In the midst of a rapid digital revolution, the banking and financial sector in India is undergoing a profound transformation, largely driven by the integration of Artificial Intelligence (AI) and Machine Learning (ML). The traditional obstacles associated with banking are rapidly disintegrating, and the days of mandatory visits to physical bank branches are fading into obsolescence. The rise of branchless banking, supported by AI and ML technologies, has transformed access to financial products and services, offering individuals the ability to meet their banking needs quickly, conveniently and cost-effectively with a few taps on smartphones or laptops. AI is emerging as a catalytic force to foster financial inclusion and advance the realm of digital banking. This transformative power allows banks to dismantle long-standing barriers such as physical distance to branches, financial illiteracy, unfamiliarity with banking processes, limited access to finance, and the absence of credit histories. The adoption of AI has given rise to innovative digital solutions encompassing online banking, mobile apps, contactless payments, biometric authentication, chatbots, virtual assistance, personalized financial services in addition to new business models such as peer-to-peer lending using credit models using alternates. data, risk assessment using machine learning. These solutions collectively improve operational efficiency and elevate the overall customer experience. A significant impact of AI in the digital banking landscape is evident in the metamorphosis of lending practices. Traditionally, creditworthiness has been measured by historical financial data, credit reports and other indicators, disfavoring those with minimal or no credit history. AI has addressed this challenge by empowering banks to extend loans even in the absence of conventional data sources. By leveraging alternative data sources such as utility and GST payments, mobile phone usage, social media activity and rental history, banks can gather information about the financial behavior of potential borrowers, enabling informed lending decisions and the creation of comprehensive credit profiles, especially for the unbanked or underbanked demographic. The collaboration between banks and digital solution providers, facilitated by the synergy of AI, ML, and other technologies, has permeated the lending domain. This collaboration spans the entire life cycle of a loan, from customer application to onboarding, approval, credit disbursement and management to collection and recovery. Customers now have access to loan products through user-friendly mobile apps or online platforms, eliminating the need for personal interactions, physical document exchanges and lengthy approval processes.
Looking ahead, the trajectory for banks involves an accelerated embrace of digital technologies like AI to foster inclusive lending. This involves providing small loans or microfinance to various segments of the population, especially those who may not fit the conventional mold of creditworthiness. Furthermore, the pivotal role of AI and ML in risk management for Financial Crime Surveillance, spanning Anti-Money Laundering, Fraud Monitoring and Prevention, and Cyber Security, cannot be overstated. Additionally, the integration of generative AI into conversational UI improves customer engagement by facilitating intuitive and context-based interactions, contributing to the ongoing transformational journey of the banking and finance sector in India.
This article is written by Rajesh Mirjankar, Co-Founder, MD and CEO, Kiya.ai. All opinions expressed are personal.
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