The evolution of partnerships between banks and financial technology (‘FinTech’) companies is facilitating the widespread adoption of advanced technologies, including artificial intelligence (‘AI’), machine learning (‘ML’) and Generative AI (‘GenAI’) in the financial sector. These innovations enable financial institutions (‘FIs’) to significantly improve operational efficiency, by enhancing risk management, fraud detection and customer engagement. Regulatory bodies, particularly the Reserve Bank of India, are actively leading efforts to promote technological innovation within the financial sector through various initiatives, including the RBI Innovation Hub, the EmTech Repository and regulatory sandboxes, while adopting a risk-based approach to the application of such emerging technologies in financial services.
Leveraging AI in the Financial Sector
Banks and FIs have leveraged AI and other technologies as part of various functions and processes. The use of such technologies has, in some instances, been recognized and enabled by regulations. For instance, the RBI Master Direction on KYC enables the use of AI/ML solutions by regulated entities for periodic monitoring of transactions as well as for video-based customer identification.