Artificial Intelligence (AI) is rapidly transforming the global financial landscape, and Bangladesh is no exception. Integrating AI in financial service delivery has opened up opportunities for banks, microfinance institutions, and fintech startups to enhance operational efficiency, improve customer experience, and provide more accessible and personalised services. As the country continues to evolve as a digital economy, AI's role in financial services is becoming increasingly significant, with transformative impacts on financial inclusion, risk management, and customer satisfaction.
The financial sector in Bangladesh has seen significant changes over the past decade, primarily driven by the rapid adoption of digital technology. With a growing mobile user base and a government pushing forward with its Digital Bangladesh initiative, the environment is ripe for innovative financial solutions powered by AI. From automated customer service chatbots to sophisticated algorithms that can detect fraud, AI applications are now being tailored to meet the unique needs of Bangladesh's financial ecosystem.
One of AI's most transformative impacts in Bangladesh's financial sector is enhancing customer experience. Traditional banking models, often laden with paperwork and slow processing times, are being revolutionised by AI-driven solutions that make banking faster, more convenient, and highly personalised.
AI-powered chatbots, for example, are increasingly being used by banks and financial service providers to handle routine customer queries. These chatbots are available 24/7 and can assist customers with various tasks, from checking account balances to explaining financial products. This reduces the workload for human customer service agents and improves service accessibility for customers, particularly those in rural areas who may find visiting a bank branch inconvenient.
Another area where AI is significantly impacting is risk management and fraud detection. The financial sector is highly susceptible to fraud, from identity theft to unauthorised transactions. AI algorithms are being employed to monitor and analyse vast amounts of data in real time, enabling financial institutions to detect suspicious activities and prevent fraudulent transactions.
Machine learning models can learn from historical data and recognise patterns that may indicate fraud, alerting banks and financial institutions to potential threats before they cause significant damage. This is particularly crucial for Bangladesh, where digital fraud and cybre security threats are rising as more people engage in online and mobile banking.
AI also plays a pivotal role in credit scoring and loan approval processes, a development that has the potential to transform access to credit for millions of Bangladeshis. Traditionally, banks have relied on credit history and collateral to approve loans, a process that can exclude a large segment of the population, particularly those in rural areas or those who operate in the informal economy.
AI, however, can analyse alternative data sources, such as mobile phone usage, social media activity, and payment behaviours, to assess the creditworthiness of individuals who lack a formal credit history. This has led to more inclusive financial models, enabling microfinance institutions and digital lenders to offer loans to underserved populations, thereby promoting financial inclusion.
Using AI in financial services is also reshaping the investment landscape in Bangladesh. Robo-advisors, for instance, are automated platforms that provide financial advice or investment management based on algorithms. To offer tailored investment strategies, these platforms consider various factors, such as the investor's risk tolerance, financial goals, and market conditions.
By democratising access to investment advice, robo-advisors make wealth management services accessible to a broader population, including young people and those new to investing. As a result, AI is helping to cultivate a new generation of investors in Bangladesh, contributing to the growth and diversification of the country's financial markets.
Microfinance institutions, a key component of Bangladesh's financial ecosystem, also benefit from AI-driven innovations. AI can optimise microfinance, from client onboarding to loan disbursement and repayment collection. For instance, AI models can predict the likelihood of loan defaults by analysing data related to a borrower's economic activity, spending habits, and other behavioural indicators.
This minimises risks for microfinance institutions and allows them to design better financial products that meet the needs of low-income individuals. Furthermore, automated loan approval and disbursement systems can significantly speed up the lending process, making microfinance services more efficient and scalable.
Financial service providers also use AI to deliver personalised financial education to clients. This is particularly important in Bangladesh, where financial literacy remains challenging. AI-driven platforms can analyse a user's economic behaviour and provide customised tips and educational content to help them manage their finances better.
This can impact financial well-being in the long term as people become more informed and confident in making economic decisions. Moreover, AI can help identify financial trends and suggest relevant products or services, enhancing customer satisfaction.
Despite these advancements, adopting AI in financial services in Bangladesh is challenging. One major hurdle is the issue of data privacy and security. With financial institutions increasingly relying on AI-driven analytics, the risk of data breaches and misuse of personal information has become a significant concern.
Regulatory bodies need to establish robust data protection frameworks to ensure that the use of AI in financial services does not compromise individuals' privacy and security. Moreover, increased awareness and education about data protection among both service providers and users are needed to foster a safer digital financial environment.
Another challenge lies in the infrastructural limitations, particularly in rural areas where internet connectivity and digital literacy may still be inadequate. While AI has the potential to revolutionise financial service delivery, its benefits will not be fully realised unless these infrastructural gaps are addressed.
This calls for coordinated efforts from the government, private sector, and international development organisations to invest in digital infrastructure and promote digital literacy. Only then can the full potential of AI be harnessed to promote financial inclusion and drive economic growth across Bangladesh.
The issue of workforce displacement also arises as AI systems become more prevalent in the financial sector. Automated systems may lead to job losses for individuals who perform routine tasks, such as data entry and customer service.
However, AI also presents opportunities for job creation in areas like AI development, cyber security, and data analytics. The key will be to reskill the workforce to take advantage of these new opportunities and ensure that the benefits of AI are equitably distributed.
Regulatory frameworks must also evolve to keep pace with the rapid development of AI technologies in financial services. Policymakers in Bangladesh need to strike a balance between fostering innovation and protecting consumers.
This includes developing regulations ensuring transparency in AI-driven decision-making processes, particularly in credit scoring and automated investment advice. Clear guidelines on data usage and algorithmic accountability are essential to maintain public trust in AI-powered financial services.
Artificial Intelligence is revolutionising financial service delivery in Bangladesh, offering a range of benefits from improved customer experience to enhanced risk management and greater financial inclusion. While there are challenges to be addressed, such as data privacy, infrastructural limitations, and workforce displacement, the potential for AI to transform the financial sector is immense.
Dr Matiur Rahman is a researcher
and development worker.
© 2024 - All Rights with The Financial Express
