As more banks and financial institutions (FIs) show indefatigable appetite for solutions ranging from fraud and risk management to regulatory compliance, the FinTech segment is set for rapid growth in India. In the past year, the banking industry in India began embracing new technologies such as artificial intelligence (AI), machine learning (ML) and blockchain to leverage existing data, expand products and services, and revolutionise the customer experience. In fact, banks are collaborating with FinTechs to experiment with a variety of use-cases, from implementing bot-enabled conversational banking services to using recommendation engines for targeted marketing of financial products.

Even as the FinTech sector slowed down globally, the scene in India presented a different picture with the country emerging as one of the most promising regions for FinTech investment. In 2016, India’s FinTech segment witnessed a strong growth; a boost provided by the demonetisation of high value currency notes. On one hand, the country has the largest unbanked or underbanked population waiting to be covered, while on the other, there are regions—such as Kerala and Gujarat—with a strong technology and infrastructure ecosystem. This provided the FinTech firms the necessary room to implement new technologies and scale operations.

Exciting days ahead for AI and ML

The two terms—artificial Intelligence (AI) and machine learning (ML)—are often used interchangeably; a fact that irritates most technocrats. AI refers to smart algorithms that vary the output based on a wide range of input variables. On the other hand, ML refers to one particular application of AI that ‘learns’ from large amounts of data and makes the required inferences useful to the user.

Banks and FIs are using AI and ML applications in data analytics and customer service for the following reasons: personalising and improving customer experiences, generating better insights, and automating back-end workflows. According to a PwC study, over 36% of large financial institutions in India have already invested in these technologies, and almost 70% reported that they are planning to do so soon.

Systems using AI or ML can undertake the execution of numerous applications such as voice and image recognition, logistics, search and matching, and personalisation. As the financial sector quickly recognises the potential of these two technologies, there is bound to be major progress in the development and adoption of AI in the years to come. Moreover, with Google and Apple incorporating AI and ML features on their mobile platforms, there is a strong indication of high demand for more efficient data analytics. Watch out for this trend in 2018 – the rapid growth of B2C applications in the realm of AI.

Blockchain is here to stay

In the past year, blockchain-based Bitcoin exchanges have been growing in India. The traditional financial services sector is also coming to terms with the fact that the blockchain architecture is ideal for different use-case scenarios. With blockchain-based systems offering vastly improved trust, transparency, and native regulatory advantages, the adoption of blockchain in the Indian banking sector is also finding support from regulators.

As large players in the BFSI sector are inclined towards innovative blockchain implementations, the technology shows promise of rapid adoption in the coming years. The significant back-office savings and transparency that blockchain provides are very attractive from a regulatory and audit perspective. Within the next year or so, about three main blockchain applications will dominate the Indian market:

Payment / fund transfer infrastructure

Smart contracts

Digital identity


However, as is the case of any new financial technology, a major issue hindering the development of blockchain is the lack of continued support and collaboration between participating parties. Similar to the AI and ML segment, FinTech startups and banks must work together to develop solutions that allow blockchain to get into the mainstream.

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