According to the World Bank, 1.7 billion people are unbanked globally. They aren’t part of any standard financial system, instead conducting financial transactions via cash, prepaid cards, or a combination thereof. Despite the rise in contactless payments and mobile banking, the unbanked population continues to remain outside the circle of traditional financial services.
But therein lie new opportunities.
Alleviating financial stress
High unemployment rates, lower income levels, and a lack of long-term savings has negatively impacted consumer finance. For individuals with limited financial resources or those living paycheck to paycheck, the global pandemic has exacerbated an already difficult situation.
AI solutions and advanced analytics can alleviate financial stress by exploring new methods of identifying credit risk, meeting lending criteria, reducing spending, and more.
As a recent use case, SparkBeyond partnered with social enterprise Speckle to help Australians undergoing financial hardship climb out of debt and lower their financial risk.
By incorporating AI technology into their system, Speckle uncovered a number of data-driven insights that helped them understand which customers would be at risk of payment default. They also found that unbanked Australians were more likely to seek short-term cash loans from predatory lenders, putting them at greater risk for more serious debt.
Speckle used this information to tailor their financial assistance in more in-depth ways, create healthier spending and savings habits, and ease the financial burdens of their clients.
Discovering new opportunities
Global finance has changed drastically in just a few short months, from consumer spending to cross-border transactions, a mainstay of international trade and economic growth.
Amid changing economic behaviors, new trends have appeared, offering financial institutions the opportunity to open up new avenues of revenue and expedite digital services for their customers.
But what about atypical customers, those who don’t fit into typical financial models?
That’s where AI can make surprising discoveries faster and more accurately than the human mind. Technology like SparkBeyond can uncover hidden patterns buried deep in data, even while new data is scarce. This results in the creation of new microsegments and the development of new business opportunities tailored to customers who are “outside of the mold”, such as customized credit scoring systems and micro loans.
SEBx, the new digital banking initiative from Swedish bank SEB, has partnered with SparkBeyond to adapt to new challenges by discovering trends and actionable insights in data. Together, we’re achieving greater financial inclusion in a competitive market.
Reducing poverty with AI
High rates of poverty – especially in developing countries – is one of the leading impediments to financial inclusion. Reducing poverty can result in higher numbers of people joining the financial system, while financial inclusion, even at a bare minimum, can stimulate local economies and reduce poverty. That’s why it remains a core element of the UN’s 17 Sustainable Development Goals.
AI can find correlations in data which connect poverty to housing prices, agricultural studies, healthcare data, unemployment records, political unrest, demographic data, and even climate change. These are areas that a human data analyst wouldn’t typically think to consider, which is why automated solutions are so critical.
When we explore previously unexplored data with AI, new insights are revealed, and these can lead to real, lasting change.