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 data points will enable financial institutions to 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 the 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 come with 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 been numerous calls by tech activist groups and CSOs for more stringent ethical guidelines to better govern artificial intelligence deployment for real-world use given how exponential the effect of biased AI could be. This is, however, an ongoing conversation by stakeholders who are seeking to 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 the 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 is widely shared and that the potential risks and challenges are nipped in the bud.

DISCLAIMER

This document does not constitute an offer to buy or sell any securities, nor is it meant to encourage an offer to do so. It is for educational purposes only. Before purchasing any security, investors are urged to consult with their respective investment houses for independent advice.

This document's facts and opinions were gathered from or arrived at after doing our best to rely on credible sources. Although great care has been taken in the preparation of this paper, NIMED CAPITAL and the Young Investors Network, as well as any team member, make no guarantees as to the accuracy of the information included within. This report's conclusions and projections are subject to change after publication at any moment without prior notice.

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Young Investors Network (YIN) is a financial education organization with a commitment to educating the youth in financial literacy, business skills and dedicated to preparing generational investors. Its mission is to inspire the youth to be outstanding investors.
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