Next-Gen Banking: Redefining Finance with AI in India

Ever since the introduction of internet banking in India nearly three decades ago, the Indian banking sector has been on an accelerated path towards digital technology adoption. Chief amongst the leading emerging technologies is Artificial Intelligence (AI), with the application of AI tools across both internal and customer-facing functions being instrumental in increasing safety and customer convenience. With this in mind, it is imperative that financial lenders recognise the opportunities presented by AI and leverage it to develop Next-Gen banking solutions. 

AI-Driven Customer Experience

One of the most significant impacts of AI in banking is the enhancement of customer experience. Indian banks are leveraging AI to provide personalized services, streamline interactions, and improve satisfaction. Chatbots and virtual assistants, powered by natural language processing (NLP), are becoming common features on banking platforms. These AI-driven tools offer 24/7 customer support, handle inquiries, and perform routine transactions; reducing the need for human intervention and slashing response times.

For example, HDFC Bank's EVA (Electronic Virtual Assistant) and ICICI Bank's iPal are prominent AI-based chatbots that have revolutionized customer service by providing instant, accurate responses to customer queries and improving engagement levels as well as customer satisfaction.

Enhanced financial access & decision-making using AI-powered predictive analysis

Even as AI-powered tools like chatbots and virtual assistants are helping banks in delivering quick and personalised customer experiences, Big Data analytics and Gen AI are revolutionizing the digital customer journey by providing intelligent insights and automating several banking functions. These technologies are facilitating banks in achieving 100% digital onboarding and other convenience features including auto-login, personalized recommendations and even risk management services to protect investment portfolios. What’s more, for the unserved segment of the Indian population that is devoid of any credit history, AI-powered predictive analytics is supporting banks in providing them with credit access and other banking services by assessing loan risks using computational models.

Fraud Detection and Risk Management

With most Indian banks having implemented AI-based fraud detection systems, they are able to continuously monitor transactions and flag suspicious activities by using deep learning techniques to analyze transaction histories and user behaviours. Advanced machine learning algorithms can detect unusual patterns and anomalies in transaction data, identifying potential fraud in real-time and helping banks minimize financial losses while protecting customer assets. As these tools are able to perform these functions with better accuracy and repeatability than human-based operations, they are proving indispensable across critical functions like customer service, risk protection as well as compliance reporting & management. What’s more, financial institutions can now not only perform these tasks at a larger scale due to AI, but also deploy their human capital towards more strategic tasks and initiatives. 

Increased banking efficiency translating into significant cost and time savings

According to the McKinsey Global Institute (MGI) , Gen AI solutions are expected to contribute additional value corresponding to 2.8%- 4.7% of total industry revenues through productivity gains across the global banking landscape. A large part of this contribution will come due to the elimination of manual tasks and reduced risk of human error. That said, the increasing use of Gen AI tools across both customer facing and internal functions where text modalities are commonplace will yield significant cost and time benefits in the future. Similarly, the ongoing pace of development in AI tools and their increasing usage will ensure that routine tasks such as document processing, customer onboarding and client servicing will soon become a thing of the past; being replaced with AI-powered tools that can deliver better outcomes at a reduced cost.    

Future Prospects and Challenges

Widespread AI adoption also presents several challenges; chief amongst which are data privacy and security concerns. Ensuring that AI systems are unbiased and transparent is another critical challenge, requiring robust regulatory frameworks and ethical guidelines. Still, the future of AI in Indian banking looks promising, with the next wave of innovation ostensibly being powered by deeper integration of technologies like AI, the Internet of Things (IoT), big data analytics and blockchain across banking channels. The launch of India’s own Central Bank Digital Currency (CBDC) has already kickstarted this journey and prepared the foundation for a ‘digital cash’ economy. With many banks and FinTech lenders already providing 100% digital customer journeys, AI is set to enhance the banking experience for millions of Indians, prioritizes their individual needs and preferences while also offering more secure, transparent, and efficient services.

Sanjay Kukreja

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Sanjay Kukreja is Global Head – Technology at eClerx.