Fighting poverty and achieving a high economic growth rate are two key priorities for developing countries.
Achieving both of these goals is reliant on financial inclusion. Developing a national digital transformation strategy that focuses on transforming the traditional economy to a digitized economy is the best way to accelerate the run rate in achieving this end goal.
The journey to financial inclusion is reliant on fintechs; disruptors in the financial sector, driving innovative transformation and changing the way financial services are delivered, the medium of transactions and the approach to business analysis.
Unlike traditional financial services firms, fintechs are not tied by legacy systems which can delay progress: they can move faster toward new and innovative services by adopting new technologies and redefining standards and expectations within the industry. Fintechs can quickly deploy emerging technologies like blockchain, artificial intelligence and machine learning – technologies that will fundamentally change the world of financial services. PWC UK notes that already “Some large financial institutions are also relying on blockchain for internal transactions between territories, effectively reducing the internal cost of moving money.”
Rapid development in consumer technologies also means customers’ expectations have grown and they now expect a level of personalization and customization which can only be addressed through automation and keeping up with the pace of emerging technologies. Further, these technologies can be used to streamline customer service through the use of chatbots and automated tools. Electronic payments, biometric-enabled authentication and blockchain for digital transactions will all improve security and reduce fraud while increasing customer satisfaction – making them core to new financial services solutions.
Artificial intelligence and machine learning in particular have the ability to improve fraud detection and reduce the need for human oversight by up to 50%. Financial Fraud Action UK (FFA UK) stated this year that fraud costs the UK £2 million every day (according to 2016 figures), and experts expect to see costs reaching $32 billion yearly on online credit card fraud alone by 2020. Artificial intelligence can play a key part in detecting this, automating the process and reducing occurrences by following different approaches like oversampling, undersampling, and combined class methods.
Governments and banks are already seeing the benefits of these emerging technologies. There are two particular examples where their deployment is lowering the cost of financial transactions. In April 2018, the National Bank of Egypt announced that it has joined a large initiative focusing on the research and application of blockchain, with R3. More than 200 banks and international companies have joined this initiative.
By 2021, Dubai will be using blockchain technology for more than 50% of financial transactions, expecting to save 11 billion AED by doing so. When announcing its blockchain strategy, Dubai predicted a 300 million dollar blockchain market across the financial sector, healthcare, transportation, urban planning, smart energy, digital commerce, and tourism.
Emerging technologies readiness
The Emerging Technologies Readiness Survey, published in Egypt during August 2018 by my team, collected the responses of 91 executives from different sectors across technology, banking and fintech. The results show that almost 74% are already using emerging technologies, with almost 29% using big data, 18% machine learning, 17% artificial Intelligence, and almost 8% are using blockchain.
Figure 1: Emerging Technologies Readiness Survey
The main driver behind adopting emerging technologies was business improvements, with 62% of respondents using emerging technologies citing this.
Figure 2: Emerging Technologies Readiness Survey
Half of respondents said their companies measured the ROI after using these technologies, but a surprising 32% do not measure the ROI and almost 18% were unsure whether their company does or does not.
Figure 3: Emerging Technologies Readiness Survey
Almost 70% of respondents whose companies were yet to adopt emerging technologies in their business stated that they have plans to deploy one or more within the next five years.
Figure 4: Emerging Technologies Readiness Survey
When asked which emerging technologies they were most interested in deploying, almost 34% of respondents said they would consider blockchain, nearly 35% said artificial intelligence, 41% said big data, and nearly 30% said machine learning.
Figure 5: Emerging Technologies Readiness Survey
Embracing emerging technologies for financial inclusion in developing countries
It is clear that emerging technologies will be essential to accelerate the goals of developing countries in achieving high economic growth rates and in driving financial inclusion and a thriving digital economy. Yet, traditional Financial Services firms can’t adopt themselves easily to these emerging technologies because of their legacy systems They can, however, partner with fintechs to get the benefit of emerging technologies deployment and achieve great mutual success.
Fintechs, traditional financial services firms, technology companies and governments need to develop and build digital transformation strategies together – strategies that include a plan of secure emerging technologies deployment and that have a clear vision of how they will maximize the benefits and minimize the risks of these technologies.
Security readiness for emerging technologies
Using emerging technologies is not only beneficial in terms of innovative new financial services, but also improves the security of information systems.
At the same time, emerging technologies such as machine learning and artificial intelligence will increasingly be used for cyber-attacks and many are not yet equipped to withstand these attacks. Two-thirds of respondents to the survey see potential risks from emerging technologies, with almost 59% saying their companies also realize these potential risks. A somewhat smaller 44% said their companies have a risk mitigation plan for emerging technologies.
Figure 6: Emerging Technologies Readiness Survey
Figure 7: Emerging Technologies Readiness Survey
Figure 8: Emerging Technologies Readiness Survey
Despite the concerns around risks, most respondents could see a great opportunity for using emerging technologies to improve the level of information security at their companies, with almost 81% saying they will use emerging technologies for that purpose.
Figure 9: Emerging Technologies Readiness Survey
Editor’s note: Mahmoud Abouelhassan will provide further insights on this topic on 30 October at ISACA’s CSX Europe 2018 conference in London.
This content was originally published here.
