According to a new report published by Allied Market Research, titled, “Artificial Intelligence in BFSI Market," The artificial intelligence in bfsi market was valued at $22.5 billion in 2022, and is estimated to reach $368.6 billion by 2032, growing at a CAGR of 32.5% from 2023 to 2032.
The BFSI sector deals with vast amounts of data on a daily basis. The proliferation of digital technologies and the widespread use of online and mobile banking have generated immense datasets. AI thrives on data, and the availability of large and diverse datasets in the BFSI sector has facilitated the training of sophisticated machine learning algorithms. This abundance of data enables AI systems to learn and make informed predictions, enhancing decision-making processes. Moreover, various fraud detection, risk mitigation, and back-end office works with thousands of people processing customer requests are improved with the help of AI-enabled technologies such as chatbots, machine learning, and other such technologies, which boost the growth of the market.
In addition, the reduction in the tendency of human errors by automation of backend processes and enhancement in proactive customer experience is expected to drive the growth of the artificial intelligence in BFSI market trends. However, rise in security concerns, inadequacy of trust while issuing customer data, and higher cost for implementation of AI technologies are expected to restrain the market growth. New entrants such as FinTech (Financial Technology) with advance features in the market, new initiatives in government regulations, and existing traditional banking system provides lucrative opportunities for the artificial intelligence in BFSI market growth.
Furthermore, major market players have undertaken various strategies to increase the competition and offer enhanced services to their customers. For instance, in September 2023, NatWest Group, a leading UK bank committed to aiding people, families, and businesses in their financial growth, has announced an enhanced partnership with Amazon Web Services (AWS), a global giant in cloud computing and AI solutions. The partnership seeks to accelerate the adoption of artificial intelligence (AI), specifically AWS’s generative AI, to assist NatWest in achieving its ambitious goal of supporting 10 million people in managing their financial wellbeing by the end of 2027.
Moreover, in October 2022, BPER Banca Group, the third largest banking group in Italy, has signed with IBM, a four-year agreement to help accelerate the bank’s evolution into a truly digital business. The four-year agreement will expand the bank's hybrid cloud strategy to modernize its technology infrastructure and applications, combining the security, scalability and reliability of IBM Cloud for Financial Services to help meet the compliance requirements of the heavily regulated industry with the resiliency of IBM z16 and Red Hat OpenShift, a leading Kubernetes platform. Such strategies are driving the growth of artificial intelligence in BFSI market.
By technology, the machine learning segment attained the highest artificial intelligence in BFSI market size in 2022. This is because machine learning technology enables the segmentation of customers based on their behavior, preferences, and transaction history. This segmentation facilitates personalized marketing strategies, product recommendations, and communication, enhancing customer engagement and satisfaction.
On the basis of region, Asia-Pacific is considered to be the fastest growing region during the forecast period. This is due to the widespread adoption of smartphones and the increasing preference for mobile banking and payments present a significant growth factor. AI-driven mobile banking applications offer seamless and secure transactions, fraud detection, and personalized financial insights.
The pandemic acted as a catalyst for digital transformation across industries, including BFSI. Organizations faced with the need for contactless services rapidly embraced AI-driven solutions to enhance their digital infrastructure. This acceleration fostered a more robust and agile digital ecosystem within the BFSI sector, making it better prepared for future disruptions. In addition, the economic uncertainties caused by the pandemic heightened the importance of risk management in the BFSI sector.
AI algorithms were deployed to analyze the impact of the pandemic on financial markets, assess credit risks, and identify potential areas of concern. Furthermore, the demand for real-time insights and data-driven decision-making escalated during the pandemic. AI-powered analytics tools enabled BFSI entities to derive meaningful insights from vast datasets, aiding in strategic decision-making. This shift towards data-driven decision models is likely to have long-term positive effects on organizational agility and competitiveness. Therefore, the COVID-19 pandemic had a positive impact on the artificial intelligence in BFSI industry.
Key Findings of the Study
- By offering, the software segment led the artificial intelligence in BFSI market in terms of revenue in 2022.
- By solution, the chatbots segment led the artificial intelligence in BFSI market share in terms of revenue in 2022.
- By technology, the machine learning segment led the artificial intelligence in BFSI market in terms of revenue in 2022.
- By region, North America generated the highest revenue in 2022.
The key players profiled in the artificial intelligence in BFSI market analysis are Amazon Web Services, Inc., Baidu, Inc., Google LLC, Intel Corporation, IBM Corporation, Microsoft Corporation, Oracle, SAP SE, Salesforce, Inc., and Palantir Technologies Inc. These players have adopted various strategies to increase their market penetration and strengthen their position in the artificial intelligence in BFSI industry.