India does not have the most financially independent population. A large percentage of the population here doesn’t even have a bank account. So you can confidently say that financial inclusion is severely lacking in our country. Financial inclusion is when every individual in a country is provided with equal access to all financial services irrespective of their background. Artificial intelligence’s role in financial inclusion is that it is a system with no biases and can be considered fair. But even with AI stepping into the picture, how far can a country go to provide everyone with financial equality?
AI Fairness In Today’s World
Artificial intelligence is already used in many sectors to optimize sales and transactions. For example, AI provides security to avoid fraud and ensure a safe payment gateway. Additionally, when it comes to spending online, AI also registers your spending habits and uses that information to provide you with suggestions that better fit your budget.
The emergence of AI in the financial sector shows how well it is adapting, even in the most traditional industries. Anyone aspiring to succeed must enroll in an artificial intelligence program.
Explainable AI For Financial Inclusion
When the data being handled is sensitive, the lack of trust comes automatically. Therefore, transparency is crucial to building customer trust and providing assurance. This is where explainable AI comes into play.
Explainable AI, also known as XAI, is a developing field that gives banks and financial institutions more clarity on their AI governance. The goal of XAI is to improve the explanation, use, and understanding of artificial intelligence for everyone. An explainable AI would be easy to understand while remaining precise and effective.
This helps because it makes AI comprehensible to all and eases out the financial hurdles people have been facing encouraging more people to take control of their finances.
Drivers Of AI Disruption In Finance
Change happens slowly, and it happens from the inside. For artificial intelligence to impact an entire industry, it must have some powerful driving forces.
Big Data
The client’s expectation shifts with any new technology. So when big data comes into the picture, it has a significant impact on the financial sector. Customers can now interact with their banks on a more digital level. Their data is collected digitally through various platforms and is analyzed in a completely secure manner.
With AI, large volumes of unstructured data can be collected and used to make better decisions in a business.
Infrastructure
Another reason large amounts of data can be processed this quickly is cloud computing. The overall development of infrastructure and resources has made the entire process efficient and helped lower the overall cost.
If nothing else, this indicates that everyone needs to realize that businesses are more prepared than ever to use AI.
Regulation
Regulators put banks under pressure to submit accurate reports on time. This is part of the banks’ legal obligation; therefore, the process must be carried out on time. The process for regulatory compliance includes gathering data from diverse sources.
With the help of artificial intelligence, this entire process is automated. This boosts the speed and quality of decision-making while addressing difficulties in the financial systems.
Competition
Every bank wants to provide the best customer service to their users, so they constantly compete with each other. However, with FinTechs becoming increasingly popular, traditional financial organizations’ competition has become a little tougher.
AI has become the cutting-edge technology that many businesses in the finance sector use to stay ahead of the competition.
How Will AI Improve Financial Inclusion?
We know that artificial intelligence is improving the financial inclusion situation. It is affecting several sectors in the BSFI industry. Here is how AI is improving the industry:
Credit Risk Management
Financial institutions must create more dependable models to create a plan against risk management. You can already see Fintechs and Digital Banking markets using AI to help with credit risk management.
Customer Relationship
For banks, customer relationship management is crucial. This is why more and more banks now offer more individualized, round-the-clock services to each of their customers. In addition, users now have the ability to connect to banking apps using facial recognition and voice commands because of AI.
Security Against Fraud
Banks always depended on anti-money laundering (AML) transaction monitoring and name screening systems. Unfortunately, most of these systems are based on old rules and produce many false positives. However, enhanced AI components are now being added to the existing systems to identify previously undetected transactional patterns.
Conclusion
So yes, AI can address the long-standing issue of financial inclusion and help improve the situation. First, however, banks and financial institutions must be open to adopting this new perspective and reinventing many of their old policies.
India will only be a financially inclusive country when everyone is assured security and efficiency.
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