90% financial orgs in India focusing on AI, GenAI for innovation

Ninety per cent of Indian financial institutions are focusing on artificial intelligence (AI) and GenAI (Generative Artificial Intelligence) as the primary technology enablers of innovation, according to a PwC India report published on Sunday. 
Titled 'Mapping the FinTech Innovation Landscape in India,' the report highlights the increasing importance of data analytics, with 74% of participants acknowledging its role in enhancing insights and decision-making.

The survey, which included 31 financial institutions such as banks, insurance companies, and fintech firms emphasizes that AI and GenAI lead innovation efforts. Furthermore, 84% identified customer experience and engagement—especially in acquisition, onboarding, and servicing—as vital areas for innovation, with over half also pointing to product distribution.

The report sheds light on risk management, operations, and regulatory compliance, underscoring the sector's commitment to strong governance amidst technological changes. Mihir Gandhi, Partner and Payments Transformation Leader at PwC India, states that as the fintech industry evolves, growth must balance digital security and regulatory compliance, emphasizing the need for fintechs to adapt to a shifting regulatory landscape while focusing on profitability and long-term sustainability.

PwC India found that 65% of participants consider risk mitigation and regulatory adaptation essential, while 45% prefer fostering innovation primarily through internal initiatives. Vivek Belgavi, Partner and Leader - Fintech, Alliances and Ecosystems at PwC India, notes that collaborative innovation is crucial for quicker market entry and improved productivity.

The report however identifies resource limitations, particularly in talent and technological complexity, as significant challenges in executing innovation strategies. Additionally, 58% of respondents lack a dedicated unit for managing innovations, it said. 

According to EY India's report on Generative AI's potential published in February, 78% of financial services firms have either implemented or plan to pilot the technology in the next year. GenAI could significantly impact the Gross Value Added (GVA) in financial services, potentially adding $66-$80 billion by 2030, with 83% of firms envisioning partnerships with external tech providers, it said.

Needless to say, many Indian banks, including the State Bank of India and major private sector banks like HDFC, Axis, and IndusInd Bank, are adopting GenAI to enhance customer engagement and service delivery. Avinash Raghavendra, President and CIO of Axis Bank, told TechCircle that for the bank AI streamlines operations and improves decision-making. He emphasized on safety and ethical considerations in AI, noting that “Axis Bank is prioritizing generative AI integration across its operations”.

The Bank of Baroda recently launched a Generative AI-powered virtual relationship manager (VRM) that provides real-time information about the bank's products and services. It also captures customer requirements for specific banking services. 

IT spending by India's BFSI sector is projected at $13.2 billion in 2024, up 12.2% from 2023, with software spending expected to rise 18.5% year-on-year, according to a report published in June by market research firm Gartner. The sector however continues to face challenges from smaller fintech players, with experts suggesting that integrating front-end and back-end operations could help traditional institutions compete more effectively. Raghavendra also believes that within the next four to five years, GenAI will revolutionise the financial services industry.