BFSI's big AI turn moves business needle for IT farm slump hits

Banking, Financial Services and Insurance (BFSI), the biggest buyers of Indian technology solutions, is expected to provide much-needed ballasts for a $280 billion industry that has struggled to raise its top line in a business environment that is shaking with AI-induced layoffs, towering tariff hurdles and potential inflation geographical challenges.

In this background, Wall Street and London's Citibanks are relatively good. With all accounts banks and financiers working on AI, the sector has witnessed an increase in payment modernization, asset services and platform integration, increasing demand for technology input.

“BFSI Vertical continues to be Infosys' strategic growth driver, with strong client interests in areas such as payment modernization, asset services and platform integration, particularly as financial institutions seek to simplify operations and enhance the customer experience while providing new experiences.

The macroeconomic environment plays an important role in shaping demand. Continuing inflationary pressures, interest rate fluctuations, and geopolitical uncertainty have made BFSI clients focused on balancing innovation and cost-effectiveness. This will lead to a shift from discretionary digital projects to a more integrated cost take-out programme that offers broader and measurable business outcomes, Gada added.

Currently, BFSI accounts for around 30% of the total revenue in the IT services industry, which is over $280 billion, according to industry body Nasscom and analysts.

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The sector, an early adopter of technology, is expected to spend the highest costs at $270-29 billion at AI/genai and 35-40%, with healthcare at 25-30% in fiscal year 2024.

Early movements

Data from the BNP Paribas contract momentum report also highlights that BFSI cut most transactions in May 2024 with six wins of 17 large transactions bagged by major IT companies.

Furthermore, the latest third quarter from March to May showed a strong momentum trend that the global largest IT giant, Accenture, continued in the BFSI vertical, peaked at 13% from a year ago.

The Nomura Report cited similar optimism about India's IT services. This cited services with healthy demand in the BFSI vertically with strong results from global banks and support for significant impacts (unlike the core manufacturing sector) from ongoing tariff issues. “Given the US administration's 90-day tariff suspension in early May, demand conditions are largely stable. As clients continue to prioritize cost-cutting, transactions center around cost-takeout and vendor integration.

Most industry experts have seen some of the green shoots of BFSI last longer, especially in the areas of digital banking and regulatory technology.

Technology Research and Advisory Firm's June report on the Agent AI Market states that BFSI remains a beacon of AI innovation with 30% of use cases/POCs (proof of concept). “This is driven by the industry's rich, unstructured, unstructured data. This is the first step to successful adoption of Agent AI in critical workflows. As Agent AI has increased its pace over the last two quarters, approximately 70% of Agent AI use cases are concentrated in three industries: BFSI, Retail and Manufacturing.”

Headquartered by BENGALURU, Infosys, India's second-largest IT leader, with a 28.4% share of BFSI revenue, is working with clients to modernize its technology foundation and transform its core operations and processes.

“We are seeing strong momentum in areas like payments, so that cloud-native platforms can improve real-time processing, faster payments, and cost-effectiveness of delivery. In core banking, many institutions will provide their legacy to provide digital models, as they provide digital models, as they provide digital momos, as they provide digital models, as they provide digital momos, and gradually benefit from the benefits of operational and experience as they undertake modernization programs,” Gada pointed out.

He said changes in regulations, competitive pressure, increased costs, customer expectations, and a market-level focus to launch AI-enabled services are pressing financial institutions to act with urgency.

“This is no longer a technology upgrade or a digital program. It is a strategic obligation to employ AI for immediate and long-term business benefits. AI and the cloud are being adopted not as isolated tools, but as integration levers to transform end-to-end processes and deliver large-scale business outcomes.”