and AI as an embedded technology. But are they ready?

Artificial intelligence is here to reinvent the whole game of banking and transform this hundred of years old business into new innovative, scalable, dynamic, micro service environment. So we need to take it a blessing and transform our banking from today itself.

Biometrics_Figure_2-OlzakIn the good old days, we moved from barter payments methods to sustainable financial payments. In those days banking was very inefficient and traditional. If we compare today’s need it was way slow but still acceptable to the customers due to the stage in the information age. Sadly many of banks, their banking systems and process are still functioning in the same manner. Arfican opportunities are lucrative but under-utilised in the banking business. African banks in the region need to step up and grasp these opportunities to succeed.

AI technologies such as machine learning, neural networks, deep learning, and big data analytics bundles like prescriptive, predictive analytics and descriptive. Virtual agents and natural language understanding technologies are gaining popularity among progressive banks.

The phrase mobile commerce was originally coined in 1997 representing “the delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless technologies.” Information security and cybersecurity are moving from static to behavioural i.e dynamic behavioural biometrics. These security modules are now gaining popularity at a rapid pace. AI-based behavioural biometrics can deliver a new era in digital authentication for financial institutions.


Banking Transformation- Papers to Digital

Banks to set themselves on for new financial, banking and innovative business. What would have been considered impossible until a few years ago — transforming themselves from impassable monoliths to nimbler organisations, open to new kinds of partnerships. But as we would soon see, Banking-as-a-Service (BaaS) rather than Banking-as-a-Platform (BaaP) more aptly describes banks’ strategy of providing public APIs and development portals.

AI is not a magic push button and it will never be but as a strategy, if one adopts it will take them to new height though, particularly for financial institutions, FinTechs and banks where data access and security play a critical role. With advancement in technology, organisations outside the banking industry diversified into financial services targeting margins in the space. These were organisations servicing millions of customers through broad distribution channels, be they mobile operators, retailers or on-line merchants.

Initially, almost all the fun and joy in terms of 100% in shape of activities in the financial services (except non-banking services) space was attributable to banks with all the revenue being collected by the same entities. Africa, as the world’s second largest and second most inhabited continent with close to 1.2 billion people as a result of summing up habitats of 56 countries, there are a wide variety of trends that are shaping the retail financial services market in the region.


Banking Penetration in Africa

According to a study by Google available on various links, 80% of Africa’s total adult population do not have access to any form of formal financial services. Africa is dealing with the challenges of putting in place efficient, secure, low cost operating models, centralised operations, multichannel and multi-product capabilities coupled with low price, lighter and lean operating models. MNO’s in Africa are winning the race due to their focus and attitude of “be my customer” as opposed to the banks “who is eligible to be my customer” approach. Fraud and cyber-crime continuing to top the chart of the risk of today’s chart with depressing regularity, preventing customers from being exposed to risk should be right at the top of banks’ agenda, along with improving the customer experience.

MNO’s speed to achieve their goal to standardise, automate, digitise, remove boundaries by bringing cross order financial/remittances service in the form of payments, cash, airtime, paperless and online. At the same time banks are still in their canteens with their coffee mugs without any sign of worry but in reality, all African banks face tough challenges from MNO’s & MFS players.

This is the time when customer centricity, financial inclusion and customer serving infrastructure (Agents, Merchants, Billers, Remittance partner’s network) should be the top agenda for banks in Africa but sadly it is not. Banks want to run only behind high value with high dollar value transactions not dollar or two dollar value transactions.

Banks in the region only continue to develop strategies to achieve sustainable growth which may not materialise as of now since it looks like the only strategy nothing beyond that. At the same time without a doubt, I need to be honest as well with specific examples wherein a Bank is trying to jump the MNO’s role with the idea of strengthening and furthering financial inclusion. Kenya’s Equity Bank, Kenya & South Africa’s FNB bank opted to be a Mobile Virtual Network Operator (MVNO).

Financial Services is data intensive and therefore a great candidate for AI automation. An MVNO is when an existing brand enters the mobile telephony business without actually investing and owning the radio spectrum but borrows the Network services from an existing Telecom Operator at a wholesale rate. MVNOs remain most prevalent in mature markets where mobile penetration has gone beyond 100%.

