AI for Financial Inclusion: A New Era for Businesses

All around the world, millions of people struggle to access basic financial services. Not necessarily because they don’t have the money in their accounts, but because the finance industry and its systems don’t just work for them. Let’s face it, the system is not built for everybody and this makes it difficult for individuals to get access to basic financial services. This gap, and others like it, can be put in the past with Artificial Intelligence (AI). Using AI for financial inclusion makes the system easier and safer for millions of people and businesses worldwide.

Have you ever tried to initiate an online bank transaction but stopped due to fraud concerns? Well, you are not alone. Due to the vulnerability online banking exposes your account, it is logical that you would not want to engage in online banking services. Unfortunately, that is the challenge many people face with financial services. Although these two gaps have a significant impact, they are not the only challenges we are presented with. There are many more that when resolved, will be beneficial to the financial industry. In the next sections of this article, you will discover some of the gaps or limitations in the financial industry today, how they affect businesses, and how we can use AI for financial inclusion, bridging these gaps and ushering in a new era for businesses.

Let’s dive right in!

The gaps in the current financial industry for businesses

Before we discuss how AI can fix things, we have to identify the problems that need fixing. If you have ever felt frustrated with banks and other financial service providers, you are not alone. There are huge gaps in the system that inherently affect everyone, including businesses.

What is wrong with the current financial system that affects businesses?

• Non-inclusive access to credit
  Businesses thrive on capital and investment. However, startups and small enterprises that cannot get investors need loans, and most are denied because they don’t have a long credit history. Other traditional lenders also rely on credit mode that is not inclusive for startups and small enterprises that don’t have a long credit history or anyone at all.
• Slow and manual banking processes
  Banking processes are slow and the manual method of carrying them out makes it slower. This often leads to slow transactions, getting credit approvals, or even detecting fraud. As they say, time is money, and as such every minute wasted waiting for approvals or transactions is a potential opportunity or customer loss.
• High costs for transactions
  Transaction fees incurred by companies for processing large payments or making international transactions are often very high. These high fees eat into the business’ profit, as such, financial growth and stability become harder than it should be.
• Lack of personalized financial insights
  Traditional financial institutions do not provide personalized insights into the financial needs of a business. They give one-size-fits-all financial advice which may not work with every business model. These insights do not consider some important aspects of the company that are necessary for planning, budgeting, and growth of a business.

These gaps cause a lot of businesses, especially startups and small enterprises to fail due to the lack of financial support they need to grow. This is where using AI for financial inclusion comes in.

The use of AI for financial inclusion

A few years back, when people thought about artificial intelligence, they thought about bots and droids. However, this is not the case as AI is not just about bots and automation alone. It has a role to play in how businesses interact with financial institutions and services. Using AI for financial inclusion in business is mainly about supporting startups and small enterprises. This is because they are mostly affected by the effects of these gaps.

Here are the ways we can use AI for financial inclusion in business.

Access to capital for funding

Are you a new business owner without a long credit history? We know that getting loans to kick-start your startup may be difficult. Fortunately, AI is fixing this outdated system and it is becoming easier for startups and small enterprises like yours to secure business loans.

Normally, traditional lenders such as banks do not consider the full picture of the business. Most of them are only concerned with the credit history. AI on the other hand looks beyond the credit history of the company. It considers factors such as

1. Your cash flow trends
2. Transaction history of the business
3. Customer payments

Therefore, financial institutions that use AI are more likely to give loans to businesses that deserve funding rather than those with a long credit history. As such, it makes loans more accessible to new enterprises and small ones too.

However, securing funding with AI for your startup is not just through financial services that use AI for inclusion. Big companies such as a16z and YCombinator are empowering startups with innovative ideas for AI development through their grant program. You can read more about HOW TO SECURE A16Z AND YC GRANT

Detection of fraud and financial risks

AI models that are trained to recognize fraudulent patterns are important in keeping a business alive. Most small enterprises and startups that fall victim to fraud such as fake transactions or hacking do not survive it. Although it may seem like the methods fraudsters and scammers use are evolving, the good news is AI is evolving too.

Using AI for financial inclusion offers real-time fraud detection or detection of other anomalies in the pattern of finance of the business. Afterwards, it immediately alerts the owner of this anomaly and appropriate steps are taken to secure the account in case of any financial risk.

Smarter financial insights

Small businesses and startups often don’t have good insights into the finances of their business. Sometimes, there is simply no time to handle all the activities of the startup together with financial analysis. However, there are AI-powered tools that serve as financial assistants giving you a decent analysis of the finances of the company.

These tools help to analyze finances, predict future revenue based on current sales, automate budgeting, and provide useful insights into areas where improvements need to be made. By doing so, it helps startups save costs and invest in the areas of the business where their funds will yield more returns.

Conclusion

Startups and small businesses often face the heat when there are limitations in the support they can get from financial institutions and service providers. However, AI is the bridge that links small businesses to efficient financial support. By using AI for financial inclusion, small businesses are given the material to thrive in our competitive market and create wealth.

You must remember that using AI for financial inclusion is not one-sided. As a business owner, it is important that you make use of relevant AI tools that will provide enough support to your establishment. You can find all these tools in our MARKETPLACE.
AI helps create wealth, therefore, we must leverage it to reach the sky.

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