South Africa’s Banking, Financial Services, and Insurance (BFSI) sectors are on the cusp of a transformation, fueled by the nation’s ambitious digital agenda and the burgeoning potential of artificial intelligence (AI).
By Langa Dube, country head and executive director at Tata Consultancy Services, South Africa
The Gen AI market is projected to reach $564,2-million by the end of 2025. With initiatives like the AI National Plan laying the groundwork, and the fact that more than 73% of South Africans believe the country will be able to harness the potential of AI over the next five years, the stage is set for AI to revolutionise the BFSI landscape.
In fact, AI is already reshaping the banking sector in profound ways.
Unlocking opportunities
Today, banks are exploring how GenAI can strengthen cybersecurity, increase productivity and personalise customer experiences – allowing them to differentiate themselves and gain a competitive advantage.
GenAI has the potential to enhance cybersecurity by monitoring logs, traffic, user patterns, and system operations. Its ability to learn in real-time helps the sector stay ahead of cyber-risks and protect financial data. As South African banks face increasing cyber-threats, this capability is crucial.
GenAI can also monitor fraud and provide alerts of suspicious activity, detecting and preventing incidents. What’s more, banks are using GenAI for legal document review, reducing processing time and improving efficiency.
Payment networks are also enhancing fraud detection, identifying and preventing fraudulent transactions. In the last financial year, fraud AI solutions helped save banks and their customers more than R1,1-billion.
Additionally, biometric authentication with advanced facial recognition, powered by GenAI, can verify identity and even detect deepfakes – tightening verification processes to protect banks from forgeries.
Leveraging GenAI, banks can empower employees with intelligent tools, enabling them to provide faster, more efficient service, and ultimately enhancing the overall customer experience. PwC’s 27th Annual CEO Survey shows that 75% of CEOs expect GenAI to improve the quality of their products and services over the next year, and 68% believe it will increase efficiency in their employees’ time at work.
And yet, one of the most powerful opportunities lies in Gen AI’s potential to enable greater, more secure access to financial services.
South Africa faces a significant challenge in financial inclusion, with roughly 20% of adults unbanked. This disproportionately affects women, rural communities, and lower-income households.
Compounding this, an estimated 47% of those with bank accounts are underbanked, failing to fully utilise available services. However, a remarkable 90% of South Africans believe GenAI can improve their understanding of complex topics, and 79% see its potential to enhance learning.
This widespread optimism presents a unique opportunity. GenAI can bridge the financial literacy gap, offering personalised guidance and support to both the unbanked and underbanked.
Imagine AI-powered virtual assistants that explain banking products in simple terms, provide tailored financial advice based on individual circumstances, and even offer multilingual support to overcome language barriers.
So while some institutions are already exploring GenAI for security and efficiency, the true potential could lie in leveraging it to create accessible, secure, and user-friendly financial solutions that empower marginalised communities and drive genuine financial inclusion.
Hyper-personalisation
GenAI enables the financial services industry to understand customer needs, preferences, and behaviour through hyper-personalisation. This allows them to offer tailored products, increasing conversion and customer satisfaction.
While chatbots and virtual assistants provide instant, accurate responses to customer queries, by learning from interactions, banking services improve their service, reduce operational costs, and streamline support. This, in turn, creates a customer-centric banking experience.
“GenAI presents a significant opportunity for South African banks and their employees to leapfrog traditional approaches and deliver truly personalised and secure services,” says Vinay Singhvi, vice-president, business unit head of BFSI Africa, UK & Ireland. “By embracing these technologies, banks can unlock new levels of efficiency, customer engagement, and competitive advantage.”
Technology providers offer tailored AI solutions to enable GenAI adoption at scale. These solutions simplify GenAI integration into existing operations and offer a customisable framework that addresses industry-specific challenges.
Navigating challenges
While GenAI offers immense potential, its adoption in the BFSI sector is not without challenges, risks and ethical considerations. Data privacy is a concern, as sensitive customer information used by AI models must be protected.
While misinformation and bias in AI decision-making can lead to unfair outcomes. Data security and compliance are critical, as banks must adhere to regulatory standards and protect against cyber-threats. The Protection of Personal Information Act (POPIA) adds another layer of complexity.
AI’s tendency to produce false positives or negatives could undermine trust. Banks must implement validation processes and maintain transparency in AI model development and deployment, ensuring high ethical standards and customer confidence.
Moreover, banks need to focus on employee training to foster a culture of ethical AI use and clear accountability frameworks – frameworks that consider both the organisation as well as society at large.
They also need to consider the operational challenges, such as integrating GenAI with legacy systems, managing the costs of AI implementation, and demonstrating a clear return on investment (ROI).
What’s more, the evolving regulatory landscape and the development of robust governance frameworks for managing AI models and validating their outcomes are crucial.
Only as these aspects mature can we expect a progression from AI assisting and augmenting human capabilities to truly transforming the BFSI sector. The potential for faster product development, driven by tools that simplify IT development and operations, also needs to be considered.
A holistic approach that addresses both the ethical and practical considerations is therefore crucial to achieving a future where technology can foster greater financial inclusion for all.