The BFSI sector has always been a frontrunner in terms of tech-deployment and has made exceptional use of technologies such as cloud to ensure cost efficiency and modernise their systems. Robust domestic demand, public infrastructure investments, and the strengthening of the financial sector collectively contribute to India’s performance.
According to a recent survey by Experian, about 74 per cent of Indian financial services and telcos companies surveyed are using cloud for credit risk decisioning. Notably, India demonstrates impressive AI and Machine Learning (ML) adoption rates, reaching 49 per cent in customer service and 40 per cent in identity verification.
Approximately 85 per cent of surveyed Indian businesses are using external cloud providers for analytics. India’s adoption outpaces countries like Germany (66 per cent), New Zealand (70 per cent), and Spain (58 per cent), solidifying its position as a front-runner in cloud, AI, and ML utilization.
About 60 per cent of Indian businesses see open banking as a gateway to new customer-consented data in open finance.Approximately 61 per cent of business leaders have established a comprehensive Artificial Intelligence (AI) risk management program and 65 per cent believe that AI gives them a competitive advantage, the report further highlighted.
Additionally, it also revealed that a whopping 80 per cent of business leaders surveyed are committed to prioritizing the integration of advanced analytics endowed with AI capabilities.
Risk prioritise for 2024
The top risk priority for most business leaders (55 per cent) is cybersecurity. This is unsurprising considering that 49 per cent have seen an increase in fraud losses over the last year. Following closely behind cybersecurity is data privacy risk at 54 per cent. These risk priorities are interlinked and involve more than protecting data from cyber criminals, the report said.
Credit risk (42 per cent) is the third risk priority and is closely tied to macroeconomic risk. Although energy prices in most regions have decreased from last year’s high, elevated inflation and the cost-of-living crisis is weighing heavily on consumers.
Nearly two-thirds (65 per cent) of respondents anticipate that this squeeze on income will result in a rise in defaults. This puts pressure on lenders to deliver more accurate predictive decisions at originations
and use customer insights to better identify signs of vulnerability – so they can take preventative action before defaults occur, the report further added.
Environmental, Social and Governance (ESG) risk is a growing concern for many businesses (40 per cent). It is well documented that climate disruptions are increasing in frequency and severity with a corresponding impact on many economies.
Role of AI in mitigating these top risks
Effectively mitigating these risks depends on improving the predictiveness of models and unlocking value from a wide variety of data sources. In this regard, AI, particularly ML, stands out as an instrumental tool with immense potential.
Achieving AI success requires large volumes of data and the right data infrastructure. Despite an increase in new data sources, the biggest data-related challenge (for 48 per cent of respondents) pertains to the difficulty in effectively sharing data at a large scale while ensuring trust and security. As a result, 86 per cent of business leaders are prioritising investments in new data sources to better understand risk and affordability, said the report.
The biggest analytics-related challenge for nearly half of respondents (55 per cent) is the ability to seamlessly connect different data assets in a data warehouse that can adequately support AI/ML use cases.
To address this issue, 86 per cent are prioritising investments in cloud technology for seamless data integration with 63 per cent agreeing that externally hosted cloud services are the best way to avoid data silos and aggregate data sources, the report further added.
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