Why African banks are investing in AI

Christine Wu, Managing Executive, Customer Value Management at Absa Retail and Business Bank, views artificial intelligence (AI) as an important enabler of the journey to a new banking model that is truly responsive to customer needs. 

“All areas of the bank’s operations can benefit from AI – from the frontline, where we can make use of smarter profiling and customer interactions that are needs-based and tailored to a customer’s profile, to customer servicing, where we can include clearer and more bespoke solutions to customers before they even ask – such as the automation of repetitive tasks,” says Wu.

AI is often defined as human-like intelligence achieved by machines – any system that “perceives its environment and takes actions that maximise its chance of achieving its goals”. Advanced AI, according to experts, is also capable of learning and problem-solving.

Enthusiastic take-up

AI has been taken up enthusiastically across Africa, although the expert view is that it needs some fine-tuning to adapt to the African social and cultural environment. Still, the potential is as great in the banking landscape as it is in online and mobile transactions.

Google is already in a position to benefit from the trend through its AI lab in Ghana, and Microsoft has its African Development Centre, based in Kenya and Nigeria, whose aims include spurring AI innovation.

Financial institutions across Africa are investing in the development of AI. The AfDB announced last year that it had approved a grant of just over $1m to support the creation of AI-backed systems to process customer complaints for the national banks of Ghana and Rwanda, and the Competition and Consumer Protection Commission of Zambia.

The monies come from the Africa Digital Financial Inclusion Facility (ADFI), a fund created by the AfDB and donor partners that seeks to advance digital financial inclusion across Africa.

“Facilitating sound policies and regulations, including those that enhance consumer protection and catalyse financial inclusion, is a key mandate for ADFI. With the proliferation of digital financial services, the financial industry needs innovative mechanisms for customer recourse and tracking for regulators. The Sinitic Africa project is one such solution,” said Sheila Okiro, ADFI’s coordinator.

Deepening customer relationships with chatbots

Ria Pinto, general manager and technology leader, IBM South Africa, has seen the rise of AI in banking at first hand. 

“It can be seen on the front end, smoothing customer identification and authentication, mimicking live employees through chatbots and voice assistants, deepening customer relationships, and providing personalised insights and recommendations,” says Pinto.

Embracing the power of AI enables banks to launch a range of services to better meet the changing needs of customers. Chatbots are a relatively new phenomenon in banking, with the capabilities of these tools rapidly advancing as a result of technological advancements.

A chatbot, or chatterbot, is a software application used to conduct an online chat conversation via text or text-to-speech, in lieu of providing direct contact with a live human agent. In the last several years, many African banks have launched chatbots, some of which are standalone, while others reside on WhatsApp.

Nigerian financial organisation Zenith Bank introducing their AI-backed chatbot called ZiVA (Zenith Intelligent Virtual Assistant) on WhatsApp last year to Nedbank South Africa also releasing their Enbi chatbot assistant, chatbots are an increasingly attractive AI tool.

Drive to improve customer service

The drive by African banks to bring AI into their operations is led in part by the need to improve customer service. Traditionally banks would need to employ often major customer service teams to be on-call for customer advice, complaints and questions. While this is still largely the case, the growth of AI is reducing the workload of staff and automating mundane tasks.

In customer services, where clients want a response quickly that fully addresses their issues, any tools that can speed up the process will save valuable staff time and improve customer satisfaction. “AI can play a key role in developing an intelligence behind common queries and creating responses that are tailor-made to those queries while improving over time.

In so doing, it can become more and more specific in shorter periods of time while reducing capacity demands,” says Wu.

Fraud detection can also benefit from the deeper incorporation of AI solutions. The quicker that IT security teams can identify potentially fraudulent activity and organise a response, the less damage these threats are likely to cause. With literally millions of data points being created in a single day at major banks, humans are unable to comb through all the information fast enough. 

However, AI tools can be deployed to look for signs of fraud long before a human could. Automated AI systems can flag up potentially fraudulent activity and push this to skilled staff in the form of alerts, allowing personnel to focus on the most important tasks easily. 

Relatively easy to incorporate

For some banks, the idea of adopting AI solutions can seem like a complex undertaking, especially for those institutions that have legacy infrastructure where data is stored in disparate silos. It’s also true that no two banks will have the same objectives or goals when it comes to how AI can be used in their operations. 

Yet, many of the most popular AI banking solutions, particularly in customer services, have been created in a way that makes incorporating them into existing systems relatively easy.

“Increasingly, banks will harness the power of modern technology to give customers the financial services they want, where and when they need them, and to address the specific needs of the financial services industry where they operate,” explains Pinto.

“As we look around, we see that major incumbent banks in Africa are starting to think like platform companies – creating new operating and business models that deliver innovative products and services with competitive speed. Such banks are doing more to harness the power of modern technology to customers’ benefit.”

Of course, if AI decision making is going to be deployed throughout a financial organisation, the firms need to not only trust that decisions are being made fairly but also that there is transparency.

“This trust in AI decisions is critical as it allows organisations to understand and explain AI-driven outcomes, making it essential for regulatory requirements and to reduce bias; and in the end, to achieve higher confidence in the quality of predictions in customer experiences,” explains Pinto.

Diverse benefits

AI-driven innovation can bring about benefits across an organisation in areas as diverse as customer service, fraud, risk and even cybersecurity. With even a relatively minor data breach or hack causing widespread financial and reputational damage, the use of real-time AI analytics can prove invaluable.

As AI continues to develop, there will undoubtedly be new uses and solutions for banks to consider. Training staff on the AI and IT skills needed to take advantage of AI now will pay dividends for the future as new innovations will be more easily integrated.

Finding the right AI partner is also an important consideration, with knowledgeable independent AI firms offering a great deal to banks which are at the beginning of their AI journey.

For banks that are yet to fully capitalise on the power of AI, Wu believes that starting where you see an overlap between value and lower risk can be an effective plan.

“This enables a safer environment for innovation before building confidence to scale to larger and more regulated spaces. Customer service is a great space to add value with the use of AI, through innovations such as chatbots, automated responses, etc. This can set the foundations and architecture for future rollouts in other areas of the bank,” says Wu.