Generative AI (GenAI) is a type of artificial intelligence that can create new content or data from scratch, such as images, text, audio, video, and code. GenAI has many applications in various industries and domains, but one of the most promising sectors for GenAI is financial services.
According to a recent report by EY, titled "The AIdea of India: Generative AI's Potential to Accelerate India's Digital Transformation", GenAI's impact on the gross value added (GVA) within the financial sector could range from 22 to 26% by the year 2030, potentially contributing an additional $66-80 billion to the GVA. The report also reveals that the financial services industry in India is currently undergoing a "transformative surge", propelled by GenAI. Around 78% of surveyed respondents in the financial sector have either implemented GenAI in at least one use case or have plans to pilot it within the next 12 months.
Some of the use cases of GenAI in the financial sector are:
- Risk management: GenAI can help financial institutions to assess and mitigate various types of risks, such as credit risk, market risk, operational risk, and compliance risk. GenAI can also generate realistic scenarios and simulations to test the resilience and robustness of financial systems and models.
- Fraud detection: GenAI can help detect and prevent fraudulent activities and transactions, such as money laundering, identity theft, and cyberattacks. GenAI can also generate synthetic data to augment the existing data and improve the accuracy and efficiency of fraud detection algorithms.
- Customer service: GenAI can help enhance the customer experience and satisfaction by providing personalised and tailored services, such as chatbots, robo-advisors, and voice assistants. GenAI can also generate natural language and speech to interact with customers in a human-like manner.
- Personalisation: GenAI can help offer customised and relevant products and services to customers, such as recommendations, offers, and insights. GenAI can also generate personalised content and messages to engage and retain customers.
However, the adoption of GenAI in the financial sector also faces some challenges, such as:
- Regulatory scrutiny: Financial organisations are grappling with increased regulatory scrutiny related to governance and standards concerning the development of large language models. There is a need for clear and consistent regulations and guidelines to ensure the ethical, responsible, and transparent use of GenAI in the financial sector[^1^][1].
- Skills gap: There is a shortage of skilled and qualified professionals who can develop, implement, and manage GenAI solutions in the financial sector. There is a need for more training and education programs to equip the workforce with the necessary skills and competencies to leverage GenAI[^1^][1].
- Use case identification: There is a difficulty in identifying and prioritising the most suitable and impactful use cases of GenAI in the financial sector. There is a need for more research and innovation to explore and discover the potential applications and benefits of GenAI[^2^][2].
Despite these challenges, the report suggests that India has a unique opportunity to become a global leader in GenAI, as it has a large and diverse talent pool, a strong digital infrastructure, a vibrant startup ecosystem, and a supportive government policy. The report also recommends some key actions for the stakeholders to accelerate the adoption and impact of GenAI in the financial sector, such as:
- Building partnerships and collaborations among the public and private sectors, academia, and civil society to foster a conducive and inclusive GenAI ecosystem.
- Developing and implementing best practices and standards for the ethical, responsible, and transparent use of GenAI in the financial sector.
- Investing and innovating in GenAI solutions and platforms that can address the specific needs and challenges of the financial sector.
- Enhancing the skills and capabilities of the workforce and the customers to leverage GenAI in the financial sector.
GenAI is a powerful and disruptive technology that can transform the financial sector in India by 2030. By embracing and harnessing GenAI, the financial sector can enhance its value creation and productivity, and contribute to the economic growth and social development of the country.
