The increasing integration of Artificial Intelligence (AI), particularly Generative AI (Gen AI), with the financial sector is poised to foster innovation and transform the banking landscape, said State Bank of India (SBI) Chairman C S Setty on Friday.
Speaking at an event organised by the Institute of Chartered Accountants of India (ICAI), Setty highlighted the growing impact of AI and Gen AI in the financial services sector, noting that these technologies have the potential to drive further advancements in banking operations. He stressed that the development of these technologies could enhance efficiency, bolster resilience, and significantly benefit the financial sector at large.
Transforming the banking landscape
Setty emphasized that the ongoing advancements in AI are shaping the future of banking, particularly in terms of how banks offer digital products. He noted that the increasing digitalisation of the Indian economy is reflected in the diverse range of digital banking products currently available to customers, with AI-driven innovations becoming an integral part of these offerings.
“The growing interest in Artificial Intelligence, Gen AI and its integration into the financial sector has the potential to drive further advancements, fostering innovation, efficiency, and resilience for the benefit of the financial sector,” Setty said. He also mentioned that while AI has the capacity to revolutionise banking services, it is equally crucial for banks to strengthen their risk management standards to safeguard against fraud and other illicit activities.
Ensuring robust risk management standards
As AI and Gen AI technologies continue to evolve, Setty stressed that there is a continuing need for banks to refine their risk management frameworks. This includes improving business arrangements, streamlining customer onboarding processes, and adopting more robust security measures to mitigate unscrupulous activities that could potentially compromise the integrity of financial systems.
Banks, according to Setty, must be vigilant in their efforts to integrate these technologies in a way that balances innovation with security. The risk of misuse or vulnerabilities emerging from new technological advancements should not be underestimated, particularly as the industry embraces the widespread use of AI in everyday banking operations.
Consumer education and protection
Along with technological innovations, Setty pointed out the growing importance of consumer education and protection, particularly as vulnerable sections of society increasingly adopt technology-based banking products. As digital banking products become more mainstream, the onus is on both financial institutions and the government to ensure that consumers are adequately educated about the risks associated with these tools, including potential cyber threats.
“Data breaches and operational failures have also increased,” Setty acknowledged, drawing attention to the rising threat of cyber attacks in an increasingly digitalised world. With more individuals and businesses relying on online platforms for their banking and financial needs, the threat of cybercrime looms larger than ever.
The growing threat of cyber attacks
Setty highlighted that cyber crimes are becoming the weakest link in India’s rapidly digitising economy, as well as in many other countries across the globe. He pointed out that certain sectors, such as healthcare, banking, and government institutions, are particularly vulnerable to cyber attacks, making them prime targets for cybercriminals. These sectors handle highly sensitive and personal data, making them valuable to attackers looking to exploit weaknesses for financial gain or disruption.
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In light of these increasing threats, Setty urged banks and other stakeholders to adopt more advanced cybersecurity measures. He stressed that as digitalisation continues to grow, protecting sensitive data and ensuring secure digital transactions should be a top priority for all involved.
The path ahead for AI in banking
Looking ahead, Setty expressed confidence that AI and Gen AI would continue to play an instrumental role in the modernisation of the Indian banking sector. However, he also emphasized the importance of balancing the use of these technologies with adequate safeguards to protect consumers and financial institutions from emerging risks.
In conclusion, the integration of AI and Gen AI into the financial sector is set to bring about transformative changes that could improve service delivery, enhance operational efficiency, and increase overall resilience. However, the challenges of cybersecurity and consumer protection must not be overlooked as these technologies become more entrenched in the daily operations of banks and financial institutions. The Indian banking sector, with its rapid digital adoption, must continue to innovate while safeguarding the interests of its customers and the integrity of its operations.
