Before November 2023, generative artificial intelligence (AI) was a foreign concept for most, limited to the sci-fi genre and technical experts.
That permanently changed when ChatGPT was launched in the public domain by OpenAI, writes Nick Manterfield, chief executive information officer at Absa CIB.
Created by a founding team consisting of tech giants, leading machine learning experts, and software engineering specialists, OpenAI’s stated purpose was to ‘advance artificial intelligence in a way that benefits humanity.’
Since that day, the economic and societal opportunities posed by AI has been at the epicentre of many global discussions and debates. Across the world, its automation capabilities and data-driven insights are creating more efficient processes in almost every sector.
Real-life scenarios are underscoring the immense opportunity that AI’s speed and accuracy can bring to the financial sector.
From improving fraud prevention, risk management, to personalised financial planning, AI is swiftly setting a new benchmark for central and commercial banks.
South Africa’s G20 Presidency has intensified the focus on AI in the African context.
Africa’s AI market is projected to increase by 27,42% in 2025 alone to $16,5-billion and by 27,42% to $16,3-billion in 2030.
AI initiatives are expected to create 230-million digital jobs in sub-Saharan Africa within the next five years.
However, the technology is a double-edged sword: on the one hand, its learning, problem-solving, and decision-making capabilities have the potential to drive financial inclusion, narrow the digital divide, and create millions of employment opportunities.
On the other, it could also exacerbate Africa’s existing economic and societal problems by further increasing digital inequality and creating job redundancy across numerous industry sectors.
What will determine whether AI growth translates into benefits for Africa’s people are regulatory frameworks. Principled governmental policies and collaborative public-private partnerships will ensure that the transformative potential of AI is counterbalanced with ethical mandates.
Compared to global economies, the reality is that Africa’s AI deployment will not be at the same speed and scale.
However, not being at the bleeding edge of AI development could be to the continent’s advantage, especially for the financial sector.
Despite having more limitations when it comes to funding, resources, and skills, Africa can harness international learnings to ensure AI development and deployment are focused on the most critical and digitally inclusive strategies.
Global learnings can guide innovation in Africa’s financial sector while simultaneously decreasing risk.
While global markets vastly differ in dynamics and demographics, there are already cautionary international case studies for our continent.
One such example is the unintentional development of a biased algorithm to evaluate creditworthiness of potential loan applicants.
Following an investigation, it was determined that higher risk scores were assigned to certain ethnicities. Instead of making formal credit processes more streamlined and accessible, the algorithm reinforced financial inequalities.
In diverse African countries such as South Africa, proactive measures must be taken to develop AI governance in a responsible way that makes ethical use a shared responsibility.
As a sector that is set to potentially progress faster with AI integration than other industries, financial institutions have even more responsibility on their shoulders.
Fortunately for the financial sector, which is a highly regulated industry, there are already frameworks in place that stipulate how financial institutions must operate, protect customer data, implement cybersecurity measures, and ensure customer fairness.
These definitive guardrails form the pre-existing pathways that must inform AI integration.
This presents a timely opportunity for the continent’s financial institutions to redevelop and enhance existing credit models to accommodate less traditional aspects of credit assessments.
AI machine learning and automation capabilities can be harnessed to move beyond the financial statement.
In a South African context, incorporating unique aspects of consumers’ financial behaviours, such as saving with stokvels and borrowing from informal loan networks, could build more advanced credit models that adapt and incorporate the country’s economic environment.
Not only can AI transform existing credit assessment processes with post-data analyses but also enhance customer experiences with predictive analytics.
As AI technology advances, banking customers will come to expect more personalised banking services, proactive product suggestions, and market-related investment opportunities.
By building a more personalised financial foundation for customers, AI is also more strategically positioned to fulfill its most impactful role yet: improving Africa’s financial literacy.
According to the 2024 Financial Sector Conduct Authority survey, 49% of South Africa’s population lacks a basic understanding of money management.
Poor financial literacy contributes to almost half of South Africans living in chronic debt, experiencing continued financial instability, and being increasingly vulnerable to economic distress.
Financial institutions can make a powerful impact on this demographic by developing personalised, AI-powered methodologies and tools to analyse customer data and behaviour to provide targeted, educational financial advice.
The technological possibilities are endless, such as Absa’s virtual assistant Abby, which uses agentic AI technology. The new tool will be able to handle tasks simultaneously through parallel processing, such as determining a user’s eligibility for a home loan, while checking balances and savings goals.
AI technology could also provide automated, low-cost investment advice based on personal financial goals and risk tolerance, gamified learning for the youth market, targeted educational guidance for customers with low credit scores or high debt, and business advice for SMEs facing potential cashflow problems or experiencing a growth phase.
The question is not whether the future state of Africa’s financial industry will be driven by AI. Instead, the challenge facing financial institutions is to utilise the immense opportunity ahead.
By shifting away from reactive, legacy processes towards responsive, agile, and proactive models, AI can truly benefit the lives of humanity, especially for the people of Africa.