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, personalised 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 utilise AI to achieve these benefits and gain a competitive edge in the market.
Artificial intelligence (AI) has revolutionised various industries, including banking, particularly in the global North, while the 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 banking 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.
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Essentially, Nigerian banks can harness AI to achieve benefits such as improved risk management, efficiency in credit analysis and credit approval, personalised banking experiences, cost savings, competitive advantage, compliance and regulatory adherence, data analytics, and innovation.
Improved customer service
One of the key benefits of AI readiness and adoption for Nigerian banks is improved customer service. AI-powered chatbots can provide instant, personalised 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.
Increased efficiency
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 analysing 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.
Enhanced security
Security is a top priority for banks, and AI can play a crucial role in enhancing security measures. AI algorithms can analyse vast amounts of data in real-time to detect and prevent fraudulent activities such as unauthorised 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.
Better risk management
AI can analyse 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 analyse 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.
Personalised banking experiences
AI can analyse customer data to offer personalised product recommendations and services, increasing customer satisfaction and loyalty. By understanding customer preferences, behaviour, and financial needs, banks can tailor their services to meet individual requirements. For instance, AI algorithms can analyse a customer’s spending patterns and recommend personalised investment options or insurance products that align with their financial goals. This personalised approach not only enhances the customer experience but also fosters long-term relationships with customers.
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Cost savings
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 optimise 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 optimise their marketing strategies by targeting the right audience with personalised offers, resulting in higher conversion rates and increased revenue.
Competitive advantage
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 personalise 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.
Compliance and regulatory adherence
AI can help banks ensure compliance with regulatory requirements from the Central Bank of Nigeria (CBN), the 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 analyse 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.
Data analytics
AI can analyse 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 analyse 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 optimise their operations, improve customer engagement, and drive growth.
Innovation
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.
Sonny Iroche is a 2022/2023 Senior Academic Fellow at the African Studies Centre of the University of Oxford. And currently in Post Graduate Studies in Artificial Intelligence for Business, at the Saïd Business School, University of Oxford Linked: http://linkedin.com/in/sonnyiroche
