In today’s fast-paced and interconnected world, access to financial services is no longer a luxury but a necessity. Unfortunately, billions of people worldwide still remain excluded from the formal financial system, lacking access to banking services, credit, and insurance.
In the United States alone, according to the Federal Reserve, “19% are unbanked and 13% are underbanked, meaning they have bank accounts, yet still rely on alternative financing methods, such as check-cashing services or money orders to meet their needs.”
Technology has emerged as a powerful tool in bridging this gap and creating financial inclusion for the unbanked population. By leveraging innovative solutions and digital platforms, we can empower individuals and communities, opening up new opportunities for economic growth and social development. Here are just some of the technologies driving change.
- Artificial intelligence (AI)
AI is revolutionizing the banking industry by automating processes, enhancing customer experiences, and improving risk management. It enables banks to analyze vast amounts of data, identify patterns, and make data-driven decisions. AI-powered chatbots and virtual assistants provide customer support, reducing the need for human intervention.
- Open banking
Open Banking is a system that allows third-party financial service providers to access bank data (with customer consent) through application programming interfaces (APIs). It enables the development of innovative financial products and services by fostering collaboration between banks and FinTech companies. Open Banking promotes competition, encourages customer-centric solutions, and facilitates the secure sharing of financial data.
- Machine learning
Machine learning involves the use of algorithms that enable computer systems to learn from data and make predictions or decisions without explicit programming. In banking, machine learning algorithms analyze large volumes of data to uncover patterns, detect anomalies, and make accurate predictions. It can be applied in various areas, such as fraud detection, credit scoring, risk assessment, customer segmentation, and personalized marketing.
Closing the Gap with Digital Loan Solutions
Adopting systems that leverage complex AI, machine learning and data-backed profiling yield the power of evening out the playing field.
AI algorithms can delve into a reservoir of information beyond conventional credit reports, generating more precise risk evaluations, which are crucial for accessing credit and funds. The result is a more just loan origination process and repayment plan.
Fintech platforms are superb examples of how AI, data, and individual profiling can more fairly originate and underwrite loans for those who would otherwise miss out on opportunities. Customer profiling based on multiple data sources (financial/credit bureau data, organizational data, digital profiling, and online psychological assessment) is collectively analyzed. AI then provides a credit score for each borrower as well as an immediate and in-depth risk assessment for each loan request.
Economic Transformation and Financial Inclusivity
When new methods of loaning are adopted, traditionally underserved sectors of society benefit. Fintech infrastructures that provide digital banking and loan solutions are no longer dependent on larger institutions, and previously untapped markets can grow their businesses, buy homes, attend college, build generational wealth, and ultimately create the potential to drive financial inclusion through connectivity.