AI and alternate finance set to reshape India’s BFSI sector

Dun & Bradstreet reports India’s banking, financial services, and insurance sector is entering a structural shift, with AI, alternate finance, and regulatory reforms shaping the next growth phase.

India’s banking, financial services, and insurance (BFSI) sector is approaching a critical transformation, according to a new report by Dun & Bradstreet. The study highlights that artificial intelligence, evolving investor behaviour, and regulatory reforms are set to redefine how financial institutions operate and grow.

AI Moves Beyond Pilots

AI is no longer experimental in India’s BFSI sector. The report finds that 68% of BFSI leaders expect AI to drive growth in fraud detection and transaction monitoring, while 56% foresee its adoption in credit underwriting and risk modelling. Additionally, 49% anticipate AI-powered customer service and conversational platforms to expand rapidly.

“Artificial Intelligence is increasingly embedded across decision-making, risk management, and customer engagement functions,” the report noted, signaling a shift from pilot projects to operational integration. This could enable faster credit decisions, improved fraud detection, and more personalized services for customers.

Governance and Regulation Key to AI Scaling

Despite strong intent, large-scale AI adoption faces hurdles, including data quality issues, cybersecurity risks, regulatory uncertainty, talent shortages, and infrastructure costs. The report emphasizes that trust, compliance, and governance will determine how extensively AI is deployed.

Rise of Alternate Finance and New Investor Dynamics

The research also points to a changing investor base in India, with younger, digitally savvy participants driving demand for wealth creation rather than just savings. Around 65% of BFSI leaders expect this shift to reshape wealth management over the next five years.

Alternative investment products, including fractional investment models and Real Estate Investment Trusts (REITs) in non-traditional sectors like data centres, are gaining traction. About 83% of respondents anticipate REITs expanding beyond commercial real estate, reflecting broader diversification in India’s financial markets.

Structural and Regulatory Reforms Essential

The study highlights the need for regulatory simplification and stronger financial infrastructure. Findings include:

76% of BFSI leaders cite unified regulations as key to growth

86% believe digital platforms and fractional investments could deepen market participation

57% see tax and regulatory simplification as critical for capital market depth

Simplified frameworks could reduce compliance complexity and support sustainable growth as the sector scales.

Balancing Innovation with Governance

As digital adoption accelerates, BFSI institutions must navigate AI, alternate finance, and market infrastructure while prioritizing governance, trust, and structural readiness. The report concludes that the future of India’s financial ecosystem will depend on balancing innovation with regulatory clarity and operational resilience.