AYMEN DAOUD: AI revolutionises wealth management in Africa

With Africa’s financial sector undergoing rapid digital transformation, opportunities have arisen for banks to cater to the growing affluent class. Technology, especially artificial intelligence (AI), can enable Africa’s financial institutions to reach more customers across the income spectrum with tailored services. 

These are exciting times for our continent. In the 21st century African countries have experienced immense growth as measured by the number of high net worth individuals. In 2000 just 32,000 millionaires made Africa their home, while the most recent data shows there are now 361,000 millionaires on the continent. The trend is expected to continue, with forecasters expecting 768,000 millionaires in Africa by 2027. That’s fastest-growing number of millionaires anywhere and a process that is likely to radically change the continent’s financial landscapes. 

Furthermore, wealth hasn’t only been concentrated at the top. Africa now has a middle class three times bigger than it was three decades ago, with 313-million people, or 34% of the total population, categorised as such. But as disposable incomes rise, so do concerns regarding how to best invest, protect and increase this new wealth. This presents African banks not only with opportunities but also with an elevated sense of urgency when it comes to digitalisation and adapting their services for a broader pool of clients. 

Untangling the complicated world of finance and helping clients learn their stocks from their bonds has traditionally been the scope of financial advisers, but cutting-edge, AI-infused technology has the potential to greatly diversify the options for clients. 

Enter AI wealth managers

The use of AI in wealth management is already being implemented and is likely to bring important changes to the industry. Rather than replacing flesh-and-bone wealth managers, AI technology is being used in conjunction with human expertise to create an enhanced user experience. 

The field of wealth management is going to become ever more important as the world’s wealth continues to increase. Today, $130-trillion worth of liquid assets exist globally, and that’s expected to rise to $230-trillion by 2030. Human financial advisers will continue to be sought after in the decades to come, but the AI revolution in wealth management has come at the perfect time to avoid a shortage of financial advice. 

Technology has already created new opportunities for the expansion of personal banking. Digital finance has profoundly shifted our perceptions regarding banks and worked wonders in extending access to financial services. Digital solutions are now dominant in parts of the world where traditional banking had historically low penetration — including Africa — bringing financial inclusion to millions in the process.  

New generation of investors 

Traditional investment services are finding themselves increasingly out of step with the expectations of tech-savvy millennial investors, who are used to the frictionless convenience of the digital age. Outdated models of wealth management also make it more difficult for banks to fully deliver customer value as they move at a much slower pace, complicating their ability to offer investment and savings propositions to their clients. With these factors at play, banks that fail to adapt are going to soon have a snowballing retention problem, as seen in other industries where disrupters bet on strategies that bring more control to the end-user. 

AI could be the next step in this ongoing process to democratise finance. Having access to financial advice from a trained AI for a fraction of the cost of human-led services will radically lower the entry threshold for wealth management services. Such services are now being employed not only by the rich but also by middle- and low-income families that are trying to better organise their mortgages, savings and expenditure. It’s not hyperbolic to say AI could forever change the face of personal finance. 

Blended wealth management 

The new wealth management standard must unite automation and human expertise to offer a range of services and capabilities that create an elevated investing customer experience. A new generation of wealthy and middle-class Africans are on the lookout for the best way to invest their money. Banks need to use every tool at their disposal to make their services appealing and profitable or be left behind.

Traditionally, wealth management was, by nature, an exclusivist and elitist field, targeting only the richest of the rich. But as the number of wealthy individuals increases and the definition of wealth continues to shift, the time is ripe for a big push towards inclusivity. Implemented wisely, automation has the potential to make wealth management the fastest-growing financial industry in the world.  

• Daoud is regional head: north & West Africa at Dutch banking financial technology company Backbase.