The New AI Game will Produce Winners and Losers
The winners will include:
Winners will include lenders that are flexible and agile. These institutions will loop digital sandboxes into product and service pipelines with short lead times. Customers of banks and other financial service providers would meet service delivery requirements tailored to suit individuals with high levels of personalization. Programmers will have a field day reimagining services and products and going wild within limits.
Ancillary industries that manufacture computer hardware and provide cloud storage, data mining services and data analytics will be on an upward swing. Telephone manufacturers with phones that enable consumers to achieve greater engagement with markets and financiers will see rising revenues.
Digital content providers in raw commodities, business and financial markets will witness rising patronage as more individuals use their mobile devices for as much business as pleasure. New customer and partner ecosystems that will forge alliances to support improved mobile customer service experiences (see illustration 16 below)
Illustration 16: The New Digital Ecosystem
The Losers will include:
Financial service providers are slow on the uptake of customers' need for agile response, flexible service structures and customer journey sensitivity. Crusty deposit money institutions (DMIs) will increasingly see deposits and earnings flatten.
Institutions that allow customer data go 'dead.' Corporations that do not use customer data to refine products and services will find themselves cheering from behind with no medals and no glory
Corporations that fail to feed into AI and ML ecosystems will find that they would be 'cancelled' by millennials and generation Y and Z customers impatient with the slowness of service delivery and the tackiness of user experience and interface (UX/UI). With the majority of Nigeria's population being between the ages of 0 and 34 and with a bulge between the ages of 18 and 40, service providers need artificial intelligence and machine learning to model consumption patterns and consumer preferences to design products and services that speak to these demographics
Old economy companies will give way to newly reimagined businesses in entertainment, hospitality, healthcare, financial services, and air travel. Even surface transportation such as buses and trains will have to reimagine their futures, emphasizing less carbon emission and improved commuter leisure at lower average costs. Conversations are ongoing using compressed natural gas (CNG) buses for urban commutes and electric trains for light intracity mass transit movement. Regarding upper-end urban housing, families rely on private solar-powered energy rather than the gas-fired or hydro-powered public alternatives.
Technology disruption is not a fad but a fact. The adoption of mobile digital platforms will be woven into the consumer's transaction journeys and underline how people work, play, and communicate in 2021 and beyond. Companies outside the digital loop will stumble, shrink, and disappear. The winners will adapt to the financial services sector while the losers will delay and be zapped (see illustration 17 below).
Illustration 17: Eyes on New Technologies
The Future of Now
Technology has taken a swing at old-world economics and is establishing new paradigms of how people interrelate and collaborate. The emerging trends establish that payment transactions will become faster, more flexible, and broader by penetrating hitherto tricky locations to reach.
Indeed, the ability to dimension a borrower's spending and saving habits suggests that micro-lending, micro-insurance, and micro-leasing will increase and proliferate as lending institutions prepare themselves with the right amount of data and the enormous power of analytics to establish risk profiles and make carefully measured lending decisions.
Another shift in the evolving lending architecture would be adopting digital records of borrowers with a permanent register of delinquent loan-takers. The profiles of hardcore debtors would be on a referable digital register that would allow lenders easy access to information across lending platforms and institutions. A platform that has taken a headstart in providing such an archived and searchable digital database is Debtors. Africa.
In a report published in 2019, the delinquent debtor digital database managers noted that "If there is one characteristic that will define the success of winners and losers in the new loan ecosystem, it is transparency, banks hiding delinquency behind a stump of grass will soon discover that their nakedness is as clear as that of a day-old baby. The only way for banks and their borrowers to create a sustainable credit environment is to stand digitally undressed, with the delinquent borrower's character open to the world to see and make judgment calls" (www.debtorsafrica.com).
"In God we trust; everybody else must bring data."
Data is the hemoglobin of the financial payment and loan systems. The customer and lender's journey touchpoints in 2022 will be anchored on the amount of shared data within the credit and payment ecosystem. The more data that exists and is shared, the better the system becomes and the easier it would be to create retail loan assets with minimal default risk. This should see deposit money banks comfortably raising their LDRs and reducing their NPLs. Of course, the high Central Bank of Nigeria (CBN) cash reserve ratio (CRR) of 27.5% would rein back lending growth, but the pull would be less severe with lower lending risks.
The rise of the data age will intensify technology applications in financial markets and increase transaction speed, data-induced resource distribution, investment allocation, and loan creation. Analysts generally agree that the future of data is here.
With the Nigerian economy (GDP) growing at 0.51% in Q1 2021 and inflation towering at 15.7% (February 2022), fiscal and monetary authorities have found themselves in a sticky place with policy choices requiring fiscal and monetary policy expansion to pull the growth rate up. Still, without prodding a rise in domestic inflation, the policy gymnastics has not been pretty so far.
However, it does appear that a ready tool for faster GDP growth is credit expansion without creating larger non-performing loan portfolios. This could be where artificial intelligence (AI) and machine learning (ML) adaptations prove to be welcome guests. The normality of adaptive technology in financial transactions may be what the doctor prescribes for an economy searching for credit growth.
Downloadable Versions of Tier 1 Banks Report (PDF)
1. Executive Summary: Nigeria’s Banking Industry: The Case for Redefining Tier 1 Banks - May 28, 2022
2. Full Report: Nigeria’s Banking Industry: The Case for Redefining Tier 1 Banks - May 28, 2022