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Africa Blog December 2023

Revolutionizing wealth management in Africa: the role of AI and Engagement Banking

Is AI the game-changer in Africa's financial sector transformation, opening doors to tailored services for diverse incomes?

Aymen Daoud

Aymen Daoud,
Head of Sales - North & West Africa, Backbase

These are exciting times for our continent. In the 21st century, Africa has gone through an immense period of growth when it comes to the number of high-net-worth individuals. In 2000, only 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. This is the fastest-growing number of millionaires anywhere in the world 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 larger than three decades ago, with 313 million people, or 34% of the total population, categorized as such. But as the amount of liquidities rises, so do concerns regarding how to best invest, protect, and increase this new wealth. This presents African banks not only with new opportunities but also with an elevated sense of urgency when it comes to digitization and adopting 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 clients are presented with.


New opportunities 🙌

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.

Modern technology enables advisers to reach more clients than ever before, while automation lets the end-user interact with wealth management services in a much more convenient and tailored manner. As with traditional wealth management, the goal is not to take control away from the customer but to enable wiser and better-informed decisions on their part. In a way, the customer has never been more in control, now that they’re holding a financial adviser in the palm of their hand.

The field of wealth management is only going to become more important as the world’s wealth continues to increase. Today, $130 trillion worth of liquid assets exist globally, with the sum 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.

Modern technology has already created new opportunities for the expansion of personal banking, allowing access for more clients than ever before. 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. The shift towards Engagement Banking, which creates a much more personalized and user-centric experience, has also galvanized younger people, who are now more likely to be interested in financial services than in traditional banking.

Engaging a new generation of investors 💁📱

Traditional investment services are now 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 banks’ 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 disruptors bet on strategies that bring more control to the end-user.

AI could be the next step in this ongoing process to democratize 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 who are trying to better organize their mortgage, life savings, and expenditures. It’s not hyperbolic at all to say that AI could forever change the face of personal finance.

At Backbase we already hold considerable experience in helping banks move towards more engaging and user-centric financial services. With AI tech now set to spur a new wave of advancement in user experience, Backbase is already offering services infused with AI technology to its clients, helping them stay ahead of both technological change and the novel user expectations that come with it.

Next-gen capabilities in wealth & investing 🤖

Technology's rapid advancement opens new avenues for innovation in wealth management. Advanced AI tools go beyond mere automation, reshaping how banks interact with clients and delivering previously inaccessible insights. Backbase is at the forefront of this transformation, offering AI-driven solutions that enhance user experiences and optimize investment strategies. As wealth and investing undergo a digital renaissance, Backbase empowers banks to lead in this evolving landscape.

The new wealth management standard must unite automation and human expertise to offer a wide 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 to them or be left out of the future of wealth management.

For most of its history, the wealth management sector used to be, by nature, an exclusivist and elitist field, targeted only towards 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.