**1. Introduction**

Digital financial inclusion is increasingly becoming central in the debate on how to ensure that people who are at the lower levels of the pyramid become financially active (Peric 2015). Banks and non-bank institutions are coming together to widen financial access using digital financial approaches to include those who are financially excluded and the underserved populations (Peric 2015). Banks and non-banking institutions are building on digital ways that were in use for years through the direct application of artificial intelligence (AI) to improve access even to the people who were previously served by the formal financial institutions (Alameda 2020; Peric 2015). The fourth industrial revolution is bringing changes in the traditional banking sector built in the industrial revolution premised on paper and physical distribution of cash (Alameda 2020).

The term fintech or financial technologies is used to describe different innovative business models that have great potential to transform the financial services industry (Mamoshina et al. 2018). The fintech business model offers various financial products or services in an automated fashion through the wide use of the internet (Paul 2019). Technologies that are driving industry 4.0 such as AI, machine learning, cognitive computing and distributed ledger technologies can be used to supplement fintech new entrants and traditional incumbents (Lopes and Pereira 2019a). Some other AI technologies that can be applied in the fintech sector to promote financial inclusion including *audio processing, knowledge representation, speech to text, deep learning, expert systems, natural language processing, machine learning* *(ML), robotics, and symbolic logic* (Paul 2019). It is believed that the popularity of AI technologies boomed in 2011 when companies like Google, Microsoft, IBM and Facebook embarked on a massive investment in AI and machine learning to be applied in the commercial space.

The traditional banking market is equipped with millions of customers with a history that spans over hundreds of years, and some of these customers may be worth billions (Alameda 2020; Peric 2015). The challenge which is currently there is that these customers are not digital (Alameda 2020; Loufield et al. 2018). On the other hand, fintech start-ups have a rich digital vision but to win the trust of customers is a huge obstacle to them (The World Bank 2020). The occurence of the disturbances caused by COVID-19 brought another perspective of fintech to customers as it was the only option available to engage in banking as well as buying. Banks resorted to digital banking while shopping in many countries was done online using various banking applications to perform transactions. In addition, the existence of various tech corporations like Google, Apple, Facebook Amazon in America and Baidu, Alibaba and Tencent in Asia who take pride in having millions of customers with financial returns in the billions and decades of history and a pure digital vision will act as examples a for banks to embrace digital technology and to understand the importance of AI in finance (Alameda 2020).

The World Bank stated that digital financial services which include the use of mobile phones have been launched in more than 80 countries (The World Bank 2020; Chu 2018). As a result, millions of formerly excluded and underserved poor individuals are migrating from cash-based transactions to formal financial services where a variety of services like payments, transfers, credit, insurance, securities and savings are offered to them (The World Bank 2020). Mobile phones and other digital tools including AI are widely used and the rate at which financial inclusion is rising is commendable (Salampasis and Mention 2018; Bill & Melinda Gates Foundation 2019). With digital financial inclusion, financial services are provided to customers at an affordable cost in ways that are sustainable to customers (Gomber et al. 2017). Digital financial services provide unlimited benefits to the previously excluded customers but it comes with a lot of risks which result from the introduction of non-financial firms in the provision of new technologies used in the process (The World Bank 2020; Rathi 2016).

Another risk in digital finance lies in the existence of new contractual relationships between financial institutions and third parties which involve the use of agent networks, other risks result from different regulatory treatment of deposit-like products as compared to real deposits, there are other risks which result from unknown and unpredictable costs to inexperienced and vulnerable consumers, together with risks that result from the use of new kinds of data which come with new privacy and data security issues (The World Bank 2020; Rathi 2016). However, experts are indicating that the use of AI (particularly algorithms) can help to fight some of the risks (Chu 2018; Killeen and Chan 2018). Motivated by the fact that in the industry 4.0, AI is increasingly becoming common while on the other hand digital financial inclusion is becoming central in the debate on how to ensure that people who are at the lower levels of the pyramid become financially active, for instance, groups of women, youths, small businesses among many disadvantaged groups. This study, therefore, intends to investigate the impact of AI on digital financial inclusion, that is to understand the channels in which AI can help to improve financial inclusion.
