AI and Compliance: How African Fintechs Can Win Trust Before They Scale, by Oladiipo Oladepo

Editor’s note: In this piece, Oladiipo Oladepo explores the intersection of artificial intelligence and financial regulation, arguing that for African fintechs, sustainable growth hinges not just on speed and innovation but on trust that is earned through proactive and ethical compliance.

Africa's fintech boom is one of the continent’s most inspiring economic stories. From mobile wallets to cross-border payments, startups are redefining how millions access financial services. But beneath the excitement lies a more delicate truth: without trust, growth collapses. And in financial services, trust starts with compliance.

As artificial intelligence (AI) becomes more embedded in fintech operations, from credit scoring (Tala) and fraud detection (Flutterwave) to chatbots and transaction monitoring, compliance must evolve alongside it. The challenge is especially urgent for African fintechs navigating fragmented regulatory environments, limited resources, and intense global scrutiny.

Why compliance matters more than ever

In 2022, Flutterwave and Chipper Cash faced regulatory suspensions in key African markets due to questions around licensing and anti-money laundering (AML) protocols. While these companies have rebounded, the incidents have raised important questions: how can fintechs grow quickly without cutting corners, and how can AI help rather than hurt their compliance standing?

Unlike legacy banks that grew with regulators, African fintechs are scaling fast, sometimes faster than oversight can follow. But with that speed comes risk. For example, fintech startups prioritizing speed in loan approvals might unintentionally discriminate based on location or gender. If left unchecked, such issues can diminish trust and might lead to regulatory bottlenecks.

Role of AI in strengthening compliance

Artificial Intelligence has an inherent dual-use quality. That is, the same model created and intended for good can be used for nefarious activities. However, if used responsibly, AI can become a compliance ally. Here’s how:

1. Automated Know Your Customer (KYC): Companies like Smile Identity and YouVerify use AI-powered tools to verify identities in real time. This not only speeds up onboarding but also ensures consistency and accuracy across markets.

2. Fraud Detection: AI systems can analyze transaction patterns in milliseconds, flagging suspicious activities that human teams might miss. Nigerian fintech Mono uses machine learning to detect account anomalies that could signal fraud.

3. Risk Scoring: Platforms like M-KOPA and Tala use AI to assessthe creditworthiness of underbanked individuals. When designed ethically, these models can improve access to credit while staying compliant with data and fairness regulations.

4. Regulatory Reporting: AI can automate the generation of audit trails and reports, reducing the burden on compliance teams and improving transparency for regulators.

All that glitters…

However, AI is not a magic fix. There are dangers in adopting AI without a clear ethical and legal framework:

● Opacity: Black-box models like deep neural networks, which can make highly accurate predictions but whose internal workings are not easily understood by humans, can make it hard to explain decisions, an issue when regulators demand transparency.

● Bias: AI systems trained on skewed or incomplete data can replicate social and economic inequalities.

● Data Privacy: Without strong data governance, AI tools can overreach, violating privacy laws or user trust.

That’s why African fintechs must build “compliance-by-design” into their products. This means involving legal, data, and risk teams early in the development process, not after a regulator comes knocking.

Winning trust through proactive strategy

To position themselves for long-term success, African fintechs should embrace the following practices:

1. Collaborate with regulators early: Startups like Paystack and Paga built strong relationships with Nigeria’s Central Bank early on. This helped them align innovation with regulation.

2. Invest in ethical AI: Train models using diverse datasets and regularly audit for fairness and accuracy. Startups can partner with academic institutions or ethics boards for guidance.

3. Transparent communication: Be clear with users about how decisions are made, especially in sensitive areas like loan denial or fraud alerts.

4. Scalable compliance infrastructure: Tools like ComplyAdvantage and Alloy offer APIs that help fintechs stay compliant as they expand into new jurisdictions.

5. Internal culture of accountability: Compliance is not just the job of lawyers. Founders, engineers, and product teams must all buy into the mindset that “speed with trust” wins.

Looking ahead

Africa’s fintech future is promising. But innovation without accountability is fragile. As AI takes on more decision-making roles, fintechs must treat compliance not as a box-ticking exercise, but as a competitive advantage.

The startups that win in the next decade will not just be the fastest or the flashiest. They will be the ones that make users feel safe, respected, and understood at scale.

And in that mission, AI can be a powerful partner if used wisely.

Oladiipo Oladepo is an artificial intelligence and financial technology expert. He writes from the United States, olace.oladiipo92@gmail.com

Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of Legit.ng.

Source: Legit.ng