For those keeping a finger on the pulse of the financial world, the buzzword Artificial Intelligence (AI) is nothing new. This technology is revolutionizing the way we handle money, from rapid trading to personalized wealth management, and even automated back-office functions. Through these advancements, financial institutions are cutting costs and delivering more value to their clients.
Financial Inclusion: The Current Situation
Despite these innovations, the benefits of these advancements are primarily felt by those who already have access to banking systems. Unfortunately, more than one billion people worldwide still lack this access. A staggering $5.2 trillion credit gap is hindering the growth of small businesses in emerging markets. For these businesses and individuals, financial inclusion remains an elusive dream.
The Power of AI and Web 3.0 Technologies
However, the combination of AI and Web 3.0 technologies could be the key to expanding access to the unbanked and underbanked populations. For this to happen, these technologies should not be treated as an afterthought. Financial institutions need to:
- Harness AI
- Develop advanced methods to determine consumers’ intent to repay loans
- Use alternative datasets to provide collateral-free credit for those most in need
Collaboration, rather than disruption, is the way forward.
Global Examples of Financial Inclusion
Around the world, we are seeing the beginnings of this change. Startups in Kenya, Indonesia, and Brazil are using alternative datasets, such as mobile usage and merchant transactions, to provide microloans and insurance to customers overlooked by traditional banks. In India, multilingual AI chatbots are breaking down language barriers. In Latin America, fintech platforms have harnessed AI to reach millions of customers, making financial services accessible on a large scale.
The Need for Inclusion Frameworks
However, financial exclusion cannot be completely eradicated by just another app. Policymakers need to develop inclusion frameworks that incorporate equity and access into the financial system. This requires building global infrastructure where inclusion is the norm, not the exception. It also involves years of policy coordination, regulatory alignment, and public-private trust.
AI: The Untapped Potential
At present, banks mainly use AI for efficiency. But the real potential lies in developing strong behavioral data models using AI. These can serve as proxies for collateral and indicators of creditworthiness, opening up access for those who have been left behind.
Collective Action for Lasting Change
Lasting change in any sector requires sustained collective action. While disruptive breakthroughs spark innovation, progress is more deeply rooted when multiple stakeholders work together towards common goals. This approach can overcome resistance, manage complexities, ensure everyone’s input, and maintain momentum.
Trust and Accountability
In finance, AI can have unintended consequences due to opaque algorithms, biases that reinforce risks, and systems that are hard to understand. Therefore, for AI to promote inclusion, it must be transparent and understandable to regulators. Institutions that use AI must be accountable. This involves rigorous bias testing, built-in human oversight, and clear channels for appealing major decisions. Without trust, liquidity dries up, credit markets freeze, and economic growth slows.
The Future of Financial Inclusion
As we move into a new technological age, AI, digital token networks, and quantum information systems stand to transform global financial inclusion. These technologies will build a trustworthy financial infrastructure, providing everyone, regardless of location, literacy, or economic status, with safe and affordable access to the global economy.
By embedding inclusion into our financial infrastructure, we have the opportunity to create a system that meets the needs of the world’s eight billion people.
