India’s Digital Revolution: Navigating the Opportunities and Challenges of GenAI in Banking

India’s digital transformation has been nothing short of extraordinary, with a significant section of its 1.4 billion people embarking on a transformative journey in recent years. The country’s Banking, Financial Services, and Insurance (BFSI) sector has been at the forefront of this revolution, with the Unified Payments Interface (UPI) overhauling money transfers across the country. The National Economic Survey for 2023-24 revealed that a staggering 88 billion+ digital financial transactions were successfully completed in the country.

The latest developments in Generative Artificial Intelligence (GenAI) have elevated the levels of inclusivity in digital banking, empowering Indians with multi-lingual chatbot-driven customer services and personalized financial advice. However, like any other technological advancement, GenAI also poses significant challenges, including the risk of financial fraud. Criminals are actively harnessing GenAI to carry out financial fraud, exploiting newer frontiers such as social media hacking, search history tracking, and smishing.

GenAI as a Double-Edged Sword: Tracking the Problem?

Several elements unique to India’s demographic make the country particularly susceptible to financial fraud. These include a large number of senior citizens who can be slow to identify and report cyber fraud, limited digital literacy, and a large diaspora that results in substantial overseas money transfers. Proactively monitoring and tracking the unorganized sector is also a difficult task, with action often taken only after a crime has occurred.

Most major Indian banks have AI-assisted preventive measures to combat cybercrime, such as multi-factor authentication and anomaly identification. However, these safeguards are not foolproof and may lack teeth against new-age GenAI-produced content, which can be extremely realistic. KPMG estimates that 75% of Indian internet users encountered deepfake content in 2024.

An Answer in AI-Driven Solutions

The key to addressing these challenges lies in the deployment of a multi-layer strategy that works to address the problems on two main fronts. Firstly, proactive protection against account takeovers or fraud initiation by cybercriminals, which can counter these attempts early in their tracks. The second measure is a safety net that halts fraudulent transactions initiated by the customer themselves, in case the first layer of defense fails. However, the key to managing both fronts is early and potent detection.

AI models trained on synthetic data can be an effective way of bolstering security systems. GenAI can be used to create data that mimics popular fraud schemes, such as identity theft, investment fraud, and romance investment. This data can then be fed to security models through extensive training, which boosts accuracy and sharpens their ability to identify and flag suspicious activity.

What’s Next for India?

India’s digital infrastructure boasts enormous potential, backed by the government’s targeted efforts to upgrade services in Tier 2 and Tier 3 cities. The widespread use of mobile applications, affordable data, and increased connectivity means solutions can be deployed quickly and effectively. In 2025, the Digital Personal Data Protection Act will be fortified, providing primary legal protection against online fraud. The Reserve Bank of India (RBI) is constantly striving to enforce strict guidelines and mandates on cybersecurity frameworks, with banks being asked to file reports on incidents instantly and with increased regularity.

The next step in India’s digital transformation process is propagating cybersecurity to all corners of the nation, with the BFSI sector at the forefront. While there is still much to be done, the foundation is already in place for India to become a world leader in safe, secure, and inclusive digital banking.

About the Author

The author is Saugat Sindhu, Global Head of the Strategy and Risk practice for Wipro Cybersecurity and Risk Services.

Disclaimer: The views expressed are solely of the author and ETCISO does not necessarily subscribe to it. ETCISO shall not be responsible for any damage caused to any person/organization directly or indirectly.

Published On Mar 17, 2025, at 09:58 AM IST

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