Recovery in BFSI fueled by AI transformation deals, says Infosys' Dennis Gada

India’s second-largest information technology (IT) company Infosys said that a better-than-expected recovery in the first quarter was driven primarily by investments in artificial intelligence (AI) within the banking, financial services, and insurance (BFSI) sector. However, a top official of the company highlighted that several clients are yet to streamline their data, which is extremely critical to creating a strong foundation to derive benefits from AI.

“We do see that clearly when banks look at transformation, while overall, the spending is increasing marginally, the spend on AI and AI-led transformation is significantly going up. Clearly, there is a meaningful change in the way BSFI industry is looking at transformation powered by AI,” said Dennis Gada, Global Head of Banking and Financial Services, Infosys, told Moneycontrol.

Infosys shares have been topping 52-week highs after the company beat analyst expectations of Q1 earnings led by the financial services, increasing its contribution in revenue by 110 bps sequentially to 27.5 percent from 26.4 percent. On the other hand, the retail, communication, energy, utilities, resources & services, and hi-tech vertical revenue share decreased, while the manufacturing sector remained flat for the quarter.

The statement by Gada assumes significance as IT companies have been saying that AI proofs-of-concept are gradually moving towards production-grade products. Companies are increasingly seeing benefits from the use of this nascent technology, with Infosys’ rival Teaneck-headquartered Cognizant saying that productivity benefits from AI and automation are helping it work with fewer employees.

AI: Banks’ top priority

Relying on a recent survey by the Bengaluru-based company, of over 400 large banks globally, Gada said that it shows growing importance placed on AI by banks’ stakeholders, including customers, boards, and investors. The survey shows that clients are evaluating how financial institutions can use AI to drive growth and efficiency.

The recovery in the BFSI sector, though still in its early stages, is largely fuelled by AI's ability to address three areas: finding new avenues for growth, driving operational efficiency, and ensuring regulatory compliance. “AI really helps banks in all of these areas,” Gada said.

He added that AI just does not enhance customer experiences with better front-end solutions such as apps and websites, but also digitises the entire banking process, right from front to back to create more efficient operations, and “AI plays a very significant role in that.”

Gada, who has spent almost two decades in the company, said compliance on the regulatory front also drives a large amount of transformation, in which AI is a critical part.

Also read: BFSI global capability centres bullish on Gen AI despite regulatory hurdles

Data foundation’s criticality

“Our advice to all our clients… streamlining the data, creating a strong foundation is extremely critical to get meaningful and sustainable benefits out of AI. Otherwise, it will be very fractional and incremental in terms of certain use cases here and there,” Gada said. He added that getting the data foundation right is extremely and fundamentally important if an organisation wants to become AI-first.

Gada pointed out that while some institutions have made significant progress in modernising their data platforms, others are still in the early stages of this transformation. “Data is the most important foundational aspect of leveraging the power of AI,” he said.

Despite the positive momentum, Gada cautioned that there is still much work to be done. “AI is in a state of readiness to leap ahead as one of the main growth and efficiency strategies of the bank, but still a lot of work (needs) to be done to make it sustainable in the long term,” he said.

This includes scaling AI initiatives, transforming talent, and managing regulatory risks associated with AI implementation.

Also read: Indian IT cos struggle with Gen AI rollout delays amid rising compute, cloud cost