Emerging Tools for Banking and Insurance in Developing Countries in the 4IR Era

Tosin Clegg

The Fourth Industrial Revolution (4IR) is reshaping industries worldwide, and developing countries are no exception. Banking and insurance sectors in these regions are undergoing a transformation, driven by emerging technologies that promise efficiency, enhanced customer experience, and financial inclusion. However, the challenge remains in adopting these innovations effectively to meet local needs.

Edith Ebele Agu, an MBA holder and Fellow of the Institute of Management Consultants, provides invaluable insights into these developments. With a robust background as a former Financial Analyst on Liquefied Natural Gas (LNG) projects and currently a Senior Manager in the sales and marketing department of a leading insurance company in Nigeria, Agu’s perspective reflects a deep understanding of the sector’s dynamics. While she worked in a leading commercial bank in Nigeria for over 16 years, some of her key achievements include structuring offshore venture capital financing for major expansion projects, implementing forex hedging strategies through non-deliverable forward (NDF) contracts, and fostering strong relationships with international technical partners.

“These tools are not just technological marvels but enablers of growth and innovation, particularly in sectors like manufacturing,” Agu explains. She emphasizes the importance of adapting global innovations to local realities. Here’s a closer look at some emerging tools transforming the banking and insurance sectors in developing countries:
AI-powered systems are revolutionizing risk assessment, customer profiling, and fraud detection. In banking, AI enhances credit scoring models by incorporating unconventional data sources like social media activity. In insurance, it facilitates dynamic pricing models and automated claims processing. Agu notes that leveraging AI has allowed her team to implement forex hedging strategies, safeguarding clients from currency volatility.

Blockchain is creating transparent and tamper-proof systems for transactions. It enables faster cross-border payments, particularly vital for economies reliant on remittances and international trade. In the insurance sector, blockchain is being used to manage claims and policies efficiently while combating fraud.

Digital lending platforms are bridging the gap for underserved populations by offering microloans. These platforms use AI and big data analytics to assess creditworthiness, providing a lifeline for small and medium enterprises (SMEs) that drive economic growth in developing nations. Insurtech is simplifying access to insurance products through digital platforms, mobile apps, and pay-as-you-go models. These solutions address the affordability and accessibility barriers, ensuring coverage for low-income groups and remote populations.

Regulatory technology (RegTech) is streamlining compliance in an increasingly complex regulatory landscape. Coupled with advanced cybersecurity tools, it ensures data integrity and protection, which are critical in fostering trust in digital financial services. Mobile banking continues to be a game-changer in financial inclusion. With the rise of fintech apps, customers can access banking services, pay bills, and transfer funds using their smartphones. Agu highlights how these platforms have driven significant growth within the manufacturing sector by facilitating seamless transactions and fostering partnerships.

While these tools are promising, Agu underscores the importance of addressing challenges such as infrastructure gaps, digital literacy, and regulatory hurdles. “It’s not just about adopting technology; it’s about embedding it in a way that aligns with our socio-economic realities,” she asserts.

To fully harness the potential of 4IR tools, collaboration between stakeholders—government, financial institutions, and technology providers—is key. Investments in infrastructure, talent development, and regulatory frameworks will be crucial in creating an ecosystem where these tools can thrive.

Agu’s experience demonstrates how innovative strategies, such as the structuring of offshore venture capital financing, can unlock new opportunities. Her work in the banking sector exemplifies how professionals can bridge global best practices with local market needs to drive sustainable growth.

As the 4IR continues to unfold, the banking and insurance sectors in developing countries stand at the cusp of unprecedented transformation.