Georgia’s AI ambitions – overcoming digital growing pains

Georgia seems never to do things by halves – it either excels or falls short. That is certainly true when it comes to artificial intelligence (AI). While efforts are underway to expand the use of AI in the country, with the government talking about plans to establish Georgia as a regional tech hub, there is a long way to go. Challenges extend from lack of skilled professionals to lack of investment.

Georgians are already seeing some of AI’s benefits when they buy products and services from banking, insurance, and e-commerce – sectors where AI is already heavily integrated. Chatbots are also a conspicuous feature of AI in Georgia. The population is also coming across AI in the public sector, although most is at an early stage of development. This is in the form of road traffic radar, in dealings with the Revenue Service, and analysis of tourist data.

Covid-19 brought some useful local AI innovation in the public sector. In the throes of the pandemic-induced quarantine, C Bot, a Rustavi City Hall ChatBot, developed by the Rustavi Innovations Hub and Rustavi Municipality with the support of UNDP Georgia, was a star, helping keep the city’s 125,000 residents informed. It handled more than 1,000 questions on coronavirus statistics and recommendations, as well as questions about municipal services such as public information, social programs, architectural services, and more.

Elsewhere in the economy, the fast-growing regional leader in retailing, Adjara Group’s online Veli Store, has entrenched AI in its strategy, operations, and marketing. Yet, in business as a whole, with most companies being private and under no pressure to divulge operational detail, it is difficult to say how many are using AI. And, while the thousands of IT workers who have made Georgia their home post Russia’s invasion of Ukraine, undoubtedly use it, this information is again impossible to assess.

In the healthcare sector, Caucasus Medical Center was an early AI entrant, announcing back in 2020 that: “Artificial intelligence has great potential and can be used in many ways. In our chain, during the first stage, two algorithms of artificial intelligence will be introduced in the fields of intracranial haemorrhage (strokes) and pneumothorax (accumulation of air in the pleural cavity).” It also used AI to monitor the condition of patients with Covid-19.

The latest sector on the AI block has been Georgia’s insurance industry, which is on the cusp of significant expansion as new motor regulations bite. Leading insurer Aldagi announced four years ago that it was going fully digital, relying on the latest technologies of blockchain and AI. “Aldagi is able to verify customers’ identity, accurately extract data from submitted documents, and process it according to all legal requirements and standards of online security and data protection,” it announced, describing AI’s impact.

AI should enable insurers to increase customer satisfaction, international consultant Gartner predicts, reducing claim processing times by 30% and cutting the cost of claim processing by up to 40%. It should also help tackle fraudulent claims, which remain an enormous burden for the insurance industry—as well as customers whose premiums may rise as a result.

AI in the banking sector

The leading AI adopters for some years now have been Georgia’s two major, world-class banks: TBC Bank and Bank of Georgia. Strengths in AI have been helping them increase their financial returns by widening services offered, as well as in diversifying out of the small Georgian economy into neighbouring countries, as their annual financial reports make clear. They have worked very closely with the country’s central bank, the National Bank of Georgia, to build the regulatory system necessary to support a digital innovation ecosystem for the financial sector.

“A key enabler” is how Bank of Georgia described AI in last year’s annual report. Expanding on this, it said: “…we enhanced the Bank’s advanced analytics and AI capabilities for improved decision-making, efficiency, and customer satisfaction. Our machine learning models anticipate individual financial and lifestyle needs, enabling us to provide personalized services for positive experiences across various touch points. We have made good progress in these areas, but we see enormous room for improvement, to become a truly data-driven organization leveraging AI use cases to their full potential.”

TBC Bank’s last year’s report also says that it is giving “increasing focus” to the acceleration of AI and Generative AI, as well as its risks and opportunities.

