GenAI To Drive Indian Banks’ Revenue Higher By Over 6%, Enhance Margins In Near To Medium-term
In addition to revenue gains, productivity gains are expected to be manifold
Indian banks stand to gain significantly from the adoption of Generative AI (GenAI) technology. According to industry experts, the banks may see their revenue grow by over 6 per cent in the near to medium term.
In a recent analysis conducted by Accenture globally, it has been revealed that the adoption of Generative AI (GenAI) could potentially revolutionise the landscape of banking, leading to increases in revenue, productivity and efficiency. The findings suggest that banks leveraging GenAI could further see 1-2 per cent in cost savings, with cost-to-income ratios declining by up to 400 bps.
“Our global research shows that banks can leverage generative AI to reinvent their enterprise, leading to a 6 per cent increase in revenues, a 22 per cent to 30 per cent increase in employee productivity, and a higher return on equity of 300 basis points,” Manoj Singodia, Managing Director and Lead of Financial Services at Accenture in India told BW Businessworld.
“Indian banks can expect similar benefits by harnessing the power of generative AI to not only boost their operational efficiency but also significantly enhance customer experiences,” he added.
Two analysts from separate brokerages, speaking on condition of anonymity, asserted that the revenue gains for Indian banks could surpass the 6 per cent mark, with productivity gains expected to be manifold. This sentiment was echoed by Sameer Goyal, Senior Director & Head of Engineering at Acuity Knowledge Partners, who anticipates even higher numbers.
“While application of GenAI can help cut bank’s costs in several areas such as customer servicing, portfolio management, wealth advisory etc., which will improve margins, new revenue can come from various avenues such as cross-selling, upselling, referral customers, and innovative products and services,” Goyal commented.
Against the backdrop of a huge increase in AI and generative AI services, Indian banks including nation’s largest lender State Bank of India (SBI) and Kotak Mahindra have recently announced increase hiring for IT roles. Majority of banks in the country have stepped up their efforts on AI to support and accelerate growth.
Ganesh Rengaswamy, Partner at Quona Capital, stressed the strategic significance of GenAI adoption for Indian banks. He said, “The adoption of GenAI can position Indian banks competitively, promoting operational efficiency, customer engagement, and product innovation. Banks that effectively leverage GenAI are likely to witness tangible financial benefits, strengthening their market position and financial performance.”
“Although quantifying the exact ROI is challenging, the integration of GenAI aligns with long-term growth and digital leadership. Banks that effectively leverage GenAI are likely to witness tangible financial benefits, strengthening their market position and financial performance,” he asserted.
_20240701175159_original_image_19.webp)