AI being the new buzz word is revolutionizing the world. Unlike the previous generation that could classify, predict, or detect patterns, it has the ability to think and produce entirely new text, audio, images, and even code. This has led to a groundbreaking change, making task automation and efficiency improvements more accessible.  Financial services have been at the forefront on AI adoption, with over 76% of Financial Institutions globally having announced AI initiatives and over 51% having integrated AI in consumer facing products.  Indian financial institutions are also actively embracing AI, with over 45% of banks leveraging GenAI for employee assistance and information distillation. The most common AI applications in India are employee support, followed by chatbots and document processing.

While AI has today become our reality, it’s just the beginning. The use cases span from hyper personalised wealth management services, alternative credit scoring, fraud detection, claims assistance, chatbots to process automation across various business verticals. Some of the most interesting use cases and current applications across verticals are as follows:

  • Payments: Banks are using AI to analyse transaction patterns, flag suspicious activities & to prevent fraud. They are also developing smart recommendation systems to help businesses choose the most convenient and cost-effective payment method for their transactions. Reserve Bank Innovation Hub (RBIH) recently launched MuleHunter AI, an AI-driven solution designed to detect and prevent mule accounts involved in financial fraud.
  • Lending: AI is transforming credit scoring, document processing, defaults modelling across fintechs, Banks and NBFCs. For example: HDFC Bank’s Eva AI streamlines credit assessment and underwriting reducing TAT for end borrowers. Using Robotic Process Automation (RPA) has helped HDFC Bank reduce the TAT for processing loan requests by 50%, improving productivity of data entry staff by 40%.
  • Insurance: There are multiple use cases of AI in Insurance ranging from Underwriting, claims processing and customer experience. FinTechs have launched underwriting platforms with dynamic risk pricing that underwrite in <1 min. Many of the top Insurers have launched their own chatbots and implemented automated claims processing for quicker TAT and better customer experience.
  • Asset & Wealth Management: Multiple start-ups and research houses are building LLMs (Large Language Models) helping users and RMs to recommend right products for their customers. Even regulator SEBI has plans to use AI extensively to process IPO applications as well as Investigations for Fraud. It plans to process over 1000 IPO applications in the next 2 years.
  • Banking & Finance Infrastructure: AI enhances infrastructure through chatbots, RPA, and cybersecurity. SBI, ICICI Bank, and HDFC Bank use AI chatbots for customer service, improving response times. These banks also employ RPA to automate processes like account opening, boosting efficiency. For cybersecurity, major Indian banks use AI to detect cyber threats and ensure compliance, protecting customer data and meeting regulations. Axis Bank has rolled out chatbots for 60,000+ employees while Bank of Baroda has adopted GenAI for transforming customer experience and improving efficiency.

While lots of new initiatives have been undertaken to adopt AI, however, many institutions’ may not be fully geared up due to legacy systems and technology. Additionally, data privacy, reliability and accuracy of these tools are few of the key hurdles that need to be addressed before widespread usage in the sector.

India is well-positioned for the next wave of AI in financial services, with leading banks, NBFCs, and fintechs already leveraging AI for various purposes and supported by the regulators as well. However, scaling these solutions remains a challenge due to legacy infrastructure, data silos, and evolving regulatory frameworks. India’s rapid digital adoption and fintech boom signal strong readiness, but success will depend on modernizing systems, collaborating with regulators for framing better AI governance frameworks, and ensuring AI models are explainable and secure. With the right balance of innovation, governance and Bank fintech partnerships, India is ready for rapid growth and innovation in financial services sector driven by large scale AI adoption.