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At the end of 2023, the release of ChatGPT, developed by OpenAI, ushered in a new wave of innovation in artificial intelligence technology, transforming industries around the world. One sector that has undergone significant change is finance, where AI is playing a key role in driving inclusive finance.
Inclusive finance aims to extend financial services to every corner of society and ensure accessible, efficient and affordable financial solutions for both individuals and businesses. AI is accelerating efforts towards broader and more accessible financial inclusion, bringing convenience to those who need it most.
In remote rural areas, farmers can now access customized farm insurance and financing products via their smartphones. Similarly, a hard-working fruit and vegetable vendor in a local market can apply for a short-term loan through his smartphone thanks to AI. Behind these seemingly simple interactions lies the power of AI, quietly transforming the way financial services are delivered.
By leveraging big data, AI can create detailed profiles of potential customers, including their income levels, spending habits, and creditworthiness. This allows financial institutions to offer personalized services tailored to individual needs. For example, banks collect vast amounts of customer information through external data sources such as transactions, usage patterns, credit reports, business registrations, and tax records. With the customer’s consent, AI analyzes these data using algorithms to identify potential small business borrowers. AI can also predict customer preferences and behavior and provide fully automated and personalized financial services.
This precisely targeted approach improves customer acquisition and ensures that your services are tailored to the right users. AI enables financial institutions to use highly customized marketing strategies, allowing them to recommend the right products to the right customers.
Additionally, channels such as text messaging, mobile apps, and social media platforms such as WeChat allow banks to effectively reach potential customers. result? Broader coverage and greater penetration of financial services into underserved communities.
Traditional financial services are often burdened with labor-intensive processes, making them costly and time-consuming. Small and medium-sized enterprises (SMEs) are particularly underserved by the traditional banking system due to their small loan amounts, high transaction frequency, and short repayment cycles, as well as information asymmetry and poor service delivery. However, AI is helping transform the way financial institutions operate, moving from time-consuming manual processes to seamless online solutions.
AI-powered services such as intelligent customer support systems provide 24-hour support and answer customer questions about loan applications, account balances, and more. This significantly increases customer satisfaction and allows for instant response to various inquiries.
Furthermore, AI has created a variety of innovative financial products. For example, an AI-powered robo-advisor can create a personalized investment portfolio based on a user’s financial situation, risk tolerance, and investment goals. It democratizes asset management, making it accessible to even the most inexperienced investors, simplifying complex investment processes, and empowering users to take control of their financial future.
Financial institutions are increasingly relying on AI-driven risk management systems that integrate every step of the lending process, from pre-loan evaluation to post-loan monitoring. Using advanced machine learning algorithms, banks can identify and mitigate risk with incredible accuracy. Traditional risk management methods often rely on manual reviews and in-person checks, which are time-consuming and error-prone. AI, on the other hand, improves risk management by analyzing huge datasets in a short amount of time, heeding early warning signals, and detecting fraud.
For banks, incorporating AI into the credit approval process has significant benefits. Automated systems significantly reduce the time needed to evaluate loan applications, and AI models evaluate multiple factors such as credit score and repayment history to accurately measure a borrower’s creditworthiness. AI-powered fraud detection systems further enhance financial security by discovering discrepancies and suspicious patterns that may otherwise go unnoticed. This provides banks with a strong defense mechanism against non-performing loans and ensures safer and more efficient financial operations.
Traditional banks’ reliance on physical branches, local service centers, and in-person outreach teams is being replaced by AI-driven digital platforms. AI enables financial institutions to move towards integrated, agile, and intelligent service delivery systems, significantly reducing operational costs while increasing the availability of financial services. Using AI, educational institutions can eliminate time and location constraints and provide 24/7 service across the country.
AI-powered systems are breaking down the data silos that once separated different financial services and enabling comprehensive integration and data sharing. This seamless access to customer data allows financial institutions to offer more personalized and comprehensive services.
In the coming years, we expect AI to play an even greater role in driving social and economic development, improving people’s living standards, and promoting financial inclusion globally. The potential for AI-powered inclusive finance to uplift underserved communities, stimulate economic growth, and improve people’s quality of life is enormous. And this journey is just beginning.
Mr. Fang Lifa is General Manager of Comprehensive Finance Department of Hengfeng Bank Mr. Sun Yunchuan is Director of International Big Data Finance Institute of Beijing Normal University
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