ARTIFICIAL INTELLIGENCE AND NIGERIAN BANKS
Sonny Iroche argues that the use of AI in the banking sector has the potential to transform operations, enhance security, and drive innovation
The banking sector in Nigeria will soon undergo a significant transformation with the adoption of Artificial Intelligence (AI). Nigerian banks, particularly the Tier 1 banks, can leverage AI technology to achieve various benefits such as improved customer service, increased efficiency, enhanced security, better risk management, personalized banking experiences, cost savings, competitive advantage, compliance and regulatory adherence, data analytics, and innovation.
Prior to the adoption of AI technology in banking, it is essential to first embark on an AI Readiness Assessment Process. Nigerian banks can utilize AI to achieve these benefits and gain a competitive edge in the market.
Artificial Intelligence has revolutionized various industries, including banking, particularly in the global North, while majority of the 54 African countries are yet to have a national AI strategic framework, and not to talk about the achievement of any substantial AI Readiness. The use of AI in the banking sector has the potential to transform operations, improve customer service, enhance security, and drive innovation. Nigerian banks, particularly those that are well resourced can leverage AI technology to achieve various benefits and improve their overall performance.
Essentially, Nigerian banks can harness AI to achieve benefits such as improved better risk management, efficiency in credit analysis and credit approval, personalized banking experiences, cost savings, competitive advantage, compliance and regulatory adherence, data analytics, and innovation.
One of the key benefits of AI readiness and adoption for Nigerian banks is improved customer service. AI-powered chatbots can provide instant, personalized responses to customer queries, enhancing the overall customer experience. Chatbots can handle a large volume of customer inquiries simultaneously, providing quick and efficient responses 24/7. For example, when a customer has a query about their account balance or transaction history, a chatbot can quickly provide the information without the need for human intervention. This not only improves customer satisfaction but also frees up bank employees to focus on more complex tasks that require human intervention.
AI can automate repetitive tasks such as data entry, processing, and document verification, allowing bank employees to focus on more high-value activities. By automating routine tasks, banks can streamline operations, reduce manual errors, and improve efficiency. For instance, AI algorithms can process loan applications faster by analyzing applicant data and creditworthiness, making the approval process quicker and more accurate. This not only saves time but also enhances the overall efficiency of the bank’s operations.
Security is a top priority for banks, and AI can play a crucial role in enhancing security measures. AI algorithms can analyze vast amounts of data in real-time to detect and prevent fraudulent activities such as unauthorized transactions or identity theft. And track the activities of hackers who defraud unsuspecting bank customers in an increasing present day scam. By continuously monitoring transactions, AI can identify suspicious patterns and alert the bank’s security team to take immediate action. This proactive approach to security can help banks mitigate financial losses and protect customer data from cyber threats.
AI can analyze large volumes of data to identify potential risks and make more informed decisions, helping banks mitigate potential losses. By leveraging AI algorithms, banks can assess credit risks, detect anomalies in transactions, and predict market trends with greater accuracy. For example, AI-powered risk management systems can analyze historical data to identify patterns of default and predict the likelihood of a customer defaulting on a loan. This proactive risk assessment can help banks make informed decisions and reduce their exposure to potential risks.
AI can analyze customer data to offer personalized product recommendations and services, increasing customer satisfaction and loyalty. By understanding customer preferences, behavior, and financial needs, banks can tailor their services to meet individual requirements. For instance, AI algorithms can analyze a customer’s spending patterns and recommend personalized investment options or insurance products that align with their financial goals. This personalized approach not only enhances the customer experience but also fosters long-term relationships with customers.
By automating processes and improving efficiency, AI can help banks reduce operating costs and improve their bottom line. AI-powered systems can streamline operations, eliminate redundant tasks, and optimize resource allocation, leading to cost savings. For example, by automating back-office processes such as data entry and reconciliation, banks can reduce manual errors and operational costs. Additionally, AI can help banks optimize their marketing strategies by targeting the right audience with personalized offers, resulting in higher conversion rates and increased revenue.
Banks that adopt AI early can gain a competitive edge in the sector by offering innovative services and improving customer satisfaction. By leveraging AI technology to enhance customer service, streamline operations, and personalize banking experiences, banks can differentiate themselves from competitors. For example, banks that use AI-powered chatbots to provide instant customer support can attract tech-savvy customers who value convenience and efficiency. And also cater for the not too savvy customers through AI-human coexistence. This competitive advantage can help banks retain existing customers and attract new ones, ultimately driving growth and profitability.
AI can help banks ensure compliance with regulatory requirements from the Central Bank of Nigeria (CBN), Nigerian Deposit Insurance Corporation (NDIC) and other stakeholders by automating processes and monitoring transactions for suspicious activities. Regulatory compliance is a critical aspect of banking operations, and non-compliance can lead to hefty fines and reputational damage. AI-powered systems can analyze transactions in real-time, flag suspicious activities, and generate reports for regulatory authorities. By automating compliance processes, banks can reduce the risk of regulatory violations and ensure adherence to industry standards.
AI can analyze large volumes of data to provide valuable insights that can help banks make better business decisions and improve their overall performance. By leveraging AI algorithms to analyze customer data, market trends, and financial indicators, banks can gain actionable insights that drive strategic decision-making. For instance, AI-powered analytics platforms can identify customer segments with high profitability potential, allowing banks to tailor their marketing strategies accordingly. This data-driven approach can help banks optimize their operations, improve customer engagement, and drive growth.
The adoption of AI can drive innovation in the banking sector, leading to the development of new products and services that benefit both customers and the bank. By embracing AI technology, Nigerian banks can introduce innovative solutions such as robo-advisors, predictive analytics, and virtual assistants that enhance the customer experience. For example, robo-advisors can provide automated investment recommendations based on customer preferences and risk tolerance, making wealth management more accessible and efficient. This culture of innovation can position banks as industry leaders and attract tech-savvy customers who value cutting-edge solutions.
What would prove challenging for some of the banks, is the huge financial requirements in the acquisition and deployment of the AI technology in the short run. But, if and when AI is properly deployed, the gains in productivity and efficiency, far outweigh the cost of acquisition.
Iroche is Chairman, GenAi Learning Concepts Ltd.
