Mumbai, November 8, 2024 — Despite the excitement surrounding artificial intelligence (AI) and Generative AI (GenAI) in boardrooms, corporate leaders in India’s banking, financial services, and insurance (BFSI) sector are grappling with pressing challenges that overshadow the hype. Chief Technology Officers (CTOs) from top BFSI and fintech firms gathered at the Business Standard BFSI Insight Summit 2024 in Mumbai on Thursday to discuss the readiness of Indian data for the “AI decade,” and the results highlighted significant hurdles.
At the closed-door CTO Lunch session, the executives shared insights into their current struggles with data readiness, security, compliance, and legacy system limitations. They expressed concerns that while AI has immense potential, Indian data frameworks are not yet equipped to fully harness this technology, primarily due to issues with unstructured data and legacy systems.
“AI requires well-organized, structured data for efficient processing, and unfortunately, much of India’s financial data remains unstructured and scattered across incompatible systems,” said one CTO present at the summit. “Legacy systems, which still hold a significant portion of data, do not integrate easily with modern AI solutions, making it challenging for us to fully leverage AI’s potential.”
Legacy Systems and Data Standardization Challenges
The CTOs highlighted the complex task of integrating older data infrastructure with new AI technologies. Legacy systems are deeply embedded in the operations of many BFSI firms, holding sensitive and historical customer data. However, these systems are often incompatible with modern AI-driven tools, making the transition challenging. Additionally, the lack of data standardization across firms exacerbates the problem, as data has to be cleansed, transformed, and unified before AI models can use it effectively.
“Standardization is crucial for making data AI-ready, but achieving this across varied legacy systems is not straightforward,” noted another CTO. “This requires significant investment, but firms are cautious due to high costs and potential disruptions to existing services.”
Balancing Innovation and Regulatory Compliance
The summit’s discussions also focused on the balancing act between innovation and regulatory compliance. The BFSI sector is subject to stringent regulations, and adopting new technologies often raises compliance risks. As AI applications expand, they bring heightened scrutiny from regulators, especially concerning data privacy and customer protection.
“Regulatory compliance and innovation don’t always go hand in hand. While we want to embrace AI for improved services and efficiency, we must ensure that our technology aligns with evolving industry standards,” explained a CTO. “One misstep could lead to regulatory actions, so there’s a constant tension between pushing forward and staying compliant.”
This regulatory pressure has led firms to carefully evaluate AI deployments and avoid rushing into solutions that might expose them to risk. Instead, they are focusing on gradually upgrading their technological landscape, paying special attention to data protection and privacy.
Data Security and Cybercrime Threats Loom Large
Data security and cybercrime remain top priorities, according to the CTOs at the summit. With the increased digitization of financial services and the move to cloud-based solutions, cyber threats have also evolved, making BFSI firms prime targets for cybercriminals. Data breaches or unauthorized access could lead to severe reputational and financial damage, creating an imperative for enhanced security measures.
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The CTOs acknowledged that while AI can enhance cybersecurity by identifying anomalies and potential threats in real-time, the existing data architecture is not robust enough to support such applications effectively. Securing sensitive customer data while adopting AI solutions is a delicate balance that requires constant vigilance.
“The cyber threat landscape is continually evolving, and AI has the potential to strengthen our defenses. However, integrating AI into security frameworks requires a high level of data readiness and reliability, which we are still working towards,” said a participant.
The Road Ahead: Gradual AI Integration
While Indian data infrastructure may not be fully ready for the AI decade, the CTOs expressed optimism about a phased approach to AI integration. Rather than implementing AI solutions all at once, BFSI firms are focusing on incremental improvements, including data cleaning, structuring, and transitioning select operations to AI-powered tools. The goal is to gradually build a data-ready foundation that can support more sophisticated AI applications over time.
“AI adoption is not an overnight change. We’re prioritizing strategic data organization and exploring pilot AI projects that can work within our existing frameworks,” explained one of the CTOs. “It’s about laying the groundwork now so we can leverage AI’s full potential in the future.”
The CTOs agreed that with sustained efforts, improved data frameworks, and adherence to regulatory requirements, the BFSI sector can eventually overcome these obstacles. The summit concluded with a consensus that while India’s data infrastructure faces current limitations, the sector is committed to evolving in line with global AI advancements, albeit through a cautious and measured approach.
