Artificial Intelligence: The Key to Financial Inclusion

Financial inclusion remains a pivotal issue, but mere access to financial products isn’t sufficient. True inclusion demands financial literacy, enabling individuals to make well-informed decisions, as stated in The Fintech Times. Helal Lootah, co-founder and co-CEO of Lune Technologies, a Dubai-based data analytics company, discusses the role of AI in achieving this, using the UAE as a case study.

Financial inclusion, as Lootah explains, is often misunderstood as just providing basic access to financial products. True inclusion begins with financial literacy, empowering people to make informed choices and actively engage in the financial system. Financial literacy enhances decision-making in budgeting, spending, planning, and recognizing opportunities. Conversely, financial illiteracy leads to missed opportunities and costly mistakes due to poor planning and unsustainable spending habits.

A 2022 survey by the US National Financial Educators Council revealed that financial illiteracy costs Americans over $1,800 annually, about 5% of household income. Despite advances by traditional advisors, digital banking, and fintechs, the future of financial inclusion and literacy lies in AI-powered financial technologies. These technologies uniquely model an individual’s capabilities against their goals, offering personalized insights.

The complexity of the financial landscape challenges even the financially literate, with digital transactions often leading to impulsive spending due to their intangible nature. While digital payments make tracking spending harder, mobile banking and financial apps show a growing comfort with digital financial management. AI-powered solutions can transform data into personalized insights and recommendations, moving beyond traditional dashboards to include savings plans and investment advice.

In the UAE, financial inclusion is a top priority under the National Agenda, seen as essential for socio-economic well-being and economic growth. With financial inclusion at 46% in 2020, the UAE leads the Gulf in this area, attracting $2.5 billion in fintech investments in 2022. The UAE’s National Strategy for Artificial Intelligence 2031 aims to harness AI across vital sectors, including finance.

For AI solutions to reach their full potential, further integration with established financial institutions is necessary. These institutions possess vast data that AI can use to generate personalized insights. Collaboration among fintechs, legacy financial institutions, and regulatory bodies is crucial for advancing innovative finance and inclusion.

Helal Lootah’s insights underscore that true financial inclusion requires a blend of access, literacy, and AI-powered personalization, driving the UAE’s leadership in fintech and financial inclusion.