Open Banking and Artificial Intelligence are more connected than might be guessed at the surface. Startups, Prosaic and Abound, have raised over $500 million on the premise that they can improve customer outcomes by combining these technologies.
But how can these powerful technologies be harnessed to improve the lives of the average Nigerian?
This article details how Incumbent Financial Institutions and Startups can optimize their returns on Open Banking and AI investments.
As seen in Figure 1, numerous use cases exist for applying AI in the Banking Industry. Open Banking and AI overlap in: credit scoring, enhanced due diligence, threat detection, forensics customer segmentation/personalization, and lots more…
As “open banking unlocks a treasure trove of customer data, AI is the master craftsman that turns it into invaluable insight.”[4] Banks and other verticals in Nigeria have an unprecedented opportunity to use these technologies to create experiences and value propositions that make life easier for individuals and SMBs.
The customer-centric shift in banking
Incumbent banks and financial institutions cannot rely on murky digital transformation projects to stay competitive with new market entrants. These capital-intensive projects must also deliver capabilities that drive customer loyalty and engagement.
Globally, “consumers want convenient, hyper-personalised advice from banks to help them manage their finances, 40 percent say they haven’t received it”[2]. Meeting these needs will require a change in how services are deployed to customers. It will require a shift from a product-centric to a customer-centric model.
These institutions must expand their customer journeys beyond “cash-in” and “cash-out” to thinking about the different life cycles or stages their users go through and creating frictionless ways of serving the customer across those stages.
In the customer-centric model customers “can find and buy all products and services necessary for their goal at once within a single hub, such as a banking app. Services can be proactively offered to consumers at the right moment in their journey.”[3]
The combination of Open Banking and AI will be key for Financial institutions to connect their users across their different life stages (through Open Banking APIs) while providing a truly customized experience (powered by AI).
Seizing opportunity through brand equity
In a survey, a whopping 42% of respondents said they would likely buy banking products solely based on brand trust. The list of non-traditional finance brands included PayPal, Venmo, Amazon, Walmart, Apple, and Google.
Juxtaposing this list against loved/impactful brands in Nigeria, we might think of companies such as Interswitch, Piggyvest, Paga, Prince Ebeano, Dangote, and Jumia as brands that could leverage their brand equity to deploy open banking services to customers.
With over 22 trillion electronic payment transactions annually, Nigeria still doesn’t have a Super App that customers can rely on. This is a massive opportunity that technology companies can take advantage of with Open Banking and AI as core enablers.
Spotlight Read: 5 Innovative Ideas that Open Banking Will Support
We see a future powered by Open Banking and Artificial Intelligence
Artificial Intelligence will have a wide-ranging impact on many industries, including healthcare, logistics, manufacturing, education, and of course banking. As we work towards a future powered by Open Banking and Artificial Intelligence, we must ensure that we prioritize data privacy. “The trust customers place in this technology rests on ironclad security and transparent consent mechanisms.
Additionally, it’s vital to ensure that AI models don’t inherit human biases that exist within the financial system” [4] Nigeria’s Open Banking Framework already provides robust guidelines around security and customer consent that will protect consumers.
The convergence of Open Banking and Artificial Intelligence presents a transformative opportunity for Nigeria’s financial landscape. By leveraging these technologies, incumbent institutions and innovative startups can unlock a new era of financial inclusion, personalization, and convenience for individuals and businesses alike.
References
[1] Infographic: Artificial Intelligence Use-Case Prism for the Banking Industry
[2] AI Set to Transform Open Banking Landscape, as 74% of Banks Recognise the Potential of Collaboration
[3] The Bank in 2030
