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Unlocking the potential of artificial intelligence in Nigeria’s banking sector

The Nigerian banking system is gradually shifting from conventional to digital banking with the implementation of Artificial Intelligence (AI) as a catalyst, disrupting the established norms within the traditional banking sphere.

According to a survey by the Economist Intelligence Unit, 77 percent of banking professionals believe that the ability to harness the potential of AI will be the determining factor between triumph and failure for financial institutions.

“Projections suggest that by 2030, the incorporation of AI into financial services could yield savings exceeding $1 trillion. Notably, traditional banks are anticipated to curtail around 22 percent of their total costs through the adoption of AI (Marsh & McLennan, 2019),” it said.

Integrating AI in banking and financial services yields multiple benefits, such as cost reduction, fraud reduction, heightened efficiency, and the eradication of routine tasks, culminating in an environment conducive to rapid innovation.

For instance, the survey also revealed that banks predominantly employ AI in fraud detection (58 percent extensively and an additional 32 percent to some extent) and optimising IT operations (54 percent extensively and 36 percent to some extent).

Anticipated areas for substantial growth include personalised investments (17 percent planning adoption in the next 1-3 years), credit scoring (15 percent), and portfolio optimisation (13 percent).

In a report by Phillips Consulting Limited (PCL), the surge in big data, driven by customers’ digital interactions, leveraging structured and unstructured data, the rapid growth of cloud technology, and robust computational resources has further accelerated this transformative change thereby allowing organisations to embrace AI with unprecedented readiness.

“In an intensely competitive environment, banks are adopting AI as a pivotal tool to stay ahead. Faced with constant rivalry from both traditional counterparts and fintech innovators, institutions are using AI to enhance existing services, introduce novel offerings, and deliver highly personalised customer experiences,” the report said.

Applications of AI in Nigeria’s banking system

Chatbots equipped with Natural Language Processing (NLP) are engaging customers 24/7, facilitating seamless online interactions and enhancing the overall customer experience.

In Nigeria, reports disclosed that 13 Deposit Money Banks (DMBs) have actively embraced the digital economy trend by incorporating AI-powered chatbots into their services.

These banks include Zenith Bank (Ziva), Fidelity Bank (Ivy), First City Monument Bank (Temi), UBA Group (Leo), Access Bank (Tamada), Heritage Bank (octopus chatbot), and Keystone Bank (oxygen chatbot), among others.

Femi Ogunibe, Techmarket’s founder said, ‘I recall a time when customers had to wait on hold for long periods just to receive a response to their inquiries. But now, the game has changed.”

“With the advent of chatbots, we can deliver a seamless and efficient customer support experience, no matter the volume of customer requests. Our chatbot solution can handle numerous customer inquiries and respond to routine questions with accuracy and speed,” he added.

PCL report also revealed that in the UAE, a pioneering virtual assistant named “EVA” has emerged as the inaugural digital aide in the Middle East and North Africa regions, possessing the ability to comprehend both Arabic and English languages, engaging users in natural conversations.

Similarly, Kuwait has introduced “Banky,” an AI-based virtual assistant that ensures secure, dependable, and swift interactions while addressing customer inquiries about banking services and products.

While in Egypt, the advent of “Zaki” has been announced, an intelligent virtual assistant heralded for enabling clients to stay informed about the latest decisions from the Central Bank of Egypt and effortlessly explore diverse offerings across various banks.

AI in fraud detection and prevention

Fraud detection and prevention powered by AI are mitigating risks and ensuring customer protection.

AI has significantly curbed banking fraud, particularly in the face of rising credit card fraud due to the expansion of e-commerce and online transactions.

A recent report on fraud and forgeries within the Nigerian banking system shows that fraudulent incidents in the second quarter of 2023 reported an N5.5 billion loss, accounting for its highest loss to fraud activities in five years.

In response, the Central Bank of Nigeria mandates robust risk management systems for all financial institutions. AI’s rising role in credit risk management and fraud detection, particularly in fintech and digital banking, improves credit evaluations by forecasting default likelihood.

“The Association of Certified Fraud Examiners noted that in 2019, 13 percent of businesses integrated AI into their fraud prevention strategies, with an additional 25 percent planning to adopt AI by 2030,” the PCL report disclosed.

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