Artificial Intelligence (AI) has significantly impacted the global financial sector, with Bangladesh slowly adopting this technology. From automating processes to enhancing customer service, several institutions in the country are beginning to leverage AI for operational efficiency. However, greater adoption and optimization are required to unlock more value in Bangladesh, especially in areas like financial inclusion, credit risk management, and fraud detection.

Current Applications of AI in Bangladesh’s Financial Industry

Chatbots and Virtual Assistants

Financial institutions like BRAC Bank and City Bank are utilizing AI-driven chatbots or virtual assistants to improve customer service through quicker responses to customer queries and reducing the burden on call centers. These bots handle basic tasks such as balance inquiries, transaction notifications, and loan applications. Globally, studies indicate that approximately 60% of customers prefer chatbots for routine assistance over waiting for human agents, further highlighting the need for AI integration.

Fraud Detection and Risk Management

Financial fraud is a critical concern in Bangladesh’s banking sector. AI algorithms are being employed to detect suspicious transactions in real time. Machine learning (ML) models analyze customer transaction patterns to identify anomalies, enabling swift responses to potential fraud.

Credit Scoring and Loan Disbursement

‍Traditional credit scoring models often exclude many individuals due to heavy reliance on credit history and formal documentation. AI-based credit scoring systems, like those developed by fintech companies such as bKash and ShopUp, analyze alternative data—like phone usage, transaction behavior, and social media activity—to offer micro-loans to underserved populations enhancing financial inclusion. For instance, bKash reported a 76% productivity boost and a 15% monthly onboarding growth rate with the help of Nimonton and Biponon, two retail AI products developed by Intelligent Machines—an AI firm in Bangladesh.

Algorithmic Trading and Portfolio Management

‍While still in its early stages, several financial institutions are exploring algorithmic trading systems that use AI to forecast stock market trends and manage investment portfolios. These systems minimize human error and optimize returns through continuous data analysis and learning. The Dhaka Stock Exchange (DSE) is gradually adopting advanced technologies, including trading platforms supported by Nasdaq’s X-stream INET, to improve market operations. Although algorithmic trading is still emerging, there are ongoing efforts to modernize infrastructure and prepare for automated systems.

Opportunities for Further AI Adoption in Finance

Expanding Financial Inclusion

‍AI can facilitate financial services for the unbanked populations, particularly in rural areas. Enhanced credit scoring tools, leveraging big data from mobile financial services (MFS), can extend loans to farmers and small business owners who lack formal credit histories.

Personalized Financial Services

‍By leveraging individual customer data, AI can help banks develop hyper-personalized financial products, such as tailored savings plans or investment strategies based on users’ income patterns and spending behavior.

Advanced Fraud Prevention

‍AI can enhance fraud prevention systems by integrating biometric authentication with transaction data analysis. Predictive analytics could also anticipate fraudulent schemes and provide proactive solutions, reducing financial crime risks.

Regulatory Compliance and Risk Mitigation

AI tools can automate regulatory compliance processes such as Know Your Customer (KYC) and Anti-Money Laundering (AML), ensuring smooth operations while lowering compliance costs. Additionally, AI solutions can strengthen cybersecurity by identifying vulnerabilities and preventing cyberattacks.

Challenges to Overcome for Full AI Adoption

Despite these opportunities, there are a number of challenges that financial institutions must address:

• Data Privacy Concerns: With increasing AI use, there is a critical need for robust data protection frameworks to ensure the secure handling of customer information. The Draft Data Protection Bill 2023 addresses some of these concerns but requires further refinement to meet global standards. There are concerns that the bill may not have the best practices in place for personal data handling and cross-border data flows.
• Lack of Skilled Workforce: There is a notable shortage of AI expertise in the financial sector. Banks need to invest in employee training or collaborate with technology firms to build AI capabilities.
• High Implementation Costs: The initial cost of deploying AI solutions can be high. Financial institutions, especially smaller banks, need incentives or partnerships to invest in AI technologies effectively.

Conclusion: Harnessing AI for the Future of Finance

AI has the potential to enhance Bangladesh’s financial industry through improved efficiency, customer experiences, and financial inclusion. To fully harness these benefits, financial institutions must overcome challenges related to data privacy, workforce readiness, and cost. A collaborative approach involving government support, private-sector innovation, and regulatory oversight is essential for responsible AI adoption in the sector.

As the financial landscape evolves, institutions that embrace AI early and strategically are likely to be better positioned to lead the industry, promoting growth and greater inclusion across Bangladesh.

References

• Dhaka Tribune. (2023, January 26). BRAC Bank introduces 1st digital banking super-app with Astha Lifestyle. Dhaka Tribune. https://www.dhakatribune.com
• IDLC. (2023). AI in the financial industry: Opportunities and challenges in Bangladesh. Market Beat. https://idlc.com/mbr/article.php?id=524
• The Daily Star. (2023, March 23). Can Bangladesh leverage AI for inclusive growth? The Daily Star. https://www.thedailystar.net/tech-startup/news/can-bangladesh-leverage-ai-inclusive-growth-3703996
• The Paypers. (2023, March 15). BRAC Bank selects Newgen’s customer experience solution. The Paypers. https://www.thepaypers.com

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