AI's transformative impact on India's financial services

artificial intelligence

By Vaas Bhaskar 

In 1995, buying (and paying for) ‘things’ online felt reckless; many web users swore they’d never type a credit-card number into a browser. Today, we tap twice on a phone and think nothing of wiring rent across town. We have always underestimated the impact of Platform shifts (PC, Internet, Mobile, Cloud, etc.) on how financial services are delivered. However, in each of these cases, there has been a profound impact on Access, Experience and Efficiency. As we sit at the precipice of the next platform shift, it feels inevitable that it will bring big changes across financial services.

Put simply, modern AI does two things its predictive forebears never could: think like a knowledge-worker and talk like a human. The first super-power is reshaping the operations of incumbent banks and financial institutions; the second will rethink how consumers consume financial services. The corollary of this is two large opportunities for Indian start-ups and tech incumbents: (a) Build AI platforms and services that will enable financial institutions to AI-supercharge their internal operations and processes, (and) (b) Re-imagine how financial services are delivered to customers

Financial institutions have been on a path of increasing digitization and thus reducing manual and cumbersome tasks. Over the last decade, private banks in India have reduced employee spends as a percentage of revenue by 200bps (18% to 20%), with a concomitant increase in tech spends (2.8% to 4.6%). AI will inevitably super-charge this trend and the key executives are taking note. In a recent survey by EY India on AI adoption priorities among financial services firms, 68% cited customer experience as the top transformation priority, followed by operations (47%), underwriting (32%), and sales (26%)

We are increasingly seeing AI in the production environment of many large financial institutions, albeit for very limited and simple use cases, e.g., monitoring call centers, soft collections, simple regulatory reporting, etc. Based on current technical readiness and nature of the task, we see two immediate areas of adoption over the next 12-24 months – customer communication, and middle/back office automations in compliance, risk & credit ops.

However, adoption isn’t without its hurdles. In conversations with senior leaders at large financial institutions, two challenges stand out. First, the sector’s unique demands, around compliance, explainability, and customer trust, are rarely addressed by generic AI solutions. Second, there’s a shortage of in-house talent to identify the right use cases, deploy effectively, and monitor outcomes. To address this, we’re seeing the rise of FS-specialized AI companies that are built from the ground up with domain-specific guardrails, explainability, and risk frameworks baked in. Many are also rethinking the service delivery model itself by using Forward Deployed Engineers (FDEs), i.e. technical experts embedded within client teams. FDEs bridge the gap between abstract models and operational reality, helping clients move from unclear ambition to working AI systems, even in the absence of deep internal capabilities.

From the customer’s lens, India’s financial services story is a curious mix of staggering digital success with significant gaps still remaining. Nearly 90%+ of Indian adults now hold a bank account, and UPI enabled 18 billion transactions in June 2025 alone—the largest real-time payment system in the world.

However, large gaps remain in both access and experience. The penetration of insurance and wealth products is among the lowest in the world (insurance penetration in India is about 3.7% of GDP; mutual fund AUM as a percentage of GDP is around 19%). More importantly, even for customers who do have access, customer love hasn’t followed: average banking Net Promoter Score (NPS) hovers around +30—among the lowest of any consumer category.

AI has the potential to close both the access and experience gaps in a way that the first wave of digitization could not. Instead of tapping through menus or learning new interfaces, customers will simply converse—by text, voice, or even vernacular video—with assistants that are available 24/7, learn individual preferences, spot intent from ambient data, and dispense advice without human biases or time limitations. Think of it as moving from “click for service” to “talk like I’m your RM”, at population scale.

In a country of diverse languages and low financial literacy, services delivered through voice (and video) could be a game-changer. We believe that voice AI, combined with deep personalization and autonomous operational agents, can enable a complete re-imagining of how financial services are delivered—especially for complex products like insurance and investments. We’re starting to see glimpses of this future globally, and some early experiments in India. For example, Lemonade’s claims bot “AI Jim” pays ~40% of claims instantly, reframing consumer expectations around payouts.

Of course, we don’t expect this change to happen overnight—even the mobile shift took a decade or more to fully play out. Regulators will closely scrutinize advice algorithms; customers will need time to trust synthetic voices with their finances; and banks must implement robust guardrails to address bias, hallucinations, and privacy concerns. We expect an interim phase of AI-augmented workflows, where bots triage and humans close, before fully AI-native journeys take shape.

The winners in this space will be those who design from the ground up for conversational finance, not those who merely put a voice or chat wrapper on old form factors.

The AI wave is upon India, coinciding with the country’s transition from a low-income to a middle-income economy. This presents a unique opportunity for both incumbents and new players to redefine how financial services are accessed and delivered—an opportunity unlike any in the past. When India reimagined payments during the mobile platform shift, we architected UPI—a system unlike any other in the world. AI could do the same for a wide range of financial products and service delivery models in the decade ahead.

(Vaas Bhaskar, Partner, Elevation Capital.)

Views are personal and do not represent the stand of this publication.