90% of financial institutions focus on AI, GenAI for innovation: PwC India

Ninety per cent of Indian financial institutions are focusing on artificial intelligence (AI) and GenAI (Generative Artificial Intelligence) as the primary technology enablers of innovation, according to a PwC India report.

As per the PwC India report titled, 'Mapping the FinTech innovation landscape in India' data analytics also continues to emerge prominently across nearly 74 per cent responses, underscoring its integral role in driving insights and decision-making within the financial services (FS) sector.

It said that 31 financial institutions consisting of banks, insurance firms and fintechs participated in the survey.

"Artificial Intelligence (AI) and GenAI (Generative Artificial Intelligence) emerged as the focus area for innovation for Indian financial institutions, with 90 per cent of the respondents citing them as the primary technology enablers of innovation," it said.

Further, 84 per cent of respondents stated that customer experience and engagement - acquisition, onboarding and servicing was the key area of focus for innovation initiatives.

Additionally, over 50 per cent of the participants highlighted product distribution as a key area of innovation.

It can also be noted that the frequent references to risk management, operations and regulatory compliance across several responses highlight the sector's diligence in maintaining robust governance frameworks amidst ongoing technological advancements, the report said.

As the fintech industry continues to evolve, it's clear that growth must be balanced with the critical challenges of digital security and regulatory compliance, Mihir Gandhi, Partner and Payments Transformation Leader, PwC India, said.

"Fintech companies need to navigate an ever-changing regulatory landscape while building compliant partnerships to ensure sustainable success. The focus is shifting towards profitability and long-term viability, emphasising the importance of changing business models, innovation and customer focus," Gandhi said.

PwC India said 65 per cent of respondents considered risk mitigation and adapting to changing regulatory landscapes as critical factors, underscoring the importance of navigating regulatory challenges while innovating.

Also, 45 per cent of the participants preferred to promote innovation primarily through internal initiatives, indicating a strong preference for using internal resources and expertise to drive innovation.

"Collaborative innovation is now seen as a key driver for fintechs, enabling faster speed-to-market and delivering tangible benefits like new product offerings, increased productivity, and reduced operational costs," said Vivek Belgavi, Partner and Leader - Fintech, Alliances and Ecosystems, PwC India.

According to the report, the primary challenges most companies encountered while running their innovation initiatives were resource constraints, particularly in terms of talent and the technological complexity associated with new technologies.

The most common objectives that companies chose for collaborating and partnering were better speed-to-market and collaborative innovation, the report said.

The report also said that 58 per cent of respondents did not have a separate vertical or business unit for managing their innovations.