Using data analytics, machine learning and AI to empower underserved communities
The global economy is a complex web of transactions and partnerships where financial services facilitate growth and development. Despite the importance of access to economic benefits, however, millions around the world are still not included in the traditional financial system.
Financial inclusion, ensuring the availability and accessibility of financial services to underserved communities, is emerging as a critical issue for the banking industry today. According to the World Bank, a staggering 1.7 billion adults worldwide lack access to formal financial services. The UAE Central Bank’s 2020 survey revealed that 85 percent of the country’s adults (aged 15 and above) use at least one form of financial service, leaving 15 percent financially excluded.
Lack of financial inclusion can lead to a variety of adverse outcomes, including difficulty saving for emergencies, inability to invest in education or business, and increased vulnerability to financial crises.
Read more: The technology trends driving the financial services sector
Access to financial well-being
Imagine a world where everyone, regardless of their background or income, has access to vital financial services, enabling them to build a brighter future for themselves and their communities. This is the vision behind financial inclusion, a challenge in today’s banking sector. By giving underserved communities access to financial services, banks can empower people to save for the future, invest in education and business ventures, and cultivate financial resilience. This improves the quality of life in underserved communities and stimulates economic growth and development.
However, it is not just about providing access to financial services. Banks are also stepping up to help underserved communities become more financially literate and responsible. They offer financial education and training programs through mobile apps and design financial products and services that are easy to understand and use. For example, Liv., an offshoot of Emirates NBD – the digital bank catering to the youth demographic – offers multiple blogs and in-app resources to help users become more financially literate.
Financial literacy
By empowering underserved communities to better understand their financial options and make informed decisions about managing their money, banks increase financial inclusion and build stronger, more resilient communities.
The banking industry aims to provide financial services to all corners of the world, including underserved communities, and stands firm in adopting cutting-edge technologies to achieve its goal. Data, data analytics, machine learning and artificial intelligence have become the new superheroes in the quest for financial inclusion. Banks are now using non-traditional data sources, such as utility bill payment history, to better assess the creditworthiness of individuals who do not have a traditional FICO or credit score.
This means that more people, once considered unworthy of credit, now have access to financial products and services that meet their needs. Additionally, these technologies enable banks to effectively manage risk while meeting the financial needs of underserved communities.
The power of technology and the cloud
The banking industry is turning to cloud-based data management platforms to address issues of financial exclusion in underserved communities. Cloud platforms facilitate easy access to the data needed for banks to better understand the financial needs and behavior of these communities. Access to this knowledge helps banks design products and services tailored to the unique needs of their customers.
However, it does not end there. In certain regions, mobile banking apps are revolutionizing financial inclusion. As smartphones become ubiquitous, these apps provide a convenient way for the underserved to access financial services, even when traditional banks are absent.
Finally, the icing on the cake is that by using data analytics, machine learning and AI, banks can now target these communities more effectively, creating products and benefits that meet their specific needs. This results in reduced customer acquisition costs, making financial inclusion efforts more profitable. These technologies not only promote financial inclusion but also boost the revenue and profitability of banks by expanding their customer base. It’s a win-win for all involved!
Karim Azar, Regional Vice President of the Middle East at Cloudera.
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