Transforming Banking: The Power of Gen AI in Delivering Personalized Experiences and Intelligent Insights

By Indranil Mukherjee

The government’s push towards financial inclusion and digital India along with smart phone mobile penetration has been a game changer. Additionally, UPI has revolutionized digital transactions and created a uniquely connected financial ecosystem. Banks and fintech firms saw significant increase in penetration and market expansion. Currently, India is estimated to have the highest number of digital banking users globally, beyond the current base it is expected that the transformative power of gen AI will fuel the next phase of growth.

Most banks are harnessing the power of gen AI for reinventing and reimagining their processes, as they continue to be challenged by the digital native fintech firms that are not constrained by the traditional ways of working or operating models. Most BFSI firms in India are strategically investing in gen AI that provides positive impact to the entire value chain across different products and services. This is driving faster innovation in product/service design, marketing through hyper-personalization, overall enhanced responsiveness and predictable ROI in areas such as customer service and experience, risk and compliance, pricing, collections, churn management and overall cost efficiency.

KPMG reports that the adoption of generative AI (gen AI) by Indian banks is rapidly increasing, with 76% of financial services executives prioritizing its use for fraud detection. Gen AI’s ability to analyze large datasets is also key in compliance and risk management, cited by 68% of respondents, while 66% plan to enhance customer service with AI-driven chatbots.

Enhancing Customer Experiences

In India, banks are leveraging AI-powered chatbots and Robo advisory virtual assistants to elevate customer service by understanding complex interactions and providing personalized responses. For example, India’s largest bank, SBI introduced chatbot, “SBI Intelligent Assistant (SIA)”, in 2017. Since then, SIA has managed customer inquiries, improving satisfaction and freeing human agents for complex issues. These chatbots handle multiple languages, making banking services accessible to India’s diverse linguistic landscape.

Driving Operational Efficiencies

Operational efficiency is crucial for Indian banks. AI-driven automation streamlines processes like loan approvals and fraud detection, reducing costs and enhancing efficiency. ICICI Bank, for example, has implemented AI to process loan applications faster, reducing the turnaround time from days to mere hours. This not only accelerates service delivery but also enhances the overall customer experience by providing quicker resolutions.

Fortifying Cybersecurity

India’s threat landscape demands strong cybersecurity. Generative AI boosts defenses by detecting threats in real-time. HDFC Bank has adopted AI-driven solutions to monitor networks, identify anomalies, and protect customer data, safeguarding trust and integrity in a digitizing economy.

Navigating Regulatory Compliance

The Reserve Bank of India (RBI) actively promotes digital transformation and regulatory compliance. AI enhances anti-money laundering (AML) and know-your-customer (KYC) processes, helping banks prevent fraud and streamline compliance. It enables efficient data analysis and risk management. However, AI adoption requires a robust framework to address transparency, data privacy, and accountability, ensuring ethical and unbiased operations.

Impact on Financial Inclusion and Rural Banking

AI can greatly boost financial inclusion in India’s rural areas by analyzing data to identify underserved regions and customizing financial products to meet their needs. Banks like Bandhan Bank are using AI to design micro-loans and savings products that empower rural populations. Additionally, AI can facilitate the deployment of low-cost digital banking solutions, making financial services more accessible to rural communities.

Enhancing Digital Payment Systems

In financial year 2024, almost 164 billion digital payments were recorded across India, a significant increase compared to the previous three years. This rapid growth is propelled by innovations in AI. AI technologies are improving the security and efficiency of digital payment platforms, thus encouraging wider adoption. UPI platforms, integrated with AI, are capable of offering personalized payment options, analyzing spending patterns, and providing security against fraudulent transactions. The integration of AI in these systems ensures that digital payments are not only faster but also more secure, fostering trust among users.

Indian Context and Challenges

While the potential of generative AI is immense, Indian banks face challenges like outdated infrastructure and a shortage of skilled AI professionals. Addressing these requires strategic investment in technology upgrades and workforce training to fully leverage AI’s capabilities. Banks must also develop a robust data governance framework to ensure data reliability and integrity, the foundation of any AI system.

Generative AI promises operational transformation, improved customer interactions, and innovation for Indian banks. By overcoming challenges and focusing on key success factors, banks can leverage this technology to meet strategic goals and secure a competitive advantage. As AI evolves, its integration into banking will drive efficiency, growth customer satisfaction.

(The author is Indranil Mukherjee, Senior Vice President and Service Offering Head, Infosys Salesforce Services, and the views expressed in this article are his own)