Using fintech companies, as well as their own IT resources, in the highly competitive Georgian market the banks have “improved traditional forms of finance for both consumers and business,” states a report on the digitalization of the Georgian banking sector from Batumi Shota Rustaveli State University and its Sustainable Development Research Institute. AI, it points out, is not only “essential for innovation,” but also for cost efficiency (reducing the need for people and physical infrastructure), for data analysis and personalization, fraud detection, and risk prevention. Of course, the operational expenses are high, but so are the improvements in customer numbers and financial returns.

Helped by AI, the number of digital banks in Georgia is rising, with Hash Bank and Pave Bank being recent additions. Last year, Bank of Georgia was Global Finance Magazine’s winner as World’s Best Digital Bank and Best Consumer Digital Bank, with its AI tuned solutions gaining comment. TBC Bank has been named the Best Digital Bank in Georgia by the Euromoney Awards for Excellence 2024.

Georgia’s startup scene

The list of 21 AI-linked Georgian companies published in March on If6s.com was a very diverse one in terms of activities, but most are niche. Just a couple of years ago, in its report Georgia – Fit for the Age of Artificial Intelligence, consultants PMCG described the AI Community in Georgia as “small.”

Despite the size of the community, Georgian AI startups have been making notable strides on the global stage. In 2021, Pulsar AI became the first Georgian startup to be acquired by a U.S. company, SpinCar, marking a significant milestone for the local tech ecosystem. Theneo, co-founded by Ana Robakidze, is revolutionizing API management with cutting-edge AI, serving over 12,000 companies, including top financial organizations. The company made history by winning Web Summit’s 2022 Startup Competition and has been recognized by Y Combinator, Atlassian, and Mercury. Additionally, startups like Enagram are enhancing the digital presence of the Georgian language by developing AI-powered platforms, addressing the challenges faced by low-resource languages in the digital era. MaxinAI, established in 2017, specializes in AI and machine learning solutions, collaborating with international clients to deliver customized software products. These achievements underscore the growing impact of Georgian startups in the AI sector.

The attitude of Georgian companies as a whole to IT is well illustrated by the fact that according to an IT industry report last year from investment bankers Galt & Taggart, “only 13.4% of companies in Georgia have a website, while this figure is 78.1% in the EU… and use of AI is 1.5% against the EU’s 8%”. True, Georgia’s IT sector has been expanding, but this was largely as a result of the relocation of international companies and IT specialists to Georgia after the Russia-Ukraine war.

On the 2024 AI Readiness Index from BTUAI, an analytical platform developed by Georgia’s Business and Technology University, Georgia ranks only 58th among 174 countries. The reasons it cites are the immaturity of the technical sector and lack of government strategy. On the Oxford Insights’ Government AI Readiness Index for 2024, Georgia scored less than 40 out of 100 against a global average of 47.6, dragged down again by a lack of confidence in the technology sector’s development.

However, on both of these indices, Georgia shows strengths in data availability and representativeness. This indicates, says Oxford, that Georgia has substantial data resources that adequately reflect diverse segments of its population, which is critical for the effective functioning of AI systems. “However, weaknesses remain in the maturity of the technology sector and governance. The technology sector shows limited support for innovative startups and insufficient development of human capital. Meanwhile, governance requires stronger ethical frameworks and enhanced skills in the public sector to better support AI adoption,” the index report summarizes.

Challenges for Georgia in scaling AI implementation outlined earlier this year by UK-based financial technology website TechBullion were:

● Talent Shortages: There is a strong technical education system, but a need for more AI specialists to meet growing demand.
● Limited AI Infrastructure: High-performance computing resources and cloud AI services are not as widely available as in more developed markets.
● Regulatory Uncertainty: AI governance frameworks are still evolving, creating uncertainties for businesses’ AI solutions.
● Investment Constraints: AI development requires significant funding, and many startups struggle to secure capital for scaling AI projects.

The banking system, says a report on Georgia from the International Telecommunications Union (ITU), Digital Innovation Profile: Georgia, has been helping raise the digital innovation game in Georgia by championing the ecosystem, providing support programs, and investing. However, the ITU calls on the government “to do more to encourage international investors.”