Lowering the barrier to wealth creation/management with AI

During a Trescon World AI Show panel discussion, the two panellists agreed that reaching and engaging the unbanked segment, is one of the biggest challenges that financial institutions traditional or otherwise, are facing today.

How can artificial intelligence (AI) play its role in rural communities where there may not be any banking infrastructure, much less access to its services?

These questions and more were answered during the panel discussion moderated by Epistemology’s strategic advisor, James Ward.

Another challenge more specifically for large established banks, is the emergence of fintechs. Kenanga Investment Bank’s Director of Digital Strategy, Dr. Sekar Jaganathan said, “The emergence of new fintechs have gone on to do two things – create much simpler payment gateways, as well as also create wealth management/creation concepts.”

He observed that fintechs and non-banks have been able to ‘create’ wealth for the unbanked segment as well, doing what incumbent banks have been doing for a long time already.

“So, policy makers need to now evolve into the new business model that is about wealth creation for customers, and also about ease of use of cashless money.

“It is a very tedious process (for banks) compared to a non-bank that can do it in a much shorter time frame.”

When asked to comment about Robinhood trading, Dr. Sekar observed that this method of commission-free trading is capturing millenials because it is selling profitability.

“Millennials love that you are making money for them, but they don’t like it when you are making money out of them.”

Trust starts to come into play, and this together with a much simplified customer experience, is driving people towards services like Robinhood trading in a massive way.

Traditional banks on the other hand, generally have not yet moved away from viewing transaction or commission fees as a revenue stream for themselves.

AI and the unbanked

Back to the question: How can artificial intelligence (AI) play its role in rural communities where there may not be any banking infrastructure, much less access to its services?

Founder of PayOK, Jayant Kumar said, “The biggest challenge we are facing in fintech in Indonesia, is outreach to the unbanked population.

“So, when we talk about AI, we mostly focus on how we can provide microfinance to the unbanked who have no past history or access to banking infrastructure, and how we can provide speed and access to the economy and to better profits.”

Jayant noted that tech and AI can drive this by enabling trust.

He expanded on how millennials are changing the rural population’s perception towards investments and finances. “(The younger generation in rural areas) are actually pushing the farmers, the villagers to get access to banks and financial institutions,” he said.

A banking agent in a community can help build trust with that community’s leader, and AI technology is leveraged, for example, to map out transaction locations so banks can detect which banking service in which locations are benefitting consumers even more, Jayant explained.

AI and wealth

 The panel discussion finally came to the topic of access to wealth management.

The observation is that it has come to the point where wealth creation is accessible to the middle-income segment, and now the low-income segment, as well.

“So long as you have a dollar to invest you have access to wealth creation – that’s where the world has come to,” Dr. Sekar said, explaining that AI is helping financial institutions understand customer needs, as well as their ability to borrow, lend, and invest. “This is where AI is used a lot for hyperpersonalisation.”

Imagine customised financial products for a million customers, versus a few standard types for all of them. Large established banks that do not evolve their understanding of AI in customer experience are at risk of being left behind.

He has observed the use of AI in robo-advisories, quantitative trading, and also optimisation of spread in forex trading. “I would see these trends picking up and creating better efficiencies in customer engagements and wealth management.”

Jayant added, “AI has made a lot of changes in terms of customer experience and how we supply credit to SMEs and the unbanked. I think this is just the start.”

The moderator, wrapped up the discussion with his evidence-based observation that investors using AI are outperforming those who who are not using AI, by 3 to 1.

He concluded, “Only investors who use AI will succeed in the future. The take up rate seems to be greater among millennials, Robinhood traders and new entrants and my advice to large institutions is, don’t be left behind.”