With pressures from other sectors that control consumer experiences, the banking industry is undergoing significant transformation driven by technological advances. While banks have traditionally been pioneers in technology adoption, changes in the financial landscape, such as the increased use of fintech platforms in developing economies and the Gen AI wave, have created new paths for the banking industry that require strategic transformation. To navigate this evolving terrain successfully, banks must center their strategies on customer-centricity, innovation, workforce development, agility and data protection.The Gen AI wave have driven boardroom conversations in the BFS industry and they are wary of being a highly regulated environment. Banks have launched pilot projects and implemented Gen AI-based POCs. In FY25, there will be many use cases based on Gen AI in the BFS industry in hyper-personalization, in voice and conversational AI, and in transaction analysis and fraud detection.
AI and hyper-personalization: The use of artificial intelligence (AI) and data analytics will transform hyper-personalization in banking. Beyond conventional personalization, this approach will leverage deep insights into individual customer behaviors, historical data and real-time contextual information to offer highly personalized and relevant financial experiences in real time. Many banks have already launched customized credit card rewards programs based on individual spending preferences and personalized financial planning recommendations using AI to improve customer experience.
Voice Technology and Conversational AI: The adoption of voice assistants and chatbots is poised to revolutionize customer interactions. These AI-driven tools will provide seamless, natural conversations for customer service, financial transactions and personalized advice, enhancing the user experience with quick question resolutions and tailored financial guidance. Conversational AI assistants chosen by financial institutions are already revolutionizing customer service by offering voice money transfers, personalized financial advice and convenient task assistance, all through natural conversation.Advanced AI and Machine Learning (AI/ML) Applications: Applications of AI and machine learning are poised to elevate financial processes beyond basic automation. These technologies will enable predictive analytics for informed decision-making, with proactive fraud detection and automated investment management optimizing portfolios through data-driven insights. Some banks use AI to analyze real-time transactions, early fraud detection and optimize investment portfolios for maximum profit.
Fintech companies have provided ease of the banking experience for consumers worldwide and therefore global banks have adopted open banking and platform solutions that integrate and embed financial and utility application systems without compromising data privacy. This trend is likely to continue its momentum over the next few years as this standard evolves to be a new benchmark in the industry.
Open Banking and Platformization: Collaborative ecosystems will thrive through Open Banking APIs and partnerships with fintech companies. This trend will stimulate the secure sharing of customer-enabled financial data, enabling seamless integration with fintech solutions. Financial application platforms will empower customers and foster cross-border partnerships, while traditional institutions will benefit from strategic collaborations to improve service offerings and drive innovation.
Embedded Finance: Financial services will continue to integrate into non-financial platforms, such as e-commerce, social media and gaming, redefining accessibility. This integration will improve user engagement and satisfaction by meeting users in their everyday digital environments, creating a more user-centric and connected financial landscape. Mobile and utility companies have launched app-based payment services that seamlessly integrate financial services into payment platforms, making money management effortless and intuitive.
Regulatory Technology (RegTech): Automation of compliance processes, simplified regulatory reporting and risk mitigation through RegTech solutions will become integrated. Advanced algorithms and data analysis will ensure adherence to evolving regulatory frameworks, improving efficiency and reducing human error. These platforms have automated Know Your Customer (KYC) procedures for banks and financial institutions using facial recognition and ID verification technologies.
Apart from AI, banks will continue to invest in technologies for their modernization journey
Continuous Cloud Migration: The momentum of migration from core banking systems to the cloud will continue to gain momentum. This strategic shift will enhance scalability, flexibility and agility, enabling institutions to quickly adapt to changing demands. Cloud adoption will remain pivotal to faster product launches, upgrades and overall cost efficiency. Several large multinational banking institutions have migrated their core banking systems to the cloud, leading to improved operational efficiency, enhanced fraud detection and cost reduction.
Cybersecurity and Data Privacy: In response to increasing cyber threats, banks will continue to prioritize robust cyber security measures and strict data governance practices. This proactive approach will protect customer information from potential breaches, ensuring compliance with evolving regulations through advanced encryption, multi-factor authentication and regular security audits. Several banks have already implemented cyber defense measures to ensure data privacy, build trust and comply with GDPR regulations, which sets this as a new benchmark in the industry.
Educational Content: Banks have increasingly focused on providing resources and tools for effective financial management. Educational content and interactive tools will empower users to budget wisely, make informed decisions and improve overall financial literacy, fostering customer engagement and loyalty. The online resources and tools provided by banks have helped customers with budgeting, saving and debt management.
Sustainable Finance: In a remarkable shift, investments will increasingly be guided by Environmental, Social and Governance (ESG) factors. Investors and banks would prioritize sustainability, aligning financial decisions with responsible business practices and ethical considerations. This would be a result of increasing awareness of the wider impact of investments, contributing to positive social and environmental outcomes. Banks focus on ESG initiatives exemplify the global push towards a sustainable financial future, serving investors seeking both strong returns and positive social impact.
In conclusion, the banking industry will continue its transformational journey in the current and next financial year by leveraging technological advances such as Gen AI to improve customer experiences and operational efficiency. As financial institutions navigate this dynamic landscape, prioritizing customer-centricity, innovation, agility and data protection will remain paramount. The industry’s commitment to sustainability and ethical considerations will ensure a rounded and progressive future for banking.
This article is written by Gautam Samanta, President & Global Leader- Banking and Financial Services, Coforge. All opinions expressed are personal.
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