Europe is home to two-thirds of domestic MVNOs (585), followed by Asia Pacific (129) and Northern America (107) [GSMA-2015 report, representing mobile operators]. On the global level, around 2 billion people don’t use formal financial services and more than 50% of adults in the poorest households are unbanked. This means banks still have a chance but they need to come out of their 100-year-old modus operandi.


Transformation Needs to Deploy AI

Lots of customer education, drive to change in customer mindset as well as behaviour is needed. Financial capability is the internal capacity to act in one’s best financial interest, given socioeconomic environmental conditions. Few golden rules to get quick wins are as follows.

  • Needs to focus outside “digital and social media channel” i.e focus on radio, road show with village communities, focus on groups within local language and style
  • Trust local people to act as brand ambassadors for increasing customer loyalty and trust
  • Focus on creating a cost-effective and efficient operating model is the golden key
  • Carefully thought through branch expansion versus setting up an agent network
  • Managing risk, security, compliance and bringing it up to the global standard
  • Leveraging mobile as a primary medium for transactions and queries and online banking
  • Technology enabled customer engagement and continuous innovation
  • A complete set of counter-measures against Money Laundering and the financing of terrorism and proliferation, covering the required legal, regulatory and operational measures through and through knowledge set
  • In-depth knowledge & willingness to attain knowledge on principles for mobile financial services Infrastructures.
  • Understanding and willingness to attain in-depth knowledge and hands-on core banking platform integration with MFS systems, architecture, banking grade switching and rules around the same

Screen Shot 2017-11-17 at 19.44.52

This education encompasses the knowledge, attitudes, skills and behaviours of consumers with regard to managing their resources and understanding, selecting, and making use of financial services that fit their needs. Mobile financial service providers i.e MNOs or Banks or even Independent MFS companies can succeed by focusing on some key areas to hold a much better position from today to tomorrow. Because financial capability is a relatively new area, alternative definitions and approaches to its measurement exist in parallel.

The term “financial literacy” refers to one aspect of financial capability—the knowledge and awareness of financial concepts and products. The framework developed for the financial inclusion and financial services for unbanked communities differ from country to country and different service providers (Banks, MNO and MFS companies). Biometric technologies such as behavioural biometrics and biometric cards offer banks the chance to stay one step ahead of the fraudsters, who continue to evolve in terms of scale, sophistication and ambition.

These policies from Ministries of Innovation MNOs are the best admirer and advantage takers. Sadly for the majority of the banks, this is still unknown path and some, not a preferred route. AI technologies offer banks an opportunity to reinvent banking processes and gain unprecedented advantages. Even more remarkably, it does so in conjunction with a step change in the customer experience.


Points to Note:

AI is becoming a classifier instrument to put banks in good and best bank category. So banks which want to jump to the best category are jumping to adopt AI, BOTS and machine learning techniques. This is possible only after banks can utilise and understand the data they have. Data to serve and understand customers etc. All credits if any remains on the original contributor only.


Books + Other readings Referred

  • Research through Open Internet – NewsPortals, Economic development report papers and conferences.
  •  AILabPage (group of self-taught engineers) members hands-on lab work.


Feedback & Further Question

Do you have any questions about FinTech, Digital Banking Technology, Machine Learning, Data Science or Data Analytics? Leave a comment or ask your question via email. Will try my best to answer it.


Sign-tConclusion – Why banks should reinvent banking in the era of artificial intelligence. Adopt the change before the change you. Banks need to adapt to a new business model to remain a partner of banking otherwise it’s not far where banks will lose banking forever. Opportunities are countless; one who seizes them first gets the upper hand. Thanks to regulation and central bank support through the Ministry of Innovation. Get up, spread your wings and grab as much sky (I guess there is no more land left) as you can.

 #WeTransformLives, #iTransformLives, #MobilePayments

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Posted by V Sharma

A Technology Specialist boasting 22+ years of exposure to Fintech, Insuretech, and Investtech with proficiency in Data Science, Advanced Analytics, AI (Machine Learning, Neural Networks, Deep Learning), and Blockchain (Trust Assessment, Tokenization, Digital Assets). Demonstrated effectiveness in Mobile Financial Services (Cross Border Remittances, Mobile Money, Mobile Banking, Payments), IT Service Management, Software Engineering, and Mobile Telecom (Mobile Data, Billing, Prepaid Charging Services). Proven success in launching start-ups and new business units - domestically and internationally - with hands-on exposure to engineering and business strategy. "A fervent Physics enthusiast with a self-proclaimed avocation for photography" in my spare time.


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