The financial services industry is at a critical moment. Traditional models of banking and lending have been reshaped by rapid technological advancements and changing customer expectations. In this environment, artificial intelligence (AI) is emerging as the most transformative force. For banks and non-banking financial institutions (NBFIs), AI is no longer an innovative tool, but a strategic need for growth, efficiency and survival.
In recent years, customer expectations have changed dramatically, and are influenced by the seamless digital experiences offered by companies outside the financial sector. Rather than just comparing banks with other banks, consumers compare them to platforms like Uber, Netflix, Foodpanda, Bkash, and Patao. To meet these expectations, banks and NBFI are rethinking customer engagement by incorporating AI at the heart of their operations. Intelligent systems can predict user needs, recommend tailored solutions, and provide seamless service across multiple channels.
Follow Daily Star's Google News channel for all the latest news. AI is turning banks into a more personalized, frictionless experience. The app can analyze spending patterns, provide relevant suggestions, enable secure payments via biometric capabilities, and provide rewards based on lifestyle habits. It also helps customers intelligently manage their finances by prioritizing payments, recommending savings and investment options, and providing daily overviews with reminders. By integrating with other apps and providing consistent services across channels, AI makes banking more convenient, proactive and tailored to individual needs.
Beyond customer engagement, the strength of AI lies in its ability to enhance decision-making across the organization. Banks and NBFIs use machine learning to process vast datasets and generate insights that guide lending, risk management, fraud detection and collections. Loans that once required several days of paperwork can now be approved within seconds by analyzing cash flow data, behavioral patterns and external signals. For microfinance institutions and alternative lenders, AI provides a way to use alternative data, such as mobile use and transaction records, to serve individuals and small businesses who lack traditional credit history. These capabilities increase efficiency and expand financial inclusion by enabling agencies to reach unserved segments with confidence and accuracy.
To get the full potential of AI, we need to modernize our technology infrastructure at the core of financial institutions. Legacy systems designed for stability and compliance often lack the flexibility of real-time AI applications. To overcome these challenges, banks are investing in scalable cloud-native infrastructure, open API frameworks and centralized data management systems that eliminate silos and provide a unified view of their customers. Upgrading these foundations will allow agencies to enable faster innovation, reliable risk monitoring and seamless external integration. Many NBFIs are not burdened by legacy systems, allowing them to jump directly into these modern architectures, offering natural advantages in building agile AI-driven operations.
However, technology alone is not enough. To be truly AI-first, financial institutions need to transform their operating models and talent strategies. Traditional departments between business and technology teams must make way for trans-functional, agile groups that embed data scientists, AI engineers and product managers who handle customer journeys and product performance as part of their day-to-day operations. At the same time, institutions need to rethink their culture, promote collaboration, experimentation, and continuous learning, and reskill existing staff on the demands of an AI-driven future.
The journey to becoming an AI-first financial institution is ambitious, but increasingly essential. Financial institutions embracing this transformation can build deeper and more lasting relationships with their customers, increase market share and achieve sustainable profitability in industries reformed by the digital ecosystem. Fintech innovators, technology giants and people slowing the risk of being overtaken by new platforms that incorporate financial services into their daily lives. AI is not just a tool for efficiency, but the foundation of a new era of financial services where intelligent, personalized, seamless experience defines value. For banks and NBFIs, the path ahead is to fully utilize the power of AI for innovation, competition and prosperity in the digital age.
The author is a banker and economic analyst
