Artificial Intelligence (AI) at the service of financial inclusion

Over the past decade, artificial intelligence (AI) has emerged as one of the most transformative technologies globally. Its ability to analyze large volumes of data, learn from it and make informed decisions, among other things, is revolutionizing multiple sectors, from healthcare and education to agriculture and finance. According to a study by McKinsey & Company, 40% of the private investments made in the AI companies analyzed contributed directly or indirectly to at least one of the 17 Sustainable Development Goals (SDGs). 

In Latin America and the Caribbean, AI adoption is booming, offering new opportunities to improve efficiency and personalization of services, including financial services. By 2023, 47% of companies in the region will have implemented AI in their processes, with another 40% exploring its use. This growing adoption is not only facilitating access to financial services for traditionally underserved populations but is also helping to create innovative solutions that can transform the region's economy. 

Implementing AI in financial solutions 

The implementation of AI in financial inclusion initiatives is making a significant difference in Latin America and the Caribbean. AI is being used to develop innovative solutions that address traditional barriers to financial access, allowing more people and small businesses to participate in the formal financial system. Among its main applications are: 

• Alternative credit assessment: Use of unconventional data, such as purchase behavior and utility payment history, to algorithmically assess the ability to pay of those without a formal credit history. 

• Digital payments: AI-powered platforms that offer fast and secure transactions, reducing reliance on cash. 

• Inclusive financial products: Design of personalized and accessible financial products that assess user preferences and needs more accurately and process claims quickly and efficiently. 

• Automated financial advice: Chatbots and virtual assistants that provide personalized and accessible financial guidance. 

• Financial education: Interactive tools that teach financial management, savings and investment, among other things. 

• Fraud prevention: Real-time analysis of the security of financial transactions through fraud detection and prevention, protecting users and increasing trust in digital financial services. 

• Risk management: Use of predictive analytics to identify user behavior patterns and mitigate risks more effectively. 

• GovTech Solutions: Optimizing government-citizen interaction with chatbots, sentiment analysis and other tools, improving consumer protection and financial transparency. 

• RegTech Solutions: Improving regulatory compliance of financial institutions through the use of natural language processing, data analytics and machine learning, strengthening fraud detection and resource optimization. 

• SupTech Solutions: Supporting financial supervisors and regulators with big data, machine learning and blockchain to monitor, analyze and assess financial system performance and risks more effectively. 

Segments of the population benefited 

These innovations are having a significant impact on various segments excluded or underserved by the traditional financial system, improving their inclusion and financial well-being. Among the most benefited groups are: 

• Women: They often face additional barriers to accessing financial services. AI helps overcome these barriers through alternative credit assessment, automated financial advice and planned savings tools, among other things. 

• Migrants and refugees: AI solutions can facilitate access to basic financial services for these groups, even without a formal credit history or full documentation. 

• Rural and smallholder farmers: AI facilitates access to alternative financing, financial services, education and fraud protection. AI-powered mobile banking applications simplify account opening and enable people in rural areas to access financial services and credit. In addition, AI can use alternative information, such as crop cycles and diversification, to assess the ability to pay and facilitate access to credit for farmers in these areas. 

• Small businesses: AI allows them to assess their creditworthiness with alternative information and offer them financial products tailored to their specific needs, as well as enabling them through platforms to plan their business finances and projections. 

• Older adults and indigenous communities: AI helps improve their access to financial services, financial education and fraud protection by impacting trust in digital finance and promoting the use of digital services.

Transformative Financial Inclusion through AI 

AI is not only transforming the financial industry but also driving social and economic development in the region. Its responsible and strategic implementation promises a more inclusive and equitable future for all. 

Considering the advantages of AI implementation in the financial inclusion of diverse population groups in the region, CAF organized the sixth edition of the Financial Inclusion Lab (FIL) 2024: Digital Solutions for Financial Inclusion based on Artificial Intelligence, with the aim of promoting the generation of viable technological solutions that help reduce the gaps in financial inclusion and education of the population and their families through the following areas: i) AI services for financial institutions - Fintech as a Service (cybersecurity, credit scoring, risk management, etc. ); ii) AI-based financial product design, focused on the needs of different vulnerable segments and MSMEs; iii) digital and financial education, training, advice and consultancy; and iv) AI-based solutions with a focus on govtech, regtech and/or suptech. 

This sixth edition of CAF's LIF aimed to support technology-based ventures that incorporate elements of artificial intelligence to respond to the needs in terms of financial inclusion and education of the population, their MSMEs and families, through their participation in acceleration programs with Seedstars, investment readiness and matchmaking programs with Endeavor Colombia, and advice to define their theory of change and key impact indicators with Agile Impacts. 

The winning ventures will also receive benefits in technology and AI, where Google will grant them USD 25,000 in credits for Google Cloud and technical support from Google for Startups. Microsoft will offer advice for the development or scaling of its products and services with artificial intelligence, workshops on the application of tools with Azure OpenAI and the Microsoft for Startups program. Amazon Web Services will provide technical talks on artificial intelligence and its support program for startups, which will allow the winning ventures to scale their business models and replicate them in other countries in the region. 

For CAF, it is crucial to support the Fintech winners of the LIF, as they are developing innovative solutions in various areas to achieve effective financial inclusion that generate positive impacts on the levels of financial wellbeing of the entire